North American Builder Plus IUL 3
- Thread starter Jay1958
- Start date
- 10,329
That is not completely correct.
When an option is at the target price, they sell at least part of them. Especially now since a few carriers got hammered on indexes that performed better than expected.
When a customer surrenders a policy, they are forced to sell the options. Attrition hits VC index options really hard. Same with Loans or Surrenders, it forces the carrier to sell off options when the withdrawn amounts get large enough.
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- 4,575
what are your thoughts on his overall point of that post though where he says low volatility index will net better returns even if it averages the same as the more common S&P500 as the low volatility index will be smoother. I have heard other agents & wholesalers say that, but I cant wrap my head around how that would be true with increasing DB policies. I also have my mind thinking something linked to a more volatile index will get the benefit in substantially down years of starting with a lower starting point & could mean more often larger following year credits.
- 10,329
I just dont feel it will work out that way.
1. the multipliers are non-guaranteed
2. the VC index is literally designed to perform less than the benchmark index
Even if it does what it implies over the next 5 years, I have zero faith it will over the next 30 years. Thats if they even still exist then.... since carriers can pull indexes at will, and have.
If IUL expectations are based on indexes other than the benchmark indicated in the contract, its based on a hope and a prayer its still offered in 20 years.
VC indexes have not met historical back-looks on the annuity side generally speaking. I dont expect them to on the life side.
Managing volatility within a managed volatility product is not for the benefit of the Owner.
One point though about your comments, most IULs are designed to switch to a Level DB once premiums stop. But we are still talking about multiple decades possibly.
- 4,575
dont you mean, most agents illustrate that someone, someday will remember to change the policy to level. Or, are you saying some carriers have it contractually written it will happen for sure.
If reliant on client remembering in the future or an unknown future servicing agent or call center servicing the policy, I dont have much belief it will get done.
How many ULs from the 80s/90s had items illustrated by agent like face reductions or changes to level or deposits being increased or child/spouse riders being deleted that never ended up getting done, causing policy to perform worse than illustrated or to lapse. I see child riders still on policies when the youngest kid of the parents is 40 to 50 years old now, so clients policy has had COI deductions for 15-25 years after having coverage.
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- 10,329
Very true. It must be serviced correctly for that to happen. Most new agents are out of business in 5 years.
If the company is forced to sell to meet redemptions I'd think the actuaries are not doing a very good job.
- 4,575
So, if let's say a once in hundred-year virus pandemic hits. Government proceeds to shut down businesses to flatten the curve. Business owners or high income folks may need access to their cash values like their agent promised them they could have access to. Let's say it is cash withdrawals & loans at 3x the expected quantity the carrier is accustomed to. How would Actuaries have been able to predict such a turn of events, triggering higher than average surrenders, withdrawals, loans, missed premiums & death claims?
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- 10,329
It happens. On a regular basis.
Its happened to the UL market. GUL market. VA market. LTC market. Self insured markets. etc. etc.
The carrier is fine long term. Its the customers who suffer.
Actuaries can and do get it wrong.
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