Regulatory concerns about the marketing and long-term viability of indexed universal life insurance policies made plenty of news in 2019.
The National Association of Insurance Commissioners continues to debate tougher regulations on IUL sales. Coverage of this issue produced some of our most-read stories of the year.
Here are the top five life insurance stories overall:
Why Is IUL Failing?
Traditional, nonguaranteed universal life insurance (often described in the insurance industry as current assumption UL) has been subjected to rather brutal criticism over the past few years.
It most recently came into the news in a September Wall Street Journal article that blamed the product for the financial hardship being experienced late in life by many policy owners who purchased this coverage in the 1980s and 1990s.
But how much of this condemnation is truly warranted, and how much of it reflects a fundamental misunderstanding of how these products are designed to work when properly tended to?
Life Settlement Trends
Insurance professionals have monitored the life settlements industry with a watchful eye in the aftermath of the significant market contraction a decade ago.
But after working through some challenges related to regulation, capital flow and underwriting, the life settlements industry is coming off another year of growth in 2018 and seems poised to remain on that steady growth trajectory.
IUL Regulations Debated
State insurance regulators debated risk and reward and how much of the former consumers should take on in pursuit of the latter when purchasing indexed universal life products.
A National Association of Insurance Commissioners' subgroup revealed the depths of members' disagreement during discussions on IUL illustrations.
The IUL illustration subgroup had a 2019 charge to "provide recommendations for modifications to AG 49 to the Life Actuarial (A) Task Force." The issue involves IUL multipliers, which did not exist when AG 49 was adopted in 2015.
Reg 187 Bearing Down On Life Insurance
On Feb. 1, 2020, New York will apply Regulation 187 to all life insurance sales in the state. It remains to be seen whether carriers and producers are ready for it.
The biggest challenge is the lack of a suitability standard for life insurance, said Cailie Currin, CEO of Currin Compliance Services, during a fall compliance webinar.
Regulation 187 was finalized in 2018 and took effect Aug. 1, 2019 for annuities. It sets a best-interest standard for annuity and life insurance sales. It also mandates enhanced disclosure and documentation, required of the producer and insurance carrier, as well as training programs.
Hybrid Policies Explode
It was one of the most stunning data sets discussed during the NAIC summer meeting in New York City: policies sold with a long-term care rider jumped from 228,000 in 2015 to 461,000 in 2018.
Today, more than 40 carriers are selling these products with a long-term care element, said Steve Schoonveld of the Society of Actuaries. "That's a really robust market," Schoonveld told the Senior Issues Task Force.
Agents should keep in mind how flexible the LTC hybrid products can be in meeting several needs for clients, actuaries said.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.
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