Indexed Universal Life Illustration Fight Continues to Boil

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.

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