#132 | 2018 Indexed UL WYSIWYG Award Winners
Modern Indexed UL products have upended the traditional Universal Life story. These days, Indexed UL products are more defined by their unique factors and formulas than by the basic shared mechanics of all Universal Life products. There is no longer such a thing as a “standard” Indexed UL product because almost all Indexed UL products are now heavily impacted by non-standard policy factors ranging from basic interest bonuses to highly complex, virtually undisclosed, formula-driven index return multipliers – and everything in between. If a basic Universal Life product requires 3rd grade math, then the modern Indexed UL product requires multivariable calculus.
Actually, the situation is worse than that. Not only do modern Indexed UL products require multivariable calculus, but they’re masquerading as if they operate on 3rd grade math. When you look at an illustration for a hyper-complex Indexed UL product, does it look any different than a basic Universal Life policy? Nope, it doesn’t. The simplest products look exactly the same on the illustration as the most complex products. This poses a real problem for producers who want to sell simple products but don’t have the time or expertise to sift through all of the material it takes to figure out the guts of a modern Indexed UL product. I get the same question from advisors all the time – how in the world am I supposed to figure out these products and feel good about what I’m selling?
That’s why I created the What-You-See-Is-What-You-Get (WYSIWYG, “wiz-e-wig”) Awards for Indexed UL products. These are IUL products that play by traditional rules of Universal Life and are free of extra product factors. They’re addition and subtraction products, not multivariable calculus products. What you see is what you get. It’s that simple. They don’t have interest bonuses, index return multipliers, dynamic COI charges or any of the other funny business found in the typical modern Indexed UL product. I can’t promise that they’ll illustrate better than Indexed UL products not on this list – they probably won’t. This is not a competitive benchmark, it’s a simplicity benchmark. And in this crazy world full of Indexed UL products that few agents and virtually no clients can understand, simplicity is an attribute worth selling in itself.
|Death Benefit Focused
American National Signature IUL
Ameritas Excel Index UL
F&G Life-Elite IUL**
Mutual of Omaha Income Advantage IUL
Pacific Life PIA 5*
Principal IUL Accumulation**
|F&G Life-Choice IUL
Lincoln WealthPreserve IUL
Mutual of Omaha Life Protection Advantage IUL
Principal Indexed UL Flex II
Protective Indexed Choice UL
*Pacific Life is replacing PIA 5 early next year with PIA 6, which will likely not be on this list because the initial filing shows that it has a Performance Factor with undisclosed mechanics
**Both products have a 0.25% fixed interest bonus
WYSIWYG Award Criteria
In order for an Indexed UL product to qualify as for a WYSIWYG Award, it must be a standard Indexed UL product without the following:
- Interest Bonus > 0.25% – Inclusion of an interest bonus breaks the connection between the stated illustrated rate and the effective rate that drives illustrated performance. Furthermore, interest bonuses are contingent on assumptions about persistency, future interest rates, investment spreads and profitability targets that will change throughout the life of the policy and will impact decisions about how to set index participation and other non-guaranteed product elements in the future. Simply put, products with interest bonuses are not the same as products without them and every interest bonus is predicated on a different set of assumptions.
- Indexed Return Multiplier (IRM) > 5% – IRMs greater than 5% are excluded for several reasons. First, they are shown as a benefit in every year of a level rate illustration but will actually only provide a benefit in the event of positive index credits. Second, as with interest bonuses, IRMs break the connection between the stated illustrated rate and the effective rate that drives illustrated performance. Third, IRMs require an allocation from the option budget that changes with overall option prices, a tradeoff that will create some bizarre results in the future that are not captured in the illustration. Finally, many IRMs rely on the same assumptions as interest bonuses and will similarly impact future decisions about the carrier manages the product over the long-run.
- Illustrated indexed loan spread greater than >1% as a result of either an interest bonus or IRM – If a product qualifies under Criteria 1 or Criteria 2 but adds the additional illustrated interest from the Interest Bonus or IRM to the illustrated loan spread, then the policy is excluded from WYSIWYG because the illustrated distribution performance depends on the carrier’s particular interpretation of AG49. Illustrated income and distribution solves are only relevant and comparable for products that have identical interpretations of how to illustrate loan spreads under AG49.
- Undisclosed Charges – If the product has a charge that is not clearly defined and disclosed in illustration material but impacts illustrated performance, then the product is disqualified from WYSIWYG.
- Dynamic Charges – A small but growing number of companies are using formula-driven charge schedules that can change with policy performance. In practical terms, this means that the charges underpinning the illustration shown to the client will absolutely not be the final charges deducted from the policy. With dynamic charges, what you see is formulaically not what you will get and these products are therefore excluded.
If you work for a carrier and you think I missed your product as a WYSIWYG Winner, then feel free to shoot me a note at [email protected] to discuss. I’m happy to add other products to the list if they deserve to be on it.
The Life Product Review is committed to delivering the industry’s best independent and objective life insurance product intelligence. While we make a limited number of articles to the general public, we reserve our best content, including our library of over 120 articles, for our Members. Join here for $99 a month or $995 annually.