Should Anyone Really Worry About Actuarial Guideline 49?

Actuarial Guideline, or AG, 49, is quite possibly the biggest life insurance regulation to be passed in decades.

Yet, although the AG 49 regulations were expected to take effect for all index universal life policies being sold on or after September 1st, nobody really seems to be talking that much about them.

Why exactly is that?

These guidelines outline some fairly drastic changes in the way that index life insurance product illustrations can be presented. So, with that in mind, both producers and consumers alike should sit up and take note.

The Effect of AG 49 on Consumers

It almost goes without saying that AG 49 should have a positive effect on consumers. This is primarily because, up until now, there had been no real guidelines that monitored these policies’ illustration projections.

It is key to note here, though, that while AG 49 does not in any way change the actual performance of the policy, it does change the way that the illustrated projection is shown to a potential insurance purchaser.

Now, by showing a more conservative anticipated long-term projection, it should not only lead to better-designed policies but also should reduce false hopes of policy owners in terms of gaining higher returns.

Although it may vary, there will now be a maximum rate that can be illustrated, based on a standardized formula. In addition, by establishing more uniformity in index product illustrations, it is intended that consumers will better understand the actual products that they are purchasing, too.

How Will Agents Need to Change Their Game Plan Now?

AG 49 will also have an effect on producers in that they will not only need to be familiar with what they can – and cannot – illustrate to clients, but will also need to be aware of how this ruling will change their business going forward.

For example, effective in March 2016, additional requirements will take place, including:

  • A limit on policy loan leverage on the index, or “participating,” loans
  • A requirement of additional disclosures that are not currently needed on non-indexed universal life insurance illustrations

Will AG 49 Have an Effect on Insurance Companies?

This more realistic crediting rate for index policy illustrations will also have an effect on insurance companies – although in this case, whether it is positive or negative may depend on which carrier you ask.

It is anticipated that we may end up seeing fewer index accounts being offered down the road. And, in some cases, with the policies that are offered, artificially high caps could be offset with higher loads.

Overall, though, AG 49 does appear to be a positive move for the insurance industry. It’s good for the client – and it helps to minimize some of the risks of buying an index universal life insurance policy.

In that regard, wouldn’t you think that more people should be talking about it!