GUL Shadow Accounts Haunt Carriers

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Shadow account deficiencies continue to haunt carriers as bottoming out interest rates and minimum reserves take their toll. For whom does the bell toll? Only the shadow knows. But one thing is clear and carriers be warned. Any attempt to bill the policy owner more than the guaranteed premium that was quoted will be met with the greatest producer revolt and the worst PR the insurance industry has ever know since the vanishing premium fiasco of the nineties. Carriers may insist that they have a contractual trigger to bill more than the original guaranteed premium quoted, but they'll either spend more in litigation or lose money as policies come flying off the books for insureds that can pass a medical exam.

ProducersWeb - Life - Milliman survey reveals re-pricing of UL products among insurers
 
Do you believe that companies would really attempt to raise those rates. I assumed that the premium is contractually guaranteed. Do you discourage future sales?
 
It is unfortunate that there is a potential to interpret contractual triggers that could, in fact, lead to additional billing beyond the original guaranteed premium quoted at issue. At present, carriers have taken the position to leave the market, increase rates on new business, and make up the shadow deficenices internally...basically becasue the PR damage would be that catstrophic.
 
Do you believe that companies would really attempt to raise those rates. I assumed that the premium is contractually guaranteed. Do you discourage future sales?

The push back on any company that attempts to enact this would be bringing equity suit against the carrier. It depends on the contract itself, but being contracts of adhesion this is an ambiguity that would most likely rule in favor of the policy owner.

Now this being said, anyone who understand level premium life insurance and the importance of a reserve, the idea that GUL premiums might not be quite right should be a surprise to no one.
 
But is it an opportunity to get low cost guaranteed premium/death benefit?

Absolutely, but making sense of how they intend to keep these policies adequately reserved is certainly an interesting topic.

Most carriers put very little actual cash aside to reserve for these products. Instead they "reserved" with Letters of Credit. Only problem they're running into is those LOC's are becoming less and less available (awesome).

They're also missing their profit goals for these products. It isn't quite the awesome deal they thought it would be.
 
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