Fund-Based Products

  • Commissioner David Lyons (Iowa) convened the Life Insurance (A) Committee for the purpose of conducting a hearing on the Second Standard Nonforfeiture Law for Life Insurance and the Standard Nonforfeiture Law for Deferred Annuities. 
  • Bill Carroll (American Council of Life lnsurance-ACLI) said the ACLI did not believe the life insurance model should be adopted in its present form because it constituted rate regulation, especially in respect to non-traditional products, referred to as fund-based products.
    • [Bonk: fund-based products ≅ Universal Life]

1994-1, NAIC Proceedings

  • (p6) - The proposal for fund-based life insurance polices such as universal life links gross premiums with cash values in a way that does not exist for traditional forms of life insurance.
  • For fund-based policies the minimum cash value is the gross premium accumulated at a minimum interest rate specified in the law less mortality and expense charges subject to maximums specified in the law and less the unamortized portion of maximum surrender charges.
  • The implication of this is that, when a company decides
    to increase its gross premiums for these types of policies, it will cause necessarily an increase in the minimum cash surrender benefits for the policy.   

    • That is not true for traditional types of policies.

--   Dwight K. Bartlett, Maryland Insurance Commissioner

1994 - SOA - Valuation Actuary - Symposium Proceedings - Session 1 - Introduction and Overview, Society of Actuaries - 110p