Filed Under:Life Insurance, Life Products

Digging into IUL at NAILBA 32

Among the numerous sessions offered today at the annual NAILBA conference was one focusing on Indexed Universal Life (IUL). Speaking on the topic were Alan Grissom of S&P Dow Jones Indices and Dick Weber from The Ethical Edge Inc. Both are equally knowledgeable in the field.

During this in-depth session, attendees took a close look at what goes on inside the policies and pricing of indexed life, while investigating some of the more important pieces beyond the normal scope of products. 

IUL has grown from about $100 million to $1.3 billion in premiums and industry professionals think that growth is going to continue as many anticipate the appeteite to remain strong

The second quarter 2013 sales and market report from Wink a life insurance and annuities research firm, shows that in 1998 the IUL market stood at $64.7 million, growing to $1.3 billion in 2012 and $668 million for the second quarter of 2013.

"We are up 15 percent for the year again," said Grissom. "Clearly we’re seeing tremendous growth with this. It’s a good story."

But what's the best crediting strategy for IUL? The most popular are:

  • Annual point to point;
  • Term end point;
  • Montly averaging.
These are three very different approaches to crediting. But do they yield very different results? According to Grissom, over the long term, they do not. 
 
"Over a long period of time, they're going to perform about the same," he said.
 
As for IUL mechanics, Grissom pointed out five important provisions:
  • Participation rate: Typically in the IUL role about 100 percent;
  • Cap: Typically 10-14 percent (100 percent PR rate);
  • Term: Higher cap rate comes with higher expenses;
  • Index;
  • Crediting formula: Best long-term performance tied to highest cap rates.
As for the difficulty in selling the product, Weber suggests lessening the confusion that not only consumers feel, but agents, too. 

"The more education we can provide around IUL, the better we can do with the products," he said.

Weber also noted that prices is often an issue for clients, but that too can be resolved in some cases.

"Price is only an issue in the absence of value," he notes. "Here's what I recommend to a broker stuggling with ‘why would I recommend paying anything more than necessary for life insurance?' Add value -- like riders -- to get away from number-driven sales."
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