Clarification on a misunderstood AG-49A regulation

September 23, 2020 by Sheryl J. Moore

*Bonuses and multipliers are not necessarily “going away” on indexed UL.*

Someone recently communicated to me that they were surprised by [an Unnamed Product Manufacturer]’s repricing of their [Unnamed Product], which previously had a big multiplier; now the multiplier is tiny.

“Why is the multiplier still there? Didn’t AG-49A dictate that the bonuses/multipliers would disappear?” they asked.

No.

AG-49A states that a bonus/multiplier product cannot ILLUSTRATE any more favorably than a product without bonuses/multipliers. It doesn’t mean that a product cannot be OFFERED without them.

So, if the product that is being illustrated with bonuses/multipliers is going to continued to be offered (as opposed to be repriced/refiled), and it is not filed via rider (but priced into the base product), the company is going to have to reduce said bonuses/multipliers to be as low as possible.

Bonuses and multipliers have a “price.” No one wants that “price” to have a drag on their IUL illustrated values, if no benefit can be illustrated by it.

So, do what you can, reduce the bonus/multiplier to be as low as possible. Then, get rid of it when you next reprice.  -sjm