Carriers Reshape Indexed UL While Variable UL Sales Heat Up

By Cyril Tuohy

Life insurers are wasting no time tweaking their indexed universal life line-ups to take advantage of a fast-selling segment.

First-quarter sales of indexed universal life rose 12 percent to $486 million compared to the year-ago period.

Rising interest rates help insurers boost the generosity of the benefits available with life insurance contracts. Meanwhile, industry analysts expect more companies to join the IUL market.

IUL policies are structured either for accumulation or for protection. Recent developments in accumulation-focused IULs have come from insurers Ameritas, Lincoln and John Hancock.

Other changes to protection-focused products have come courtesy of Pacific Life and AXA.
Living benefit riders usually come as contract options and at extra cost.

Here’s a rundown of some recent IUL product developments.

Growth IUL from Ameritas. Growth IUL is new this year and will eventually succeed Excel Plus IUL, which will be phased out by December 2019 to conform with new mortality tables, said Kelly Halverson, Ameritas vice president and actuary — individual product development. Growth IUL’s significant features include:

» A 10-year lookback guarantee of 4 percent. Credited interest will equal at least 4 percent compounded annually over the first 10 years for account values allocated to the index strategies.
» A lifetime income rider.
» An accelerated death benefit rider for chronic, critical or terminal illness with 18 qualifying triggers.
» An index credit boost of 10 percent of the index credit starting in year six.

Growth IUL joins the company’s Excel IUL and Excel Plus IUL product lineup.

WealthAccumulate IUL from Lincoln Financial. WealthAccumulate IUL joins the company’s protection-focused WealthPreserve IUL and offers protections not often found in IUL contracts. WealthAccumulate IUL comes with:

» An executive rider and a “Surrender Value Enhancement Endorsement” feature designed to help business owners protect employees and reposition assets to buy life insurance.
» An accelerated death benefit to help pay for chronic or terminal illness.
» Premium allocations across three index accounts.

Accumulation IUL from John Hancock. The company said it updated the design of its Accumulation IUL contract to deliver stronger protection against market downturns and more value. Tweaks to Accumulation IUL include:

» A critical illness rider for financial protection in case of a heart attack, cancer or stroke.
» A rider that accelerates the death benefit to help pay for long-term care expenses.
» Through Hancock’s Vitality program, policyholders who select Accumulation IUL with Vitality can earn rewards for healthy living like walking, eating well and getting regular checkups.
» Premium allocations across four index accounts.

XL-CV Max IUL from Midland National. Midland National’s new XL-CV Max IUL boosts the growth of cash values with the help of interest multipliers. The contract offers:

» An account interest multiplier that boosts the interest credited by 10 percent beginning in policy year six.
» A guaranteed 1 percent interest bonus on the index account kicks in at policy year 11.
» A return of premium death benefit option.
» Accelerated underwriting, which allows qualified applicants to avoid paramedical exams.
» A maximum accelerated death benefit amount that has been raised to $2 million.

IUL Protect from AXA. Earlier this year, AXA announced that its popular IUL Protect contract would benefit from an extra interest credit feature.

Since then, the Federal Reserve has raised benchmark lending rates twice.

» AXA’s IUL Protect extra-interest credit feature was raised from 25 to 50 basis points on all IUL Protect accounts, the company said. The extra interest is credited on top of the index credited to the policyholder’s cash values.
» IUL Protect comes with an optional long-term care rider.
» The contract also provides for a no-lapse guarantee until age 90, or for 40 years if the policy is bought before age 50.

Discovery Protector IUL from Pacific Life. Pacific Life has issued its protection-focused IUL, Pacific Discovery Protector IUL, after finding success last year with the accumulation-based IUL contract Pacific Discovery Xelerator IUL. Among the features of Pacific Discovery Protector IUL are:

» An indexed interest performance factor that may raise crediting rates of the indexed account beginning in year 11.
» Flexible premium payments.
» Several living benefit riders.

VUL Back In The Game

Take a guess at which was the fastest-growing life insurance line in the first quarter? Variable universal life.

That product line, long ago eclipsed by faster-growing insurance product lines, appears to have stirred back to the life and outpaced even hot-selling IUL products over the past two quarters, data show.

With VUL, cash values are invested in the market, with the policyholder taking on the investment risks, so VUL sales tend to rise and fall with the stock market, said Ashley Durham, assistant research director of LIMRA Insurance Research.

VUL sales rose 10 percent in the first quarter over the year-ago period, and policy count rose 8 percent, LIMRA also reported.

In the fourth quarter, VUL sales rose 17 percent over the year-ago period. IUL sales rose 8 percent in the first quarter, the sixth consecutive quarter of growth, LIMRA reported.

The line now represents 63 percent of all universal life premium and 23 percent of all individual life premium.

Strong equity markets have spurred interest in VUL, and sales are expected to increase for the full-year 2018 over 2017, LIMRA analysts said. VUL sales rose 2 percent last year over 2016.

But come 2019, VUL sales are forecasted to fall due to an economic slowdown as predicted by LIMRA’s economic forecaster, Oxford Economics, Durham said.

VUL Once A High Flier

VUL sales peaked around the year 2000. But after the dot-com market collapse, lifetime guarantee universal life (LTGUL) started eating into VUL’s market share.

LTGUL sales rose steadily until 2008, after which market share eroded with the collapse of interest rates.

Changes in reserving requirements also made LTGUL more expensive.

Whole life also captured some market share from VUL in the wake of the 2000 market downturn as agents and consumers moved toward products with less volatility, Durham said.

Whole life, with its straightforward design, was easier for agents to sell and for consumers to buy. The potential for policyholders to benefit from dividends also helped whole life nibble away at VUL share, she said.

Then came IUL without the risk of market-related losses to which VUL contract holders were exposed.

VUL declined further and accounted for 6 percent of all insurance premium at the end of last year, LIMRA said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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