Critics say regulation hasn’t curbed overly rosy projections for indexed universal life insurance
December 15, 2017 by Greg Iacurci
A regulation governing indexed universal life insurance policies has had a fairly limited effect, leading some observers to question whether the regulation went far enough and if more stringent rules are necessary.
“Illustrations are what sell cash-value life insurance,” said Sheryl Moore, CEO of Moore Market Intelligence. “It was timely to implement this illustration regulation, but I don’t really feel like it was effective in accomplishing what people thought it should accomplish.”
National Life was the third-largest seller of indexed universal life insurance through the first three quarters of this year, behind Pacific Life Companies and Transamerica Life Insurance Co., according to market research firm Wink Inc
Observers said indexed universal life insurance has enjoyed a competitive advantage of sorts over other types of life insurance when it comes to policy illustrations. The NAIC had previously issued regulations aimed at reining in illustrations of cash-value life insurance products such as variable universal life and whole life. However, those largely didn’t cover indexed universal life insurance because IUL products were developed after issuance of the regulations, Ms. Moore said.
Many broker-dealers, for example, currently have representatives run policy illustrations for clients at 7% net of fees, said Ms. Moore. She questioned why projections for variable universal life, which have unlimited growth potential, are so similar to those of their indexed counterparts.