Sheryl Moore, indexed insurance product icon and creator of LifeSpecs, the number one industry due diligence software for financial professionals and carrier product design teams.
Current Carrier Rank by Quarter
Pacific Life Companies
National Life Group (LSW)
Midland National Life
American General Life Companies
Lincoln National Life
Allstate Financial (LBL)
North American Company
Fidelity & Guaranty Life
The Hartford (est)
Q1 1998 to Present
The First Indexed UL
The first Indexed Life product introduced was the TransDex 500, an Indexed UL that was launched by Transamerica Occidental in January of 1997. Less than four years later, Transamerica had exited the Indexed Life market with a total of only ten carriers in the market at year-end 2000. However, with sales burgeoning on the ten-year anniversary of Indexed Life, the carrier decided to re-enter the market with their new design in January of 2007, TransIndex IUL. Four other insurance carriers have made similar decisions to re-enter the market after pulling their Indexed Life product as of the close of 2007.
Indexed Life Then vs. Now Just one year after their introduction, sales of Indexed Life reached $64,717,446 at the close of 1998. A little less than a decade later, sales of the product had increased nearly eight times 1998’s levels to a whopping $512,247,694 at the end of 2007. Today, thirty-four carriers compete against one another in the Indexed Life market. Not bad for a product that less than a decade old!
Indexed Universal Life provides lifetime coverage that is unbundled and flexible, yet earns potential interest that is based on an external index, such as the S&P 500®. Universal Life (IUL) was developed in 1997, and was a solution for people who wanted the safety and guarantees of Universal Life, but also wanted a potential for greater interest crediting. This permanent type of insurance provides lifetime coverage if performance warrants, as well as minimum guaranteed cash values and death benefits (like traditional Universal Life). Minimum guarantees may be slightly lower than traditional UL, in order to compensate for the greater upside crediting potential. Upside potential is limited, however. The cash values of an IUL are based in-part on one or more indexed crediting method(s) that the client selects. In this manner, IUL's resemble VUL because the client has some control over the policy through the premium allocation (although not all policies give a choice of multiple crediting methods). However, like traditional UL, the insurance company assumes any risk in the event of a downturn in interest rates. The funds that back this type of product are also held in the insurance carrier's general account. Therefore, the Indexed Universal Life policyholder is always protected by the minimum guarantee, regardless of interest rate performance. Insurance carriers who sell this type of product offer it via a life insurance policy, as it is a fixed insurance product. This type of product is typically positioned for clients who are risk averse, but want greater potential for indexed gains. Indexed UL has greater upside potential (although limited), minimum guarantees, and downside protection. A consumer cannot lose their principal due to fluctuations in the market with this type of product.
Indexed UL is a type of fixed insurance product, and regulated by the state insurance departments for each individual state. It does not require the presentation of a prospectus because it is not a securities product.
The insurance company must pay out a minimum guarantee, regardless of what they earn on their investments. The minimum guarantee on Indexed Life products is lower than those of a traditional Universal Life, but their potential interest crediting is greater. A client may purchase an Indexed Universal Life product with a minimum guarantee of 1.00%. The maximum credited interest may not exceed a cap of 8.00%. However, if the market “tanks” and the insurance carrier does not earn anything on their money, the consumer is still protected by the minimum guarantee of 1.00%. For this reason, the insurance carrier holds the risk with an Indexed Universal Life policy.
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