As foretold by Veralytic in 2008 & again in 2009 insurance companies have continued to increase pricing and/or withdraw their lowest cost products. The cost of doing business in the Guaranteed Universal Life (GUL) markets has risen as the interest rates have fallen. In 2009 the GUL market had increases up to 40%, in 2010 increases up to 20%, in 2011 up to 40%, and just these couple months in 2012 the GUL marketplace has experienced up to 18% increases in premiums. There are some insurance companies that have taken multiple increases (on same product or through discontinuing and issuing new products) that combine to an increase of up to 65% in their GUL line up in just 3 years! Several companies have had to exit the GUL market completely.
In addition, these pressures apply not just to GUL but to all products. The pricing of all products is a function of costs and interest. When it is harder to make money on the interest side of the equation, the only options often become increasing costs or exiting the market altogether. Those with large GUL blocks, sometimes seek increases to costs and/or lower interest crediting rates in other blocks of business to make up losses on these lower performing blocks of GUL business.
Below are the changes published for 2012:
Carrier in Top 14% - Lowering interest rates by 25 basis points on all UL type products.
Carrier in Top 8%– GUL & SGUL premium increases of 12% at most issue ages
Carrier in Top 19% - GUL cost increases of approx .5%; level pays increased on avg. less than 1%
Carrier in Top 15%- GUL cost increases with the largest increase to short and single pays
Carrier in Top 10%– GUL cost increases ranging from 5-18% focused on single pays; full and short pays will have minor increases
Carrier in Top 8%– Cost Change with greatest impact in the single-pay market for young insureds
Carrier in Top 12%– minimal cost increases to level pays; larger increases to single and 10-pays
Carrier in Top 12%- VUL No Lapse Protection rider discontinued
Carrier in Top 12%– GUL product discontinued
Carrier in Top 23%– GUL cost increases on average 3% for guarantees to age 105, with most of the change in younger ages and lower face amounts over 75; cash accumulation reduced
Carrier in Top 23%– cost increases on average 13% for guarantees to age 105
Carrier in Top 6%– UL and SUL imposing premium cap of 8 times the target premium
INSPECT WHAT YOU EXPECT! Use a Veralytic Research Report to measure policy expenses and know if a particular insurer is increasing or decreasing policy expenses. If you(r clients) do not know what they are paying for cost of insurance charges (COIs), fixed administration expenses (FAEs), cash-value-based "wrap fees" (e.g., M&Es) and premium loads in their life insurance policy holdings now, then there will be no way to know if or when such policy expenses are increased. Now is the time to find out.
The appropriateness of a policy should be re-evaluated when the insurer announces product changes. In order to fully assess the impact of recent changes on your clients’ permanent life insurance portfolios, or to establish a baseline by which to judge the impact of future shifts in cost, request a Veralytic Research Report now. Just fax the detailed expense report along with the policy illustration toll free to 800-409-3222end_of_the_skype_highlighting or email to email@example.com to request a Veralytic Report for your client's policy. If the policy illustration is not available, download a sample Request for Information (RFI) letter to gather the necessary policy information.