1999 - SOA - The Next Generation Universal Life - Society of Actuaries - 30p

  • 1999 - SOA - The Next Generation Universal Life, Society of Actuaries ---  [BonkNote]   ---  30p
  • Daniel F. Byrne, M Financial Group
    • From a distribution perspective, I think one of the challenges that face us in UL is the servicing of UL.
      • Flexible premium, high-degree-of-service UL products have little or no renewal compensation paid if there’s no premium paid.  
    • The long-term impact of servicing a block of very flexible products without funding to the servicing provider remains to be seen.
    • From a consumer perspective, I think market conduct and performance representation issues are very important...
    • In the majority of them, as long as you have $1 in cash left at age 100, the contract will stay in force for the balance of the life.
    • Will that encourage and motivate buyers and funders to minimally fund UL contracts to $1 at age 100?
      • That comes with a high degree of volatility attached to that approach. 
    • Finally, we must be very careful to learn from the vanishing premium losses and communicate in-force performance regularly.
    • UL, by its nature, tends to have bigger and later surprises.
    • Let’s take a look at a particular case, and we’ll take a look at a funding and performance level of whole life versus UL... 
    • But I think it demonstrates a minimum level of ongoing communication and disclosure is necessary with a flexible premium product. I think it poses a challenge for us in the industry. 
    • The vanishing premium problem came to surface because premiums became due and there was no early warning sign of a premium if it comes due.
    • We kind of lull ourselves into a false sense of confidence here, because UL has a later delivery of bad news, and the surprise is much bigger.