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?