Tag Archives: universal life

Annual Milliman survey reveals a staged approach in implementing recent regulatory changes for UL/IUL products

Results from participants in Milliman’s annual comprehensive study of universal life (UL) and indexed universal life (IUL) issues indicate a staggered approach in implementing recent regulatory changes. Principle-based reserves (PBR) may be implemented as early as January 1, 2017, and 27 survey participants reported they expect to implement PBR for all of their UL/IUL products spread over the three-year phase-in period allowed. Resource issues, time needed, financial impact/cost/benefits, clarification/finalization of PBR/IRS regulations, and PBR implementation of other products first were cited as factors impacting the rationale for implementation plans.

Similarly, the earliest effective date for the use of the 2017 Commissioner’s Standard Ordinary (CSO) mortality table was January 1, 2017. The 2017 CSO is the new valuation mortality table to be used in the determination of CRVM, net premium reserves, tax reserves, nonforfeiture values, etc. Twenty-two survey participants reported that they would implement this table for all of their UL/IUL products spread over the three-year phase-in period allowed. Ten participants reported implementation of the 2017 CSO would be product dependent; implementation will be immediate for some products and over the three-year phase-in period for others.

“It’s not surprising that these regulatory changes are not being implemented immediately, given the complexity of the regulations, the potential impact on pricing and the bottom line, and the strain on resources, especially for smaller carriers,” says Sue Saip, consultant in Milliman’s Chicago office.

The 10th annual Milliman study, “Universal Life and Indexed Universal Life Issues”, focuses on current topics relative to universal life with secondary guarantees (ULSG), cash accumulation UL, current assumption UL, and the corresponding indexed UL (IUL) versions. Thirty-two carriers of universal life and indexed universal life products participated in this annual survey.

In addition to PBR and the 2017 CSO information, the survey also indicates that the use of new underwriting approaches is gradually gaining popularity. Scoring models are being used by 11 survey participants to underwrite their UL/IUL policies. Eight of the 11 use these models for fully underwritten policies, one uses them for simplified issue policies, and the final two use them for both fully underwritten and simplified issue business. Eight participants reported using scoring models with automated rules. The types of scoring models used include lab scoring models, credit scoring models, and scoring models relative to motor vehicle records. The survey also revealed that 10 of the 32 participants utilize fluid-less underwriting programs at face amounts where they previously would require fluids.

The study includes detailed information on product and actuarial issues, such as sales, profit measures, target surplus, reserves, risk management, underwriting, product design, compensation, pricing, and illustrations.

The “Universal Life and Indexed Universal Life Issues – Detailed Report” is available for purchase here  or by calling Gina Ritchie at (312) 499-5605.

Milliman survey reveals reactions to UL/IUL regulatory changes

Milliman today released new results from participants in its annual comprehensive study of universal life (UL) and indexed universal life (IUL) issues, namely, the reaction of issuers of universal life products to recent and upcoming regulatory changes. Principle-based reserves (PBR) will be effective January 1, 2017, and nine survey participants reported they anticipate implementing PBR immediately. Nineteen expect phasing-in the implementation of PBR over the three-year phase-in period allowed. Factors impacting the rationale for participants’ implementation plans include resource issues, the impact on reserves and capital, the need for preparation and research, and competitive reasons. Fifteen participants do not know what approach they will use for pricing new UL/IUL products in a PBR environment for products that require one of the VM-20 reserve components (VM-20 includes valuation manual minimum requirements for PBR for life insurance products).

On September 1, 2015, sections 4 and 5 of Actuarial Guideline 49 (AG 49) became effective, impacting issuers of IUL contracts. These sections of AG 49 provided guidance regarding the determination of the maximum indexed crediting rate that may be used with IUL illustrations. The survey included 22 IUL participants and the majority (19) reported they had made adjustments to illustrations based on AG 49, but few participants had made changes to their product designs because of AG 49. Eighteen of the 22 IUL participants reported the rate that was calculated for the Benchmark Index Account per Section 4A of AG 49. The rates ranged from 5.02% to 7.77% with a median of 6.87% and an average of 6.72%. This was also the range reported for the rate typically illustrated by reps in IUL illustrations for participants’ most popular strategies. The median illustrated rate was 6.70% and average was 6.59%. This compares with the median illustrated rate one year ago of 7.50%, and average of 7.10%. Twenty of the 22 participants reported the illustrated rate decreased relative to the rate one year prior.

The ninth annual Milliman study, “Universal Life and Indexed Universal Life Issues,” focuses on current topics relative to universal life with secondary guarantees (ULSG), cash accumulation UL, current assumption UL, and the corresponding indexed UL (IUL) versions. A new high of 35 carriers of universal life and indexed universal life products participated in this annual survey.

In addition to PBR and AG 49 information, the survey also indicates that the popularity of IUL products generally and UL/IUL products with living benefits has continued, consistent with the past several years. IUL sales during YTD 9/30/15 accounted for 51% of total UL/IUL sales combined (reported by survey participants) during YTD 9/30/15, increasing from 37% in 2012. During YTD 9/30/15, sales of chronic illness riders as a percentage of total sales were 23% of UL products and 41% for IUL products, at or near peak levels. Despite a shift away from single premium business to limited pay business for sales of UL/IUL with long-term care (LTC) riders, during YTD 9/30/15 sales of LTC riders as a percentage of total sales by premium were 19.2% for UL products and 9.4% for IUL products, both at peak levels.

The study includes detailed information on product and actuarial issues, such as sales, target surplus, reserves, risk management, underwriting, product design, compensation, pricing, administration, and illustrations.

The 444-page “Universal Life and Indexed Universal Life Issues – Detailed Report” is available for purchase by visiting the Milliman website or by calling Gina Ritchie at (312) 499-5605. Participating companies receive a complimentary copy of the detailed report, as well as individual company responses reported on an anonymous basis.

Milliman survey indicates past trends continue: Life insurers focus on living benefit riders and indexed universal life

The popularity of indexed universal life (IUL) products has increased over the last few years, as reported by participants in Milliman’s annual comprehensive study of universal life (UL) and IUL issues. Total IUL sales as a percent of total UL and IUL sales combined for survey participants increased from 25% in 2011 to 45% during the first nine months of 2014. During this period, cash accumulation IUL sales comprised 82% of total cash accumulation UL/IUL sales, and current assumption IUL sales comprised 17% of total current assumption UL/IUL sales. Overall survey statistics suggest that companies plan to focus more on cash accumulation IUL and current assumption IUL products, and less on universal life with secondary guarantees (ULSG). Five of the 29 survey participants reported discontinued sales of ULSG products.

During the first nine months of 2014, sales of chronic illness riders as a percent of total sales were 17% for UL products and 45% for IUL products. Similarly, during the first nine months of 2014, sales of long-term care (LTC) riders as a percent of total sales were 18% for UL products and 9% for IUL products. Nearly 86% of survey respondents expect to market either an LTC or chronic illness rider within the next 24 months.

The eighth annual Milliman study, “Universal Life and Indexed Universal Life Issues,” focuses on issues relative to universal life with secondary guarantees (ULSG), cash accumulation UL, current assumption UL, and the corresponding indexed UL (IUL) versions. Twenty-nine carriers of universal life and indexed universal life products participated in this annual survey.

In addition to sales information, the study also includes detailed information on product and actuarial issues, such as target surplus, reserves, risk management, underwriting, product design, compensation, pricing, administration, and illustrations.

The 344-page “Universal Life and Indexed Universal Life Issues – Detailed Report” is available for purchase by visiting the Milliman website or by calling Gina Ritchie at (312) 499-5605. Participating companies receive a complimentary copy of the detailed report. Individual company responses are reported on an anonymous basis.

Milliman survey indicates IUL and chronic illness riders remain priority for life insurers

Total Indexed Universal Life (IUL) sales, as a percent of total Universal Life (UL) and IUL sales combined, increased from 14% in 2010 to 31% during the first nine months of 2013, as reported by participants in Milliman’s annual comprehensive study of UL and IUL issues. In recent years more companies have entered the IUL market. Expectations of survey participants suggest that companies will focus more on cash accumulation IUL and current assumption IUL products, and less on universal life with secondary guarantees (ULSG). Five of the 26 survey participants reported discontinued sales of ULSG products.

The popularity of chronic illness riders has also increased over the last few years. Fourteen participants currently offer a chronic illness accelerated benefit rider on either a UL or IUL chassis. During the first nine months of 2013 sales of chronic illness riders as a percent of total sales were 11% for UL products and 33% for IUL products. The majority of participants that reported UL/IUL sales with a chronic illness rider provide a discounted death benefit as an accelerated benefit. Similarly, during the first nine months of 2013, sales of long-term care (LTC) riders as a percent of total sales were 17% for UL products and 9% for IUL products. Nearly 85% of survey respondents expect to market either an LTC or chronic illness rider within 12 to 24 months.

The seventh annual Milliman study, “Universal Life and Indexed Universal Life Issues,” focuses on issues relative to ULSG, Cash Accumulation UL, Current Assumption UL, and the corresponding IUL versions. Twenty-six carriers of UL and IUL products participated in this annual survey.

The study also includes information on product and actuarial issues, such as target surplus, reserves, risk management, underwriting, product design, compensation, pricing, administration, and illustrations.

The 484-page “Universal Life and Indexed Universal Life Issues” is available for purchase by visiting the Milliman website or by calling Gina Ritchie at (312) 499-5605. Participating companies receive a complimentary copy of the detailed report, as well as individual company responses reported on an anonymous basis.

ULSG AG 38 valuation research report

Recent revisions to Actuarial Guideline 38 (AG-38) have focused on the way companies have structured their universal life no-lapse guarantee provisions to minimize potential premium deficiency reserves. In particular, the calculation to derive the minimum premiums from which potential deficiencies may arise has been redesigned to take into account multiple charge structures and premium payment patterns, and requires the actuary to select the charge structure or premium pattern that would tend to maximize premium deficiency reserves. For companies that wish to continue to offer strong secondary guarantee protection on their products, it will be difficult to avoid holding premium deficiency reserves.

This paper examines the impact on the reserves for a universal life secondary guarantee (ULSG) policy design with a multiple charge structure under the pre-2013 valuation of Section 8C relative to the requirements specified for 2013 and later business under Section 8E.

Re-pricing by Universal Life Insurers Remains Active as Revealed in Annual Milliman Survey

Fourteen of 31 respondents to Milliman’s fifth annual comprehensive study of Universal Life (UL) and Indexed Universal Life (IUL) issues reported they re-priced their UL with Secondary Guarantee design in the last 12 months. Nearly all reported that premium rates on the new basis versus the old basis increased. Modifications to secondary guarantee products are anticipated by 15 participants in the next 12 months. Such re-pricing and modifications may be driven by the fact that only nine of the survey respondents met their profit goals in 2010 and through the first nine months of 2011. This percentage is the same as that reported for 2009 in the prior Milliman survey. The primary reason cited for failure to meet profit goals continued to be interest earnings.

The Milliman study, “Universal Life and Indexed Universal Life Issues”, explores issues relative to Universal Life with Secondary Guarantees (ULSG), Cash Accumulation UL, Current Assumption UL, and the corresponding indexed UL (IUL) versions.

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