2016 sOA Life & Annuity
Symposium
Session 45: Life Product Trends
Timothy C. Pfeifer, FSA, MAAA
Pfeifer Advisory LLC
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May 17, 2016
Agenda
Indexed Universal Life
Term Life Insurance
Par Whole Life
2017 CSO
Underwriting Trends
Other Topics
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Indexed Universal Life
Continual Strong Growth and
Increasing Market Share
Interest rate levels have
begun affecting caps
Gradual Expansion in
Number of Underwriters
Hedge programs are less
precise than for FIAs
Different Product Flavors,
Accumulation, Income, DBG
Adoption of Actuarial
Guideline 49 – 2nd part
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Indexed Universal Life
Mechanics of AG 49
Product Impacts
Defines maximum
illustrated credited rate
Increase in persistency bonuses
Specifies specific
disclosure requirements
Re-configuration of loads and charges
Limits participating loan
leverage to 100bps
More S&P 500 accounts with non-zero floors
Guides Illustration
Activity in DCS
Fewer index choices
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Term Life
Not a “Price War,”
but General
Direction of Rates
Down
Use of Captives to
Support Prices Slowed
Considerably with
AG48, but not Erased
Term Life is a Loss
Leader for Most NonFinancing Carriers
Implications of PBRmost carriers thought
originally a slam dunk
for Term – Now?
Today and in Future,
Much Less Reason to
Spike Premiums at
End of LPP
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Term Life
Future Issues for Term
 Tax reserve treatment under PBR
 Lower, levelized compensation as risk mitigator
 Resurgence of ROP benefits?
 Will fractionally lower premiums give way to
process and other competitive focal points?
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Par Whole Life
Continued Low Interest
Rates Pressuring Dividend
Scales
Improved Mortality Results
can Help only to a Degree
Indexed Components to
Dividend Scales
A Couple of Carriers have
Dusted off Older Par WL
Designs
Participating Products
Continue to be Priced with
Lower Hurdles
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2017 CSO
Developed by Society of Actuaries and American Academy of Actuaries,
at the request of the NAIC
 Also, 2015 VBT (with Relative Risk Tables)
 A 2017 CSO Preferred Structure Table as well
 Guaranteed Issue Version in the works
2017 CSO is a series of tables that split overall mortality into more
granular components. Structure is similar to 2001 CSO as follows:
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Terminal Age of 121
Tobacco-distinct tables begin at age 18
Non-tobacco tables reflect super-preferred, preferred, and residual standard
Tobacco tables reflect preferred and residual
25-year Select Period
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2017 CSO
Uses of 2017 CSO
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CRVM Reserves*
Net Premium Reserves*
Nonforfeiture Determination
Cap for UL COI charges
* 2017 CSO Preferred Structure can be used
Impact of 2017 CSO
 Results in significantly lower CRVM reserves at
ages 25-50 for Durations 5-40.
 Results in consistently lower XXX reserves for LT20
 But, substantially reduces Guideline Premiums and
increases CVAT factors on permanent products
Adoption of 2017 CSO
 Permitted for use on January 1, 2017
 Three-year transition – mandatory by January 1, 2020
 Implementation prior to January 1, 2020 can be on a product-by-product basis
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Underwriting
The Name of the Game is Accelerated Underwriting
Often, subject business limited to
$250,000 to $500,000 face
Often limited to a specific cutoff
age like 60 or 65
If clean responses to app questions and
database checks, issue within 24-48 hours
Database checks for MVR, MIB,
and Rx
If responses to app questions aren’t clean,
then additional more invasive underwriting
Expert Underwriting Systems
with Predictive Analytics
Assumptions have been that mortality mirrors fully underwritten experience
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Other Topics
Reinsurance Dynamics
Levelized Commissions
Variable UL Developments
Guaranteed Issue Products
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Thank You
Timothy C. Pfeifer, FSA, MAAA
Pfeifer Advisory LLC
www.pfeiferadvisory.com
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