#127 | Securian and Nationwide Product Preview

As always with product previews, the full story about the product will come out at launch. This preview simply covers what the filing says and how the carrier might build it for launch.

Securian CAIUL

Securian has always been quick to release new products and build out its portfolio, so it should be no surprise that they’ve decided to build what will undoubtedly be a very competitive death-benefit focused Indexed UL product. I covered the issues with using Indexed UL for death benefit in a previous post where I outlined my cautions and skepticism about the concept.

As befitting Securian’s generally aggressive stance in the Indexed UL space, this product is stuffed to the gills with bonuses and multipliers. It has a 2% asset charge (0.16% monthly) to fund an unspecified indexed multiplier. Securian included the charge as a part of the base policy charges and added a bracketed index return multiplier to all of the indexed accounts. This is in keeping with what other life insurers are doing in accumulation products but is very aggressive for death benefit Indexed UL products. On top of that, the product has an Annual Policy Credit with the same vague and opaque language as the one in Orion IUL. The APC is a major factor in the illustrated performance of Orion and will likely be a major factor for this one as well. In other words, buyer beware. More on this product when it comes out.

Nationwide IUL Accumulator II Preview

Nationwide has been loath to go for blood in the Indexed UL space. They’ve traditionally focused on actually adhering to AG49 and promoting low policy charges. Well, it appears that most of that is going out the window with their new Indexed UL products. Desperate times call for desperate measures, I suppose.

Accumulator II sports a new set of Indexed Account options that have up to a 3.25% asset charge to fund the Advanced Multiplier, which appears to be a basic index return multiplier. If Nationwide hits the gas at launch, their 3.25% will be the highest asset charge in the industry and will fund the highest multiplier as well. However, I’ve been assured that they are only planning a 2.25% asset charge at launch. I also know that they originally thought a 2.25% charge would get them to the top of the spreadsheet, which it almost assuredly will not. Other companies are coming out with gargantuan asset charges in early next year and Nationwide is launching a lower cap than its competitors at  just 9.25%. They’ll need every penny of that 3.25% charge to win on the illustration and my bet is that they’ll use it by early next year.

Accumulator II still has a suite of Core Indexed Accounts, which are marketed as more “traditional” indexed account solutions. However, Nationwide now has the ability to add an asset charge of up to 0.5% annually on those accounts. This is actually the first time I’ve seen a life insurer add the ability to charge an asset fee after the fact and while it might sound like a minor quirk, it’s actually a material change. In the future, Nationwide might decide to maintain its current cap by increasing the asset-based charge. Why would they want the latitude to do that? Financially, their minimum guaranteed caps are low enough that they don’t pose any risk, but increasing the fee rather than lowering the caps can make their marketing story hold water when it otherwise wouldn’t. In other words, Nationwide built itself an escape hatch for having to continue to drop caps. This is problematic. People who buy the Core accounts are doing so because they want downside protection with upside potential. Increasing the fee while maintaining the cap violates the first part of the formula and Nationwide can pull that lever without asking their permission about whether they’d rather pay the fee or have a lower cap. Tsk tsk. This 0.5% fee should either be charged right now to fund a higher cap so that clients know it’s in their policy, or they should get rid of it. This middle ground they’ve chosen is bad form.

Overall, Nationwide’s moves reflect the continued shift in the Indexed UL market towards more leverage, more illustrated performance and higher fees. It’s disappointing from a carrier that has traditionally been opposed to those things. But if Nationwide does it, then everyone is probably going to do it. That’s the tragic reality of the modern Indexed UL market.