How Allianz is leading the evolution with enhanced client education and the potential for greater indexing control
Allianz Life Insurance Company of North America (Allianz) continues its long-term leadership by sharing its lengthy experience with — and vision for — trends in the fixed indexed universal life insurance (FIUL) space.
In this Movers & Shakers Q&A, we interview Austin Bichler, FSA, MAAA, Senior Director Actuary & Illustration Actuary, Allianz, who shares the latest on AG 49, how the rule will continue to impact the industry and the company’s continued insight into what’s ahead for FIUL.
What’s the latest on AG 49?
The impacts of Actuarial Guideline 49, part A, were effective for FIUL policies sold on or after December 14. It adds conservatism to FIUL illustrations by reducing the index credit performance that can be shown. When illustrating certain features, such as multiplier bonuses, the illustration cannot show better results than a product without such features. In addition, there are a couple of other changes specifically in the illustration of loaned values.
There have been a few different versions of the guideline since it initially came out in 2015, but the regulators’ goal has been pretty consistent: Ensure that there is consistency among different product features and among the assumptions used for non-guaranteed illustrated rates within an FIUL illustration.
How has Allianz changed its illustrations beyond AG 49 requirements?
We’ve used this opportunity to fine-tune our illustrations in order to simplify them, make them more visual and align them with the story we tell in our marketing materials for a more cohesive package. Our goal has always been to focus the illustration so that it facilitates consumer education and understanding. We feel the newer illustration format builds on our previous efforts to help consumers understand how the product works, its potential and its risks.
AG 49 implementation has been a long road for the industry. Are there any silver linings with this latest phase?
It’s important to remember that the rule only changes illustrations. This does not change or restrict any actual product features that can be offered. There is a lot of value to be had in FIUL policies and the features and potential benefits they provide to the customer. They are just going to look different now in an illustration.
Added conservatism in illustrations is not a bad thing if this leads to a shift in focus from numbers on the page to more of a discussion and education and a truly holistic view of all the product features. We believe this fresh approach is a benefit to the consumer and will make the FIUL industry as a whole stronger. Our industry will have to get creative with additional benefits we offer and how we market them, and that is always a good thing when innovation and invention are at work.
In practical terms, how does enhancing education and client expectations make a difference to consumers?
It is always good to create more discussion, conversation and education because that can lead to a more informed consumer. When you manage expectations and the consumer has insight into what can happen in the future, I believe that consumers will be more satisfied, feel confident in their decisions, see the long-term value of FIUL and have a better understanding of the total picture of what it offers as part of their financial strategy.
Where do you see carriers shifting as AG 49 implementation continues?
Every carrier is wrestling with what may come next and how they will align with changes. Many won’t have their answers immediately after December 14, and some carriers are going to have multiple answers. As things change, our industry and carriers need to focus on opportunity. When I talk with those involved in the sales process, it really is seen as an opportunity for education and to shine in the client’s eyes. Being open and knowledgeable in conversations can leave a great impression with clients, and more business may come a financial professional’s way. I fully expect some changes in product benefits that are offered, but I think it might even be more interesting to see how the sales process and marketing evolves.
Where is Allianz, as a leader in the FIUL space, seeing success in light of AG 49 adjustments and changes?
We will have new features, and we are looking at potential product redesigns that make things even more straightforward and more focused. But at the end of the day, we recognize the power of indexing and indexing potential. We have been selling FIUL since 2005. The actual credits earned on our policies have averaged 6.98%, and that is over 15 years.1 Even though it can’t necessarily be shown in an illustration, we have a great track record for actual results that our clients have seen with their policies. The value of FIUL is going to be even more apparent in the current interest rate environment, which is really low right now. Customers are going to be looking for higher interest credit potential, and we offer some really unique index allocation options and crediting methods that other carriers do not offer and cannot offer. So far in our experience, these unique offerings are playing a role in what continues to drive our success.
How does the Index Lock feature on Allianz FIUL insurance policies reflect the company’s innovation and leadership in the marketplace?
Our Index Lock feature offers clients greater control by providing the opportunity to lock in an index value one time during the crediting period; that index value will remain locked until the end of the crediting period2, and it is used to determine the interest credit to the client. It is another tool available to financial professionals and their clients that no other FIUL carrier currently offers. Features that can provide greater control are especially important in a rapidly changing market environment. We’re also adding the Index Lock feature to select, previously issued policies at the policy anniversary, so it’s been a great opportunity to spark discussions between the client and the financial professional at policy review.
Do you have any other thoughts to share on where the NAIC might be headed and what the future might hold in light of AG 49?
I think it will be an evolving topic, and I don’t discount that at some point the path might go toward disclosures. As far as illustrations, the regulators could look at more ways to disclose realistic ups and downs with credits in FIUL policies in order to show the risk and the reward. A lot of good work was done by regulators and the industry to get us to this point today, and it will be interesting to see if and when the discussion gets picked up again and whether we can continue to increase client education within FIUL illustrations.
Allianz is proud to be a leader in indexed solutions and to use its experience and knowledge to develop unique FIUL products. To learn more, visit www.allianzlife.com/lifesalestools.
1. The average interest credited shows FIUL insurance policy crediting history of Allianz FIUL policies from 3/1/2006 through 12/31/2019 for products with complete 12-month data available. Credits are based on actual caps, participation rates and interest rates that have been applied to in-force policies. This is only one aspect of an FIUL insurance policy, which does not take into account policy fees and charges and does not describe any other features. Many factors, including the current market environment, may affect the interest credited to the policy. You should consider all product features before purchasing a policy.
2. The index value is locked at the end of the business day, and the actual index value locked may be higher or lower than the value at the time of the lock.