Close Close

Life Health > Life Insurance

Indexed Universal Life Illustration Fight Continues to Boil

Your article was successfully shared with the contacts you provided.

The National Association of Insurance Commissioners (NAIC) is continuing to offer a quarantine-friendly alternative to wrestling and football, for people who miss wrestling and football: a fight over proposed changes to indexed universal life (IUL) insurance illustration standards.

Members of the NAIC’s Life Insurance and Annuities Committee have voted unanimously to approve a proposed update to Actuarial Guideline 49, which sets the rules for showing how an IUL policy might work in the future.

Members of the full NAIC could vote on final approval for the proposal as early as Aug. 11, during one of the web sessions that’s part of the NAIC’s summer national meeting.

But the proposal continues to face emotional opposition from some of the best-known U.S. life insurance distribution specialists, including many people who have been quoted in articles on ThinkAdvisor and in related publications for years, and who have had many articles of their own published by ThinkAdvisor and related advisors.


  • Links to Life Insurance and Annuities Committee documents, including the July 10 materials packet, are available here.
  • An article about life insurance sales is available here.

The list of bitter opponents of the proposed AG 49 includes Birny Birnbaum, of the Centers for Economic Justice.

The opponents list also includes Larry Rybka, the chief executive officer of Valmark Financial Group; Mike Brohawn, president of Your Life Insurance Solution; Stephen Leimberg, publisher of Leimberg Information Services Inc.; Ben Baldwin Jr.; and Joseph Belth, a professor emeritus at Indiana University.


An IUL policy is a life insurance policy with returns tied to the performance of a designated investment indicators, or set of indicators, such as the S&P 500 stock index.

Wink Inc. says insurers generated about $527 million from the sale of IUL and indexed whole life in the first quarter.

An illustration is a document that shows how a product might perform in the future, in specified conditions.

The History

The NAIC tried to address concerns about lack of realism in IUL illustrations in 2015, when it approved AG 49.

Some IUL supporters worried AG 49 would be so strict that it would hurt IUL sales.

But indexed life sales have increased from $479 million in the third quarter of 2015, before AG 49 came along.

The ACLI contends that its proposal would help address regulators’ concerns about illustration realism, and be relatively simple for life insurers to adopt, and for state regulators to implement.

The ACLI has stuck in its comments mainly to focusing on how specific provisions in its proposal might work, and how those provisions could be adjusted.

How Rybka, Leimberg and Other ACLI Proposal Critics See Things

Rybka and other critics have argued that abusive use of illustrations continues.

Rybka writes, in an analysis with the title, “How to Retire in the Magical Retirement Income Castle in the Clouds,” the sellers are magnifying the problems with the illustrations, by persuading investors to take out big loans to pay for IUL policies.

Rybka says he personally saw three colleagues show how they used illustrations to persuade clients to borrow large sums to pay for IUL policies.

“The proposals showed that the loans would be paid back using projected policy cash values and have plenty remaining in the policy to provide a lifetime income of hundreds of thousands of dollars a year to the policyholder and a multi-million-dollar death benefit at the end,” Rybka writes. “Each presentation proposed the clients borrow money from major commercial banks who were willing to lend $2 [million] to $3.5 million to each client over five to seven years to purchase these policies. These proposals are not outliers but part of massive sales efforts by some insurance companies and banks to push products that may be good for them, but carry significant risk for the client.”

One criticism Rybka, Leimberg, Birnbaum and others have of the ACLI proposal is that it would let life insurers use some factors not disclosed in the policies in the illustrations.

Rybka, Leimberg, Baldwin, Birnbaum and others are calling for the NAIC to go with an alternative “independent proposal” that would be simpler than the ACLI proposal and would let illustrations include on the effects of factors disclosed in the policies.

— Read AG49: Carriers Face a Life Marketing Change, on ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on FacebookLinkedIn and Twitter.