Earlier this year, the National Association of Insurance Commissioners (NAIC) adopted uniform standards for Indexed Universal Life (IUL) policy illustrations. The intention was to provide "more realistic" guidelines for the illustrations that can be used to market IUL policies to prospective customers.
The new actuarial guideline establishes a uniform methodology that must be followed in determining the maximum annual rate of index-based interest that can be used to calculate policy values in IUL illustrations, based on the historical performance of the S&P 500 Index.
It also limits the maximum spread between the interest rates that may be credited and charged for policy loans to ensure that illustrations do not overstate the effect of any interest rate arbitrage that may be achieved, and requires disclosure of additional information intended to make consumers more aware of the potential variability of interest rates that may be credited under IUL policies.
Now let's be honest with each other for a moment: how many LifeHealthpro.com readers think that the average policy owner can understand those new guidelines on his or her own?
Or how about this gut check: how many of you are comfortable with the amount of information baked into these illustrations and the reliability with which most insurance companies produce "current" versus "guaranteed" illustrations?
In fact, let's take it a step further: do we truly believe that the policy illustrations provided by life insurance carriers are written and delivered in a way that is friendly or accessible to a consumer who has little or no knowledge of how life insurance products are priced and structured?
Do you believe that most consumer advisors, those who are not experienced insurance agents, understand those policy illustrations as well?
This is important because seniors need to understand where they stand with their life insurance, a crucial asset in their financial portfolios. Moreover, if one of your clients has a clear understanding of his or her policy illustration and determines that it's just no longer needed or affordable, that individual has a right to know about the options available to them — including possibly selling the policy through a life settlement.
