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Updated Indexed UL illustration guidelines to take effect Sept. 1

Brian Anderson

The National Association of Insurance Commissioners (NAIC) on June 18 approved updated, more reasonable guidelines for the illustrations that insurers, agents and brokers can use to market indexed universal life (IUL) products. The new guidelines are set to take effect Sept. 1.

Adoption of Actuarial Guideline XLIX for Indexed Universal Life Illustrations (AG 49) represents the work of the Life Actuarial Task Force to develop realistic credited rates for illustrations of IUL products. It is expected to take effect for all IUL policies sold on or after on Sept. 1, 2015.

“The guidelines approved today by the NAIC are the result of a considerable collaborative effort between regulators and industry,” the American Council of Life Insurers (ACLI) said in a statement issued shortly after the NAIC approved the new guidelines on a conference call of the Executive Committee/Plenary last Thursday.

The new guidelines offer uniform rules for the development of illustrations of IUL products that will benefit consumers, the ACLI statement continued, providing guidance in determining the index-based crediting rate for the currently payable scale and the disciplined current scale; limit the policy loan leverage shown in an illustration; and require additional consumer information (side-by-side illustration and additional disclosures) that will aid in consumer understanding.

“Moreover, the guidelines would set a maximum rate that could be illustrated based on a standardized formula. The maximum rate could vary depending on product design,” the ACLI statement added.

The new guidelines are intended to solve the current lack of uniformity in how carriers and agents illustrate the potential performance of IUL policies, and how hypothetical historical index returns are calculated. The NAIC had asked the ACLI to provide industry input for the development of the guidelines, leading to ACLI establishing a task force to develop an industry-supported recommendation. After extensive deliberation and a vote by ACLI member companies, ACLI delivered a recommendation for the guidelines to the NAIC that was supported by a super-majority of the ACLI Life Committee, the CEO Steering Committee, and the ACLI Board of Directors.

On the June 18 call of the Executive Committee/Plenary, the NAIC also advanced some additional key regulatory priorities in adopting the Cybersecurity Guiding Principles, and the Title Insurance Consumer Protection Fund Guideline. The NAIC also adopted amendments to the Valuation Manual, amended charges for the Market Regulation and Consumer Affairs (D) Committee and made a technical revision to the Notice of Protection Provided by Life and Health Insurance Guaranty Association.

The Cybersecurity Guiding Principles identifies types of safeguards regulators expect insurers to have in place to protect consumers in the event of a cybersecurity breach. The 12 principles direct insurers, producers and other regulated entities to better identify risks and develop practical solutions to protect consumer information. The NAIC also announced that they are cohosting an event on cyber issues with the Center for Strategic and International Studies on Sept. 10, 2015.

“The NAIC continues to update and modernize the U.S. system of state-based insurance regulation through these updates to our framework,” said John M. Huff, NAIC President-Elect and Missouri Insurance Director. “Insurance regulators are moving forward with the tools they need to protect consumers, especially in light of recent cyberattacks in the U.S.”



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