Veralytic Reports evaluate policies on five (5) criteria to rate the appropriateness of a given product for a given planning situation using a star rating system. A full star indicates the policy under consideration receives the highest comparative rating, a half star indicates a median rating, and an empty star represents the lowest rating compared with benchmarks.
- Financial Strength & Claims-Paying Ability: The insurer’s financial strength and claims-paying ability ranks in the top decile (i.e., among the top 10%) of all rated insurers. While high ratings for financial strength and claims-paying ability do not necessarily, in and of themselves, render a policy appropriate, high ratings and low cost is considered more appropriate than otherwise.
- Cost Competitiveness: The policy under evaluation illustrates an overall cost structure and premium that is more competitive than the relevant benchmark representative of an average, but competitively priced product. While a low overall cost structure and low illustrated premiums do not necessarily, in and of themselves, render the policy appropriate, low premiums that are the result of a low cost structure attributable to some demonstrable operating, underwriting and/or marketing advantage are considered more appropriate than otherwise. To evaluate Cost Competitiveness, the Veralytic Research Platform considers Funding Strategy and Pricing Style (reported in “Product Profile” located at the top left corner of page 1 of the Veralytic Report), as well as Premium Cost Competitiveness (reported in “Premium Comparison” located at the upper right corner of page 1 of the Veralytic Report).
- Pricing Stability: Pricing of all life insurance policies are a function of three (3) variables: 1) cost of insurance (COI) charges, 2) policy expenses, and 3) the illustrated/actual earnings rate on policy cash values. Pricing for the policy under evaluation is adequate and reasonable to the extent that cost of insurance (COI) charges and policy expenses appear to be based on actual claims and operating experience according to disclosures included in the illustration of the policy under evaluation. In addition, the insurer’s retention capacity allows the insurer to exercise substantial control over pricing for the policy under evaluation, and, therefore, pricing for this policy is least vulnerable to changes in the reinsurance market. While Veralytic has no way of predicting whether a policy will perform as illustrated, the Veralytic Reports do consider whether the values illustrated are consistent with the insurer’s historical experience, whether this experience has been fully disclosed, and how potential changes in experience might impact future policy performance.
- Relative Policy Value: Cash value liquidity for this policy is less adequate than the representative benchmarks. While liquidity can be less relevant in certain plan designs, policies with higher cash values and greater liquidity than relevant benchmarks are generally considered more appropriate than policies with lower cash values and more limited access to policy cash values.
- Historical Performance: The cash value allocation options within the family of mutual-fund-like separate accounts for this policy are considered roughly comparable to representative benchmarks. Because cash values for variable universal life (VUL) products are invested in a given family of funds, the number of underlying sub-accounts and the number of different asset types are important indicators of appropriateness. (The Veralytic Report compares the number, type, performance, and expense ratios for the policy's underlying sub- accounts with benchmarks and summarizes comparisons in “Product Profile” located in the upper left corner of page 1 of the Veralytic Report. The significance of Cash Value Allocation Options is discussed in detail on pages 7 and 8 of Section 4, Veralytic Report User Guide, of this report.)
All five factors contribute to appropriateness, and no single factor is sufficient to determine appropriateness. When all other appropriateness factors are equal, the policy receiving the higher appropriateness rating for any one criteria is considered more appropriate. In other words, if two policies receive similar ratings on four criteria but one is rated higher on the fifth criteria, it is considered more appropriate.