By Cyril Tuohy
Life insurance sales are flat, so what’s a life carrier to do? Why not bundle other products onto the life platform?
That’s exactly what some carriers have done: adding critical illness, long-term care and disability riders onto the basic policy.
Now American International Group (AIG) has gone further with its AG Asset Protector product. The product bolts onto the basic life platform what AIG calls two “innovative riders” that allow policyholders to access their death benefit while they are still alive.
One of the riders, Accelerated Access Solution, is designed to protect against chronic illness. The other rider, Lifestyle Income Solution, offers policyholders protection against outliving retirement income, the company said.
“Three different pieces of this are packaged together, and bundled to create the effect of treating three contingencies,” James A. Mallon, president of life insurance with AIG Global Consumer Insurance, said in an interview with InsuranceNewsNet.
When the health impairment criteria for the Accelerated Access Solution is met, the funds from the rider can be used to help pay for assisted living, nursing home care, adult day care – any type of expense, even if not directly related to the illness, according to AIG.
“The beauty of this design is there’s going to be a benefit no matter what,” Mallon said, either through the chronic illness rider, the longevity rider or the death benefit. Policyholders pay one premium for three benefits.
“The incremental additional expense becomes very affordable over the basic benefit design, the base life chassis,” he said.
Financial advisors should immediately be able to recognize the value of Asset Protector, which will be distributed through career financial advisors, independent broker-dealers, independent life insurance channels and Variable Annuity Life Insurance Co. (VALIC), Mallon also said.
Mallon, who recently introduced Asset Protector to distributors, said producer excitement was “off the charts.”
The market will tell.
For the moment, though, carriers are tweaking their life platforms every which way to boost the sale of life insurance, hit hard by low interest rates and hemmed in by regulations that prohibit life insurance products from being marketed as long-term care insurance.
The answer, many companies seem to think, is to broaden the life platform by adding riders where they can to make the life insurance chassis more flexible.
In January, New York Life announced the launch of a level premium chronic care rider to newly issued standard and custom whole life policies.
“With this feature, there is even more value to the policyholder in the form of additional protection for their family in the case of chronic illness,” Craig DeSanto, senior vice president of New York Life, said in a news release.
In December, Nationwide launched YourLife CareMatters, a life insurance policy for clients looking for a variety of long-term care options. The policy, sold through advisors, is designed for people 40 to 75 years of age with investable assets of $250,000.
If the policyholder needs care, the coverage pays out “indemnity-style,” along with a minimum death benefit, said Eric Henderson, senior vice president of life insurance and annuities for Nationwide.
“If care is not needed, the premium can be recovered through a death benefit or through our return of premium option, which includes any growth,” he said in a statement.
Riders have also been added to annuities to make them more attractive, and some carriers have issued crediting options to universal life policies in an attempt to sweeten the attraction of the protection products.
“Americans are living longer, but with increased longevity also comes concern about financial distress due to illness or a shortfall in retirement income,” said John Deremo, executive vice president and chief distribution officer, life insurance, with AIG Financial Distributors.
Life insurance sales have flat-lined in recent years as interest rates dropped to near-record lows last spring.
Total annualized premium for universal life, variable universal life, term and whole life was flat at the end of the third quarter 2013 compared with the third quarter in 2012, according to the U.S. Individual Life Insurance Sales Summary Report issued by LIMRA.
Face amounts declined 2 percent over the same period. The total number of policies in all categories dipped 3 percent, with face amounts declining 2 percent over the same period, according to LIMRA.
Cyril Tuohy 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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