Policyholder Options

  • Many insurance contracts offer the policyowner options regarding premium payment, benefit patterns, and policy loans.
  • This flexibility means that many different patterns of future cash flow could arise under the contract. (p6)

2002 09 - AAA - Fair Valuation of Insurance Liabilities: Principles and Method, American Academy of Actuaries - 48p

  • The ACLI’s Dolan says the size of the premium depends on the returns on the options in the policy.
    • “The fact is, in a different (and better) economic environment, less in premiums would be paid than originally planned,” he notes.
  • “Owners of this product must be aware of exactly how it works, because, unlike certain other types of life insurance, IULs have a fluctuating component to them.”

2020 0923 - Forbes - Sounding The Alarm On Indexed Universal Life Insurance - [link]

  • Michael Lovendusky, ACLI, said consumers are mostly confused about options, guarantees and riders. 
    • The ACLI work group was considering asking the Life Insurance and Annuities (A) Committee to narrow the charge to look at only products with options, guarantees and riders, but Ms. Cude said she thinks that it is important to consider how the disclore for all products could be improved. 
  • Michael Lovendusky, ACLI,  said the ACLI work group thinks that most confusion for consumers involves complex products like Universal Life, and not Simple products like term life.

2016 0403, NAIC Proceedings - LIIIWG - Life Insurance Illustrations Working Group

  • 1982 - AP - The Life Insurance Policy as an Options Package, by Michael L. Smith, The Journal of Risk and Insurance, Vol. 49, No. 4 (Dec., 1982), pp. 583-601 (19 pages)
  • We also became more aware of the exercise of policyholder options.
    • This was not just through surrenders of annuities but also through options that we thought were safe, such as policy-loan provisions in ordinary life policies with fixed interest rates of 5% or 6%.
    • I remember Sylvia Porter, the financial columnist, writing about borrowing against your life insurance at 5% or 6% fixed interest and investing in a money market account at 15% interest.
    • Insurance companies experienced a cash-flow squeeze as money flowed out through the policy-loan feature.
    • There were some company failures at this time; Baldwin United was one of the most prominent.
    • Other companies suffered lesser degrees of financial stress.

--  Dennis L. Carr, vice president in charge of product development and asset/liability management for the ARM Financial Group

1994 - SOA - Asset / Liability Management (ALM): An International Perspective, Society of Actuaries - 18p