Yet another announcement yesterday from a top of the line life insurance company. No names but it rhymes with Lincoln. I’ve warned, screamed and hollered over the years that assumed interest rates aren’t just assumed, but simply unsustainable so I want you to bear with me as I go through this announcement and show you how, in the full light of day this company, like so many others, has shared the bad news with agents and policy holders.
“On September 12, 2016, in response to persistently low interest rates, the Unnamed Company will update its Unnamed® Life Insurance UL product, which will require higher premiums on new sales. The current version of the life insurance product will sunset on October 14, 2016 in approved states.” This is a product that has only been on the market for a short period, telling me that it was set up to attract (bait) life insurance customers, or they had an exceptionally stupid group of actuaries working with them. At the time the first product came out there was simply no indication that higher interest rates should be expected anywhere in the near future.
So, once again a very small proportion of a customer base got a great deal on a very sensitive product, one so dependent on life insurance assumptions that there isn’t even room for a late payment. And now they put the insurance world on warning that those assumptions will remain low for the foreseeable future, as in forever.So o to the really bad news for those that bought traditonal universal life between 1999 and 2007 with this same company. “Effective October 9, 2016, current Cost of Insurance (COI) rates are being changed on some Universal Life Insurance policies issued by an unnamed company between the years 1999 and 2007. While the majority of these changes are increases, some policyholders will also see decreases, reflecting this company’s commitment to acting fairly and responsibly. It should be noted that a large percentage of those policyholders with a COI increase have a lapse protection rider or provision that remains in effect.
“Some policy holders will also see decreases”. The only policy holders that will see decreases are those that overfunded the assumptions on these policies in hopes of high returns. The only reason for the decrease would be an overcharge for assumptions to begin with.
Bottom line. You can slip almost any company’s name in the unnamed slot and have an accurate picture of how the customer’s trust and good faith is being treated. Many people have lost not only their retirement nest eggs but their life insurance to these companies and the agents that sold these policies based on assumptions have mysteriously retired or changed careers. Shame on the life insurance companies, agents and state commissions who signed off on these products. If you have questions call or email me directly. My name is Ed Hinerman. Let’s talk.