Managing life insurance is not an easy job in this historically low interest rate environment, especially with the unprecedented cost of insurance (COI) increases we have seen in the last few months. In one of our recent blogs, we highlighted one Transamerica policy our Remediation Department has dealt with. That policy’s premium jumped from $36,400 to $81,595 overnight. Hard to deal with policies like that…and hard to manage.
Now Transamerica is making it even more difficult to manage their policies. Yesterday we received an email from Transamerica that they will no longer run in force ledgers based on “current assumptions” on a specific group of Universal Life policies. According to the carrier, they are no longer “able to run non-guaranteed rates on a number of in force products.” They told us that after “annual illustration testing” of their in force products, going forward they will only illustrate “the guaranteed future interest rate and monthly deductions,” on that group of in force policies.
Just so I am perfectly clear: This means that we literally cannot get an in force policy illustration that projects the policy values into the future based on what Transamerica is actually charging and crediting inside these policies. The only ledgers we can receive are based on guaranteed maximum charges and guaranteed minimum interest rate assumptions.
So how do we manage the policy? According to an email from Transamerica, we can request “a policy’s current accumulation value and monthly deduction amounts” and then “determine whether the current premium will sustain the policy until the next anniversary.”
Projecting past the end of the policy year is anyone’s guess, I assume. It is virtually impossible to fund a lifetime asset like life insurance efficiently with information that provides insight less than twelve months ahead.
The policies affected are not among those previously affected by the COI increase announced a couple of months ago. And Transamerica has told us that no COI increases are planned for this group. We will see.
At ITMTwentyFirst we manage over 800 Transamerica policies and our goal is to maximize the benefits to beneficiaries and policy owners. In fact, our clients, many of the top Trustees in the country, have a fiduciary duty to do just that.
What is Transamerica’s duty to its clients?
Ultimately this is an NAIC Illustration Regulation issue. Carriers are required to test for compliance with the regulation on an annual basis, as it relates to inforce business. Based on conversations I’ve had with several carrier actuaries, certain parameters of the test (primarily lower general account portfolio returns) have caused several carriers’ products to fall out of compliance. A carrier has limited options when a product is out of compliance, especially when the product falls into the NLG-UL bucket. Often leaving the carrier with one option, which is to only project values on a guaranteed basis moving forward.
This is a great point Greg. I understand what you are saying and spoke with the NAIC about this. Maybe I am too hard on the carrier? Maybe this is the best they can do? Here is the problem I have. We (at ITMTwentyFirst) have the ability to “reverse engineer” and analyze the policy, but what about the poor consumer that does not? They are going to receive an illustration that shows that if they continue to pay the same premium they have been paying for years the policy will lapse in 2-3 years because now they are only showing guaranteed crediting rates/costs. Will the uniformed consumer understand that or simply throw their hands up and surrender the policy for the cash value? Maybe I am too harsh, but it just does not seem fair to me.
THANKS FOR MONITORING THIS MATTER. AS A TA OWNER OF UL WE NEED TO HAVE FULL DISCLSUER AND THE ABILITY FOR LONG TERM ASSESSMENTS.
I agree. This is a long term asset.
how do we make some collective attempt to address the issue with TA?
We are addressing the issue with our clients with affected policies and will be notifying states for their thoughts on the matter.
[…] guaranteed future interest rate and monthly deductions” on that group of in-force policies. See Transamerica Now Making It Almost Impossible to Manage Their Life Insurance Policies. This decision makes it virtually impossible to understand the actual policy performance on those […]
On March 11, TA sent two IFLs on the same policy. One premium was $40,000. The second was $287,000. They both projected coverage to age 96. Today TA tells me that the $40,000 illustration was incorrect – that premium will only carry the policy for 2 years. Premium increase is 600%!
John: I understand your frustration. if you would like me to take a look at your situation, you can email me at firstname.lastname@example.org. I would note that a lawsuit has been filed against Transamerica and I will be posting information later today about that. We manage many of these policies and are actively reviewing this situation. Thanks for your input.
[…] the past we have written about limitations on obtaining ledgers to manage inforce life insurance. In one instance the inability to provide in-force ledgers based […]
[…] November of 2015 we published a blog noting that Transamerica was no longer providing inforce illustrations with “current […]