VULs Come With More Levers That Adjust For Risk

By Cyril Tuohy

A life insurance expert with Lincoln Financial Group said Friday that enhancements to the company’s AssetEdge suite of variable universal life (VUL) policies represent a trend of giving policyholders more control in their exposure to stock market gains.

Exposure to market gains is important now because stocks generally have done well since the end of the 2008 financial crisis. However, advisors also are having difficulty generating enough yield from bonds and fixed income portfolios due to extended low interest rates.

At the same time, many preretirement and retirement investors remember the market collapse and aren’t comfortable with too much exposure.

That has spurred VUL product experts to insert more levers to calibrate the asset accumulation side of VUL products. These levers include volatility managed funds, indexed universal life funds with caps and floors, and premium guarantees to avoid policy lapses.

Michael Parker, vice president of life product management with Lincoln Financial Group, said that people want performance they can’t otherwise generate in a fixed income investment program.

“The VUL flavor of life insurance is becoming more popular because it gives opportunity for attractive economic gain while at the same time via new evolutions, protecting against most significant downside risk,” Parker told InsuranceNewsNet.

LIMRA data shows that individual VUL annualized premium rose 21 percent in the first quarter compared with the year-ago period, far outpacing the 8 percent growth in first quarter annualized premiums for individual life sales as a whole.

Lincoln Financial said in a news release that its latest changes to AssetEdge VUL include new fixed and index accounts to help advisors tailor growth within the policy’s cash values.

The company also said that the changes include three new indexed accounts designed for moderate growth to protect policyholders from market dips, a fixed account for investors in search of predictable growth, two loan options, and a living benefits rider to be used in the event of an unexpected, permanent chronic or terminal illness.

Index accounts use a one year point-to-point crediting methodology tied to the performance of the Standard & Poor's 500 index.

As much as policyholders would like to take advantage of market gains, “recent memories of a bad stock market performance makes them justifiably nervous,” Parker said.

“That disposition has driven VUL in a direction that allows policyholders to have the opportunity to have some stock market participation while at the same time protect the downside,” he added.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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 cyril.tuohy@innfeedback.com.