Despite industry concerns about an 18-month-old regulatory guideline for indexed universal life insurance, sales of the popular product remain robust, new research shows.
The 78th edition of “Wink’s Sales & Market Report,” which aggregates data from 48 manufacturers of indexed universal life products, reveals that IUL premium revenue for the three months ending December 31, 2016 totaled $534.5 million. That’s up a marked 18 percent from third quarter sales of $452.9 million. But fourth quarter 2016 sales dipped modestly (1.3 percent) from the $541.5 million revenue recorded in the fourth quarter of 2015.
For all of 2016, IUL sales topped $1.97 billion — an all-time high for the product. That compares with 2015 sales of $1.86 billion, a 5.9 percent increase.
“It is hard to believe that indexed life continues to prosper with AG49 just in the rearview mirror,” says Sheryl Moore, President and CEO of Moore Market Intelligence and Wink, Inc. “This was not only a record-setting year for indexed life sales, but (the fourth quarter of 2016) was the second greatest quarter ever in terms of sales.”
NAIC Actuarial Guideline 49 (AG 49), which took on Sept. 1, 2015, establishes for policy illustrations a benchmark-crediting rate, one of many moving parts in an IUL policy. The guideline also establishes a ceiling for index values used in policy illustrations, limits loan crediting rates to 100 basis points over a charged rate and requires additional disclosures.
Like other NAIC model acts, the guideline is not mandatory for states. But most state insurance commissioners tend to adopt model laws, in part to lend consistency to insurance regulations across state lines.
Industry stakeholders have feared that the NAIC guideline would lead to greater uniformity, and thus less innovation, in IUL product design. Because policies must now be illustrated based on their general account, cash values will show in most cases a lower amount than when illustrating using an index.
Indexed products allow policyholders to capture a portion of market returns while also providing protection from market slides. Consumer demand is fueling sales of indexed UL products as well as fixed indexed annuities.