The National Association of Insurance Commissioners adopted the new Actuarial Guideline 49 (AG 49), which provides standardized requirements for calculating maximum illustrated rates for indexed universal life (IUL) policies. The new requirements also impact illustrations where the policy has a loan.
Lincoln Benefit Life (LBL) will implement the new requirements for all Ultra Index illustrations produced September 1, 2015 and later. This change applies to both new term conversion illustrations, as well as illustrations for existing policies.
Why is the New Guideline Necessary?
Regulators became increasingly concerned about the variety of practices companies had used to produce illustrated rates for IUL policies. The new guideline will make illustrated rates more uniform across the industry. The new rules use a series of 25-year rolling average rates, which should provide greater stability in the illustrated rates.
What changes will I notice?
For the LBL Ultra Index, you will notice two changes:
- The maximum illustrated rate will be reduced. For Ultra Index, requirements will result in a reduction of the illustrated rate by about 45 bps for the current cap rate.
- LBL had to remove “Scenario B” in the Policy Value Overview section, which showed illustrated values based on actual S&P performance (and the current cap rate) over the past 30 years. The average illustrated rate in Scenario B exceeds the maximum illustrated rate mandated by the new regulation. Accordingly, LBL relabeled the scenarios and made minor wording changes to ensure the narrative text flowed properly.