Actuarial Outpost
 
Go Back   Actuarial Outpost > Actuarial Discussion Forum > Life
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions



Reply
 
Thread Tools Search this Thread Display Modes
  #1  
Old 08-07-2017, 09:27 AM
simonbelmont's Avatar
simonbelmont simonbelmont is offline
Member
SOA
 
Join Date: Mar 2011
Location: NY
College: Graduate - NYU
Favorite beer: whatever's cheapest
Posts: 254
Default Non-Permanent IUL

I feel like this concept would have been capitalized upon if it was feasible, but why are there no non-permanent IUL products out there (something in between permanent and term). The big downsides of IUL products are

1. They are expensive compared to term insurance. They are expensive because, since everyone eventually dies, permanent life insurance must be priced so that there is enough money to pay a death benefit to everyone.

2. The vast majority of high income Americans eventually reach financial independence and generally no longer have a need for life insurance.

IUL is incredibly popular right now, and I feel like you could reach a large segment of the term market by developing an IUL product that only lasts until people don’t need life insurance anymore, say age 70. Having an age 70 limit seems like it could kill these two problems with one stone. You wouldn’t need to price as high since people are (relatively) unlikely to die before 70 and people wouldn’t be paying for excessive coverage for a death benefit they don’t really “need” to pay for after a certain point. Am I missing something simple as to why this is not being done?
Reply With Quote
  #2  
Old 08-07-2017, 11:47 AM
DES DES is offline
Member
 
Join Date: Nov 2003
Posts: 75
Default

You could always just fund your IUL such that it terminates at age 70. What other way is there to accomplish what you are suggesting?
Reply With Quote
  #3  
Old 08-07-2017, 11:54 AM
simonbelmont's Avatar
simonbelmont simonbelmont is offline
Member
SOA
 
Join Date: Mar 2011
Location: NY
College: Graduate - NYU
Favorite beer: whatever's cheapest
Posts: 254
Default

I was thinking if there could be any mortality savings by limiting the "term" of the product. I know cost of insurance charges are generally year by year based on experience, so there may not be any savings there, but could there be any reserve saving due to the fact that people would not be around past 70 and would that allow for cheaper insurance? I am trying to think of a way to frame it as more of a commodity/cheaper life insurance product that undercuts the cost of permanent IUL
Reply With Quote
  #4  
Old 08-07-2017, 12:51 PM
simonbelmont's Avatar
simonbelmont simonbelmont is offline
Member
SOA
 
Join Date: Mar 2011
Location: NY
College: Graduate - NYU
Favorite beer: whatever's cheapest
Posts: 254
Default

Taking this quote from an article comparing term and perm:

"Permanent life insurance is substantially more expensive for two reasons: First, while term policies are primarily created to last only for a finite period of time that will likely end before you die, permanent polices are often designed to exist until you actually leave this earth. This dramatic increase in the likelihood that the insurance company will be responsible to pay a death benefit means they need to charge more in premiums. Second, permanent policies often have a tax-privileged savings component attached to the policy, so a portion of your premium is set aside to accrue for your future use."

Wouldn't that lead to the conclusion that making the UL period finite would address that first issue?
Reply With Quote
  #5  
Old 08-07-2017, 02:13 PM
JMO's Avatar
JMO JMO is offline
Carol Marler
Non-Actuary
 
Join Date: Sep 2001
Location: Back home again in Indiana
Studying for Nothing actuarial.
Posts: 37,613
Default

Quote:
Originally Posted by simonbelmont View Post
I feel like this concept would have been capitalized upon if it was feasible, but why are there no non-permanent IUL products out there (something in between permanent and term). The big downsides of IUL products are

1. They are expensive compared to term insurance. They are expensive because, since everyone eventually dies, permanent life insurance must be priced so that there is enough money to pay a death benefit to everyone.
They also typically pay higher commissions to the agent. That makes them more expensive, and it has little or nothing to do with death benefits after age 70.

If you can convince the agents that a lower commission product, with shorter coverage period, would be easier for them to sell, you might get the product you are thinking about.

One thing I don't get. When you say IUL, do you mean products indexed to stock market performance? The indexing on this stuff is tied to the cash value. If you eliminate cash value, what benefit do you think there is to indexing? Or does the I in IUL mean something else to you?
__________________
Carol Marler, "Just My Opinion"

Pluto is no longer a planet and I am no longer an actuary. Please take my opinions as non-actuarial.


My latest favorite quotes, updated Apr 5, 2018.

Spoiler:
I should keep these four permanently.
Quote:
Originally Posted by rekrap View Post
JMO is right
Quote:
Originally Posted by campbell View Post
I agree with JMO.
Quote:
Originally Posted by Westley View Post
And def agree w/ JMO.
Quote:
Originally Posted by MG View Post
This. And everything else JMO wrote.
And this all purpose permanent quote:
Quote:
Originally Posted by Dr T Non-Fan View Post
Yup, it is always someone else's fault.
MORE:
All purpose response for careers forum:
Quote:
Originally Posted by DoctorNo View Post
Depends upon the employer and the situation.
Quote:
Originally Posted by Sredni Vashtar View Post
I feel like ERM is 90% buzzwords, and that the underlying agenda is to make sure at least one of your Corporate Officers is not dumb.
Reply With Quote
  #6  
Old 08-07-2017, 02:27 PM
Old Timer's Avatar
Old Timer Old Timer is offline
Member
SOA AAA
 
Join Date: Sep 2001
Location: The Great East
Posts: 1,992
Default

To pile on what Carol is saying, if you are going to have cash values, you will need to make sure the policy tax compliant with 7702.
__________________
Life is chaos personified.
Reply With Quote
  #7  
Old 08-07-2017, 02:30 PM
simonbelmont's Avatar
simonbelmont simonbelmont is offline
Member
SOA
 
Join Date: Mar 2011
Location: NY
College: Graduate - NYU
Favorite beer: whatever's cheapest
Posts: 254
Default

I wouldn't want to eliminate the cash value, otherwise we just have something like secondary guarantee UL. Maybe it isn't possible to have cash value and cheaper insurance, I was just wondering if you could have that cutoff age, maybe a refund of cash value, and not be stuck having to cover that older age group
Reply With Quote
  #8  
Old 08-07-2017, 03:44 PM
JMO's Avatar
JMO JMO is offline
Carol Marler
Non-Actuary
 
Join Date: Sep 2001
Location: Back home again in Indiana
Studying for Nothing actuarial.
Posts: 37,613
Default

Quote:
Originally Posted by simonbelmont View Post
I wouldn't want to eliminate the cash value, otherwise we just have something like secondary guarantee UL. Maybe it isn't possible to have cash value and cheaper insurance, I was just wondering if you could have that cutoff age, maybe a refund of cash value, and not be stuck having to cover that older age group
uh uh
Quote:
Originally Posted by Old Timer View Post
To pile on what Carol is saying, if you are going to have cash values, you will need to make sure the policy tax compliant with 7702.
__________________
Carol Marler, "Just My Opinion"

Pluto is no longer a planet and I am no longer an actuary. Please take my opinions as non-actuarial.


My latest favorite quotes, updated Apr 5, 2018.

Spoiler:
I should keep these four permanently.
Quote:
Originally Posted by rekrap View Post
JMO is right
Quote:
Originally Posted by campbell View Post
I agree with JMO.
Quote:
Originally Posted by Westley View Post
And def agree w/ JMO.
Quote:
Originally Posted by MG View Post
This. And everything else JMO wrote.
And this all purpose permanent quote:
Quote:
Originally Posted by Dr T Non-Fan View Post
Yup, it is always someone else's fault.
MORE:
All purpose response for careers forum:
Quote:
Originally Posted by DoctorNo View Post
Depends upon the employer and the situation.
Quote:
Originally Posted by Sredni Vashtar View Post
I feel like ERM is 90% buzzwords, and that the underlying agenda is to make sure at least one of your Corporate Officers is not dumb.
Reply With Quote
  #9  
Old 08-07-2017, 03:45 PM
JMO's Avatar
JMO JMO is offline
Carol Marler
Non-Actuary
 
Join Date: Sep 2001
Location: Back home again in Indiana
Studying for Nothing actuarial.
Posts: 37,613
Default

Um, I may have missed your answer. What does the I in IUL stand for in this thread?
__________________
Carol Marler, "Just My Opinion"

Pluto is no longer a planet and I am no longer an actuary. Please take my opinions as non-actuarial.


My latest favorite quotes, updated Apr 5, 2018.

Spoiler:
I should keep these four permanently.
Quote:
Originally Posted by rekrap View Post
JMO is right
Quote:
Originally Posted by campbell View Post
I agree with JMO.
Quote:
Originally Posted by Westley View Post
And def agree w/ JMO.
Quote:
Originally Posted by MG View Post
This. And everything else JMO wrote.
And this all purpose permanent quote:
Quote:
Originally Posted by Dr T Non-Fan View Post
Yup, it is always someone else's fault.
MORE:
All purpose response for careers forum:
Quote:
Originally Posted by DoctorNo View Post
Depends upon the employer and the situation.
Quote:
Originally Posted by Sredni Vashtar View Post
I feel like ERM is 90% buzzwords, and that the underlying agenda is to make sure at least one of your Corporate Officers is not dumb.
Reply With Quote
  #10  
Old 08-08-2017, 08:56 AM
simonbelmont's Avatar
simonbelmont simonbelmont is offline
Member
SOA
 
Join Date: Mar 2011
Location: NY
College: Graduate - NYU
Favorite beer: whatever's cheapest
Posts: 254
Default

I is still indexed, sorry, I'm an annuity actuary, I'm taking from this thread that there are 7702 tax implications that would not allow for a non-permanent policy with cash value?
Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 04:45 PM.


Powered by vBulletin®
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.20569 seconds with 9 queries