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Indexed Universal Life And Chronic Illness Riders Popular With Life Insurers



Index universal life (IUL) sales made up 31 percent of all universal life (UL) sales in the first nine months of 2013, compared to only 14 percent of UL sales for all of 2010, according to a new study published by the actuarial firm Milliman.

The increase in IUL sales is a sign that over the past four years, insurance carriers have been more attracted to the cash accumulation portion of IUL products than to the secondary guarantee or the death benefit within those contracts, Milliman said in a news release.

The company didn’t release specific sales numbers.

A strong stock market last year has attracted more interest on the part of life and annuity carriers in index products in general.

Tighter actuarial guidelines and more stringent reserving requirements have also made offering the death benefit more cumbersome, a Milliman spokeswoman said.

Carriers also appear to favor current assumption IUL products, or policies with a lot of flexibility, in which policyholders can modify the amount or timing of their premium payments in exchange for changes to the death benefit, the survey found.

Last month, American International Group launched Elite Survivor Index II, a survivorship index universal life insurance product which allows policyholders access to the policy’s cash value after the first year the policy is issued.

Five of 26 insurance carriers participating in the survey reported discontinued sales of UL products with secondary benefits, Milliman said.

Cash accumulation IUL products made up between 85 and 87 percent of the IUL market in the first nine months of last year, the Milliman survey also found.

Death benefits are still popular among UL policies, however. UL with secondary guarantees still made up 65 to 70 percent of all UL sales in the first nine months of last year.

Secondary guarantees were offered as a way to make sure UL policies did not lapse during the early policy years.

Of the 26 carriers surveyed, 14 offered a chronic illness accelerated benefit rider on either a UL or IUL product chassis, Milliman also said.

In the UL market, 11 percent of sales in the first nine months of 2013 contained a chronic illness rider. In the IUL market during the first nine months of last year, 33 percent of sales contained a chronic illness rider, the survey found.

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In the UL market, 17 percent of sales in the first nine months of 2013 contained a long-term care (LTC) rider, and in the IUL market during the same period 9 percent of sales contained an LTC rider, the survey found.

Nearly 85 percent of carrier respondents expect to either market an LTC or chronic illness rider within 12 to 24 months, the survey also found.

The findings were included in Milliman’s seventh annual “Universal Life and Indexed Universal Life Issues.”

is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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