Wink CEO: Both Sides Nearing Compromise on Illustrated Rates for Indexed Life Insurance as 2014 Sales Jump 15%
March 24, 2015 by Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com
PLEASANT HILL, Iowa – As the regulatory debate on illustrated rates continues, full-year 2014 sales of indexed universal life insurance jumped 15% to $1.5 billion. But the chief executive officer of Wink Inc. says she’s “encouraged” that both sides — including some whole life companies — are nearing a compromise.
Capturing first place in total sales were the Pacific Life companies, with full-year 2014 sales of $202.2 million and a 13% market share, according to Wink, a firm that tracks the data. Pacific Life has been the top seller of indexed life since the second quarter of 2013, or seven straight quarters.
Indexed universal life is a permanent life insurance policy that allows policyholders to tie accumulation values to a stock market index, typically the S&P 500. The policies typically contain a minimum guaranteed fixed interest rate component along with the indexed account option.
There are essentially two camps, Sheryl Moore, president and CEO of Wink and Moore Market Intelligence, told Best’s News Service. “The whole life companies feel that indexed life should be illustrated at a rate that is similar to traditional fixed universal life,” she said in emailed comments. “The indexed life companies feel that their product should be illustrated at a rate that is representative of the potential for market growth in the S&P 500.”
Moore said she doesn’t 100% agree with the methods being hammered out. However, she’s “encouraged” that during the last meeting of the National Association of Insurance Commissioners “it appeared that both sides are nearing a compromise.”
Capturing second place was Aegon’s U.S. operations, with total sales in 2014 of $170.2 million and 11% market share, according to Wink. Of all the Aegon companies, Western Reserve Life Assurance Co. of Ohio, part of Aegon USA Group, is the largest seller of indexed universal life.
Coming in at No. 3 was National Life Group, with sales of $135 million. Life Insurance Company of the Southwest, part of National Life, is the primary seller of indexed life for the group. Minnesota Life Insurance Co., whose parent company is Securian Financial, came in fourth place, with sales of nearly $113 million.
Rounding out the top five was Zurich American Life, with total 2014 sales of $74.2 million, according to Wink.
Last November, a panel of the NAIC was offering a compromise to end an industry divide on how companies should present indexed UL to potential buyers. Its life actuarial task force has been the site of debate about how to provide information about indexed UL through illustrations as the American Council of Life Insurers and a coalition of individual major life insurers have battled over different approaches (Best’s News Service, Sept. 22, 2014). Companies that do not sell indexed UL include MetLife (NYSE: MET), New York Life, Northwestern Mutual and OneAmerica.
Any changes ultimately would be part of the Life Insurance Illustrations Model Regulation, whose passage by the NAIC predates indexed UL products. The model regulation provides actuaries with guidance on how general account life insurance products should be illustrated but does not provide any guidance for indexed UL because they have the non-guaranteed index.
As indexed life became more popular, “many companies that didn’t offer the product became irritated about the methods insurance companies used to illustrate the product’s cash values and death benefits,” she said. Ultimately, the decision reached by the task force “will be a better solution” for indexed life than what’s in place today, Moore said.
Separately, new annualized premium for all types of individual life insurance in the United States grew 11% in the fourth quarter, resulting in a 2% increase for 2014, according to Limra.
Indexed universal life “continued to drive growth in the fourth quarter 2014,” said Ashley Durham, senior research analyst of insurance research for Limra, in a statement. “Market conditions and increased carrier and product options have led to a decade of positive growth for IUL.” The product now represents 20% of all individual life premium and the majority of universal life premium at 52%, according to Limra.
In the fourth quarter, total sales of indexed life increased 23.6% to $498.1 million, according to Wink. The Pacific Life companies maintained their No. 1 position. Aegon finished as the second-ranked company in the market. National Life Group, Minnesota Life, as well as Accordia rounded out the top five companies, respectively.
Pacific Life Insurance Co. currently has a Best’s Financial Strength Rating of A+ (Superior).
