REGULATORY
Indexed Universal Life after AG 49A
In mid-December or soon after , we ’ ll experience another change in what seems to be an ever-evolving indexed universal life ( IUL ) industry . Revised regulation , Actuarial Guideline ( AG ) 49A will go into effect , significantly altering how IUL illustrations look going forward .
Several years ago , as you probably remember , IUL illustrations were very inconsistent — you could have two products with the same caps and actual performance , offered by different insurers , where one ’ s projected performance was much more aggressive than the other . In 2015 , the NAIC responded by creating AG 49 to address two main objectives :
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Create a more consistent approach to illustrations .
Remove some of the aggressiveness , especially when illustrating loans or withdrawals .
To accomplish this , they established a single standard to determine illustrated rate and put a 1 percent cap on maximum loan arbitrage — the difference between the illustrated rate and loan rate . However , they didn ’ t address benefit projections of features outside of loan rates or illustrated rates — even though they were highly dependent on index performance . Consequently , some carriers took advantage .
Illustration changes are likely to have a drastic effect on the industry but vary depending on the type of sale , e . g ., premium finance , supplemental retirement income , or estate and business planning .
16 Perspectives Q4 2020