US Sales of Indexed Universal Life Rose 18.7% as Debate Over IUL Illustrated Rates Continues
November 26, 2014 by Fran Matso Lysiak
PLEASANT HILL, Iowa – As issues over illustrated rates for indexed universal life insurance are sorted out, competition among companies in the overall universal life product space is growing, according to Sheryl Moore, president and chief executive officer of Wink and Moore Market Intelligence.
As the matter of illustrated rates for indexed life “gets hammered out, we’re going to continue seeing more companies entering this now-mainstream product line,” Moore said.
Pacific Life companies, with third-quarter sales of $43.3 million and an 11.6% market share, maintained its No. 1 position for indexed life sales, according to Wink. Again capturing second place was Aegon’s U.S. operations, with sales of $42.1 million. Western Reserve Life Assurance Co. of Ohio, part of Aegon USA Group, is the largest seller of indexed universal life of all the Aegon companies.
Coming in third-place again was National Life Group with sales of $30.4 million. Life Insurance Company of the Southwest, part of National Life, is the primary seller of indexed life for National Life.
Keeping its position at No. 4 was Minnesota Life Insurance Co., whose parent company is Securian Financial Group, with sales of $27.4 million.
Rounding at the top five in fifth place was Zurich American Life, with sales of $17.8 million, according to Wink.
Earlier this year, the New York Department of Financial Services said it was investigating the marketing of indexed universal life insurance products, regarded as one of the fastest-growing in the industry. The letter to insurers said DFS’ concern is that indexed universal life insurance “be presented to prospective purchasers in an appropriate manner with respect to the product’s future performance” (Best’s News Service, Sept. 22, 2014).
Around that time, the American Council of Life Insurers and a partnership of four life insurers offered a panel of the National Association of Insurance Commissioners competing plans on how companies should market this product to prospective buyers. The insurers, which do not sell indexed universal life, are MetLife, as well as New York Life, Northwestern Mutual and OneAmerica.
Product development “has surpassed regulation when it comes to indexed life,” Moore told Best’s News Service. “Uniformity has long been lacking in the calculations of the rate at which the policy values are projected to consumers,” she said, noting regulation is needed “to ensure realistic expectations are communicated to the prospective purchaser.”
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.
As part of its shift to insurance products that are less capital-intensive, MetLife (NYSE: MET) stopped selling universal life insurance with secondary, no-lapse death benefit guarantees. Earlier this year, MetLife also launched a new universal life product that Gene Lunman, senior vice president of retail life and disability insurance products at MetLife, maintains is one that in some ways should be considered for many people who are probably buying indexed universal life.
Its “Secure Flex” combines elements of guaranteed universal life and current assumption universal life policies in one product, according to Metlife. It’s a kind of hybrid between universal life policies on one end that offer strong cash value growth but weak guarantees, and those on the other end that offer strong guarantees but little cash value.
A younger individual, who is concerned about cash value growth, would likely choose the former policy. While an older person, who is more concerned about guarantees, would likely choose the latter.
Indexed universal life is used for various reasons, estate planning being one. MetLife says its new product can be used for estate planning purposes
SecureFlex can also appeal to a younger buyer — starting at 35 up to 65, Lunman said. At younger ages, the probability of surrendering is much higher than dying so it has the guaranteed death benefit but is equally strong if a policyholder needs cash, he said.
Several other companies have a product in this class — meaning they provide a guarantee to a particular age, Lunman said.
Moore said indexed life competes with traditional fixed universal life. Indexed universal life policies are sold for the cash accumulation, the no-lapse guarantees, the death benefit, and more, she said. In particular, cash accumulation sales may target estate planning, premium financing, retirement income and more, Moore said.
Many companies sell indexed life with secondary, no-lapse, death benefit guarantees, Moore said. The “biggest educational angle” she has with indexed life is that “everyone thinks that it is only for cash accumulation. Not the case,” Moore said.
Recently, Best’s News Service reported an NAIC panel is offering a compromise to end the divide on how companies should present indexed universal life insurance. Any changes would be part of the Life Insurance Illustrations Model Regulation, whose passage by the NAIC predates indexed universal life (Best’s News Service, Nov. 17, 2014).