|Posted on November 8, 2012 at 5:40 AM|
I’ve been hearing a lot of rumblings recently about life insurance and annuity carriers implementing price increases or halting sales of certain products.From articles about many annuity products increasing costs and/or decreasing benefits in order to remain viable to countless product update notifications from life insurance carriers, it’s clear we are in the midst of a significant price and benefit adjustment cycle. While it’s bad news for consumers and the producers who sell these products to them, it seems like a necessary adjustment thanks to the continued low interest rate environment. Standing pat is unrealistic for the carriers, who continue to have trouble making money on the interest side of the equation as rates remain anemic. That leaves their options to increasing costs, decreasing benefits or exiting the market.
Guaranteed universal life products have experienced some of the most significant rate increases in the past couple of years as interest rates have remained low. Some carriers are temporarily suspending their Guaranteed UL products altogether.
How AG 38 Will Impact Your Book of Business
There is a firestorm of activity at the insurance carrier level that will undoubtedly have a substantial impact on your clients.
Actuarial Guideline 38 (aka AG 38) was originally created in2003, and enforces reserve requirements on universal life insurance products employing secondary guarantees. In response to regulators’ concerns regarding reserve calculations for recent product designs, AG 38 will be revised on January 1, 2013. The reserve requirement could increase as much as two to seven times the current level for carriers with a sizable existing book of shadow account based ULSG business.
As a result, some carriers are pulling their guaranteed ULproducts from the market; others are limiting the amount of 1035 exchange and lump sum value that will be accepted. And almost all carriers are going through MULTIPLE price increases between now and the end of the year.
As an insurance professional, you must be aware of these changes and take advantage of the many opportunities to help clients find the right insurance products with the least rate increases. Here are some examples of carriers making changes:
NOVEMBER 7, 2012 - Due to the upcoming change to AG 38, Protective will discontinue new sales of its Secure-T, Centennial G II, Centennial G II Plus, ModLife, OneStep Life universal life products, as well as reprice Protective Survivor UL (6/12), effective December 31, 2012. Inforce policies remain unchanged.
Protective will release information on the new products it will introduce to address the revised guidelines in the near future.
Applications signed and received by December 31 will be accepted for the current products. Policies issued in 2013 will result in a choice for the applicant: Accept a policy backdated to December 28, 2012 by paying back premiums and signing a customer acknowledgment form to receive the old products; Switch to one of the new competitive products that will be available beginning January 1, 2013. All policies issued under the current product plans must be placed and in force by February 28, 2013.
NOVEMBER 7, 2012 - Due to the revised AG 38, effective January 1, 2013, United of Omaha will adjust products to remain compliant with the guidelines. Information on the rates for applications dated in 2013 will be available in the coming weeks.
Of the four products in the GUL Solutions portfolio, the survivorship product will not be ready for sale on January 1, 2013. United of Omaha anticipates the GUL Survivor product will be AG 38 compliant and available for sale beginning again in February 2013. The GUL, GUL Plus and GULE 2013 policy forms will be ready for sale on January 1, 2013.
Applications for GUL, GUL Plus, GUL Survivor and GUL Express must be signed by December 31 to be eligible for the old rates. Applications for GUL, GUL Plus and GUL Express signed by January 1, 2013 or later will receive new rates.
GUL, GUL Plus, GUL Survivor, and GUL Express applications signed December 31, 2012 or earlier must be received in the Home Office by January 7, 2013 to be eligible for old rates.
If GUL, GUL Plus, GUL Survivor and GUL Express apps signed December 31, 2012 or earlier are still pending by April 1, 2013, the policyowner will be contacted to determine whether processing should continue for old rates.
If a policy eligible for old rates is approved by Underwriting in 2013, the issue date of the policy will be backdated to December 28, 2012. All back premiums will need to be collected.
ULOCTOBER 23, 2012 - Effective October 22, Genworth launched its new traditional term product, Colony Term 10, 15, and 20, to replace Colony Term UL, except in New York. It will also reprice and expand its GenGuard UL product on November 12.
The new GenGuard UL will combine features from Colony LifeLong UL and GenGuard UL into one comprehensive product, offering up to lifetime benefit coverage to age 121 for single, short and level-pay planned premiums. It will also serve as the new conversion product, replacing Lifetime Protector SG II in all states except New York effective December 7.
Additionally, Genworth removed Colony Term UL NY from the marketplace as of October 22, and will remove GenGuard SUL, GenGuard SUL NY and GenGuard UL NY as of November 12.
Applications received for Colony Term UL after November 9 will be processed as Colony Term and require an amendment on delivery. Applications received after November 9 for GenGuard UL old rates will be processed as with the new rates. Any applications received for Colony LifeLong UL after this date will also require an amendment on delivery.
OCTOBER 17, 2012 - ING has announced that will suspend sales of all fixed and indexed universal life products that offer a no-lapse guarantee.
Affected Products:ING Universal Life-Guaranteed Death Benefit (ING UL-GDB)ING Universal Life-Guaranteed Death Benefit NY (ING UL-GDB NY)ING Survivorship Universal Life-Guaranteed Death Benefit (ING SUL-GDB)ING Survivorship Universal Life-Guaranteed Death Benefit NY (ING SUL-GDB NY)ING Indexed Universal Life-Guaranteed Death Benefit (ING IUL-GDB)ING Indexed Universal Life-Guaranteed Death Benefit NY (ING IUL-GDB NY)
November 2 is the deadline for home office to receive formal applications for the above products. This deadline alos applies to applications that were previously submitted as informals; are for term conversions to the product; were previously closed; or will be owner by trusts that are not yet established.December 13 is the deadline for receiving all administrative and underwriting requirements in home office, including NY Reg 60 (November 16 is the deadline for receiving applications for NY Reg 60).
All policies must be placed by December 31, including 1035 exchanges and NY Reg 60 cases. At least the Minimum Monthly Premium must be paid on 1035 exchanges by December 31, even if 1035 monies have not been received. Thereafter, at least the Minimum Monthly Premium must continue to be paid to keep the policy inforce until 1035 monies are received. All 1035 monies received will be addd to minimum premiums already paid. No previously paid premiums will be refunded.
Applications, requirements or premiums received after these deadlines will require an amended application and appropriate paperwork for a product currently offered by the ING family of companies.
THE CHANGES THAT ARE BEING IMPLEMENTED ARE TOO MANY TO BE LISTED HERE. CLICK HERE TO SEE A SUMMARY REPORT.IT IS ALSO ADVISABLE TO CONTACT THE CARRIERS YOU REPRESENT AND EDUCATE YOUR SELF ON THESE CHANGES. WE ANTICIPATE MORE CHANGES TO OTHER PRODUCT LINES IN THE NEAR FUTURE AS CARRIERS ADJUST THEIR RESERVE REQUIREMENTS DICTATED BY AG38. - Actuarial Guidlenies 38
Courtesy of Premierbrokerage.com
Categories: Life Insurance