UL – Universal Life Insurance

Most of us have forgotten the original concept of universal life.

—  Michael R. Tuohy, Tillinghast

1988 – SOA – The Future Economy – Society of Actuaries – 24p

  • WHO CONCEIVED THIS INSTRUMENT? – [Universal Life Insurance]
  • Subject to responsibility being accepted (and documented) by somebody else, we hold that the father is George R. Dinney, and the place of conception Winnipeg, Canada.

1981 – SOA – Who Conceived this Instrument?, by EJM, Ernest J. Moorhead (Jack), The Actuary, Society of Actuaries – 2p

  • Universal Life is not well understood and part of the mystery about it may well be due to a failure in my communication……
    •    …….Universal Life was developed in 1962 as a generic plan, which means that it subsumes all other life insurance products.

1987 – Book Chapter – The Search for New Forms of Life, by G. R. Dinney, The Search for New Forms of Life. In: MacNeill, I.B., Umphrey, G.J., Chan, B.S.C., Provost, S.B. (eds) Actuarial Science. The University of Western Ontario Series in Philosophy of Science, vol 39. Springer – link.springer.com/chapter/10.1007/978-94-009-4796-2_19

  • Hopefully it will continue to be developed and sold in a responsible manner.

—  Randall P. Mire

1983 – SOA – Universal Life (rsa83v9n32), Society of Actuaries – 22p

  • Background
  • When universal life was first popularized about 20 years ago, there was considerable controversy with regard to nonforfeiture compliance.
    • Was it term plus a side fund?
    • Whole life with flexible premiums?
    • Or something entirely different?

2001 – SOA – Universal Life, No-Lapse, and the Law vs. Free Markets, Society of Actuaries, by David J. Hippen, actuary at the Florida Insurance Department – 5p

  • 2018 0507  – Texas Department of Insurance (TDI) – What you should know about your universal life insurance policy – [VIDEO-YouTube-00:58]

 

  • This topic was described under the topic heading “Completely Flexible Life Insurance Plans (Universal Life Insurance Plans)” in the June 1981 semi-annual report of the former (C4) Technical Subcommittee. 

1982-1. NAIC Proceedings

  • The dollar amount of universal life insurance in force in the United States increased sevenfold between 1983 and 1987.7
    • 7/ See American Council of Life Insurance, Life Insurance Fact Book (1988 ).  (p23)

—   Statement of Kenneth W. Gideon Assistant Secretary for Tax Policy Department of the Treasury (DOTT)

1989 1019 – GOV (House) – Life Insurance Company Taxation, Charles Rangel (D-NY)  —  [BonkNote]

  • It is illuminating to note that the development of Universal Life, the major product innovation in individual insurance, resulted when a securities executive was put in charge of an acquired life company.

[Bonk: Who was the “securities executive”? EF Hutton / California Life]

1985 1111 – Keynote Address – The Search For Competitive Advantage – William A. Sherden – p328

1985 – Proceedings of the Casualty Actuarial Society, VOLUME LXXII, Number 137 – May 1985, Number 138 – November 1985 – 378p

  • Jim Anderson is revered, but I think he did a disservice to the industry by coming out with that product. [Bonk: product = Universal Life] 
  • UL is a horror. — Who understands UL?
    • The home office doesn’t. Maybe they do now.
    • The IT department doesn’t.
    • The owner doesn’t. 

—  Jeff Robinson

2003 – SOA – Do You Know How Much You’re Spending? The Hidden Costs of Product Complexity, Society of Actuaries – 19p

  • The concept of Universal Life has been the subject of speculation and discussion by many people over many years.
    • To my knowledge, the first detailed written presentation of the concept appeared in a paper presented by James C. H. Anderson at the 1975 Pacific Insurance Conference.  
    • Because of the high level of flexibility provided in a “Universal Life” style Adjustable Life product….. 

—  David R. Carpenter

1979 – SOA – Future Trends and Current Developments in Individual Life Products (rsa79v5n44), Society of Actuaries – 24p 

  • Richard F. Fisher sums up his viewpoint thus :
  • Universal Life is marketed as a tax-free money market fund, or other short-term investment vehicle, with term insurance available to be purchased from the fund.
  • Current high short-term yields are illustrated for very long periods of years.
  • Continuance of the term piece has all the problems of continuance of term insurance purchased in any other way. 
  • The product will result in term coverages that lapse at high ages, disappointed beneficiaries, tax questions.

1981 – SOA – More on Universal Life, The Actuary, Society of Actuaries – 2p

  • Universal life insurance is more flexible than whole life.
  • You can change the amount of your premiums and death benefit.
    • But any changes you make could affect how long your coverage lasts. 
    • If your premiums are lower than the cost of insurance, the difference is taken from the cash value.
    • If the cash value reaches zero, your policy could lapse.
  • The company will send you a report each year showing your cash value and how long the policy might last.
    • The estimate is based on the cash value amount, the cost of insurance, and other factors.
    • Review it carefully.
    • You might need to pay more in premiums to keep the policy in effect until the maturity date.

?-2026 – Texas – Life Insurance Guide – [link]

  • The December, 1980, revisions of the standard valuation law and the standard nonforfeiture law for life insurance allow the commissioner of insurance for each state to issue a regulation pertaining to these types of policies.
  • Thus, such policies would no longer have to be “forced into a mold,” which was intended for more traditional plans, in the calculation of reserves and nonforfeiture values.

1981-4, NAIC Proceedings

  • III. FUNDED PLANS OF LIFE INSURANCE (UNIVERSAL LIFE) AND ANNUITIES (LATER CHANGED TO UNIVERSAL LIFE AND RELATED PLANS OF LIFE INSURANCE AND ANNUITIES)       

 1982-4, NAIC Proc. 

  • …nominees for the hard questions are:
    • Are short-term new money investments appropriate for a product designed to meet life-long insurance needs?
    • Is it appropriate for buyers, or potential replacers to compare “new money” with “portfolio” sales illustrations without explaining the profound differences between them?
    • How will the great continuing planning and service needs of Universal Life policyowners be provided for?
    • Who will satisfy these needs and how will they be compensated?
    • Does anyone believe that a policyowner can figure it out all by himself, or that an 800 number in the home office will suffice?

—  Dale R. Gustafson

1981 – SOA – More on Universal Life, The Actuary – Society of Actuaries – 2p

1982-2
NAIC Proceedings

Bill White, chief actuary, New Jersey, reported on their special project pertaining to universal life.

  • Their commissioner, on June 25, 1982, declared an 81-day moratorium on “Universal- Flexible Factor” type of policies.
  • His staff was directed to:
    • (1) study the matter and issue a position paper on the subject;
    • (2) conduct public hearings on March 10-11;
    • (3) terminate the moratorium April 16 with the publishing of a set of guidelines.

Reports and results have been mailed to each insurance department.

Some of the questions New Jersey conveyed included:

(1) are these policies participating or non-participating;

(2) the “Bait and Switch” potential;

(3) disclosure;

(4) Federal Income Tax aspects;

(5) non-forfeiture values;

(6) replacement problems.

The concern was not just with the “twisting” replacements, but what was the impact of justified replacements on the solvency

of replaced companies.

1982-2 358
  • New York reports that they have determined that Section 216 and 208, (a) and (b), and perhaps other sections of their law, prohibit the issuance of universal life type products.
  • Their law is currently being amended to permit such policies.

1982-2, NAIC Proceedings

 

  • ACTUARIAL
    • 1975 (originally) – SOA – The Universal Life Insurance Policy,  by James C.H. Anderson, Society of Actuaries – 10p
    • 1981 – SOA – Universal Life (RSA81V7N412), Moderator: Samuel H. Turner, Society of Actuaries – 16p 
    • 1983 – SOA – Universal Life Valuation and NonForfeiture: A Generalized Model, by Shane A. Chalke and Michael Davlin, Society of Actuaries – 72p
    • 1999 – SOA – A Brief History of Universal Life,  by Douglas C. Doll, Society of Actuaries – 4p
1987-Huebner-Black-Skipper-Life-Insurance-11ed-p94-UL-Flexible-Graph 1987-Huebner-Black-Skipper-Life-Insurance-11ed-p94-UL-Flexible-Graph