Regulators Close In On IUL Illustration Compromise

By John Hilton

Regulators and industry representatives came closer to agreement on a middle ground to save the controversial multipliers and bonuses that many blame for rosy indexed universal life illustrations.

A National Association of Insurance Commissioners' subgroup is still working through the details, but regulators seemed receptive to industry proposals that would limit maximum illustration rates to the 6% range.

A group of industry representatives presented a pair of options this week that would, theoretically, keep illustrations with and without bonuses and/or multipliers all in the same neighborhood. IUL Illustration Subgroup regulators held a conference call Tuesday.

"If either of these options are going to open the door towards more 7% and 8% illustrations, then it's going to be a problem," said subgroup Chairman Fred Anderson, deputy commissioner of insurance for Minnesota.

"It just seems like we're not going to come up with language that a hundred percent addresses every situation, but I think generally, if it's not going to be possible to develop some product that illustrates in the sevens and eights then I think we'll generally be happy."

'Multiple Other Approaches'

The subgroup has a mandate to clamp down on multipliers and bonuses that critics say enable insurers to get around Actuarial Guideline 49, approved in 2015.

In late October, the Life Actuarial Task Force voted to add language tightening AG 49, leaving the details to the subgroup. The key wording is this: multipliers or other enhancements should not illustrate better than non-multiplier designs.

Since then, regulators and industry representatives have struggled to find ways to comply with that directive.

Both options presented this week utilize the supplement option budget with multipliers and/or bonuses to mildly increase the illustrated rate.

"There may be multiple other approaches that conceptually work and obviously it comes down to the experts who understand how these products work, and the illustration of these products work," said Brian Bayerle, senior actuary with the American Council of Life Insurers. "And so we are we're definitely open to alternative approaches."

The subgroup set a comment period through Feb. 14 on the options presented.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.