At a time when large financial institutions seem to be all about blatantly bilking their customers, as in Wells Fargo just announcing a 3% increase in already stupid high credit card rates, life insurance companies continue to act innocent in the face of evidence that they too are taking advantage of current and prospective policy owners.
My post yesterday calling out West Coast Life on their change of conversion options to a non guaranteed product is just the tip of the iceberg as I expressed in a recently published article.
It seems that the turn many insurance companies are taking toward non guaranteed “permanent” products has, at least to me, an uneasy similarity to adjustable rate mortgages. Lots of ways for the companies to win and lots of ways for the clients and their families to lose. Companies use four primary criteria to justify a change in a non guaranteed rate, mortality assumptions, interest rates and the loose cannons of them all, reserve requirements and company performance.
Reserve requirements have been changed in the recent business environment with state agencies wanting to see more actual cash opposed to leveraged accounts. More cash has to come from somewhere and as I’ve often discussed, non guaranteed values in life insurance are fair game for changing. They were declared non guaranteed for a reason.
Company performance is a more nebulous animal. Non guaranteed gives the company the latitude to raise rates if they are losing money, or if they simply aren’t making as much as they would like. A kind of profit faucet.
Bottom line. Is the sky falling? No. Not really, although some companies are acting like it. The good news is that there are plenty of companies and products out there that still bring fully guaranteed universal life at good prices to the table. An independent agent can steer you in the right direction. Just make sure they know you won’t accept any surprises down the road.