2021 | Page 28

28 ID Trends NAILBA
Variable Universal Life Trends

Gaining headwinds with

Variable Universal Life

The combination of regulation and economic factors has created a headwind for Indexed Universal Life ( IUL ) in 2020 , leading into 2021 . According to LIMRA , IUL new premium was 16 % lower in the fourth quarter of 2020 than it was for the record-breaking final quarter of 2019 . While IUL will continue to be a great solution for many , an alternative option is brewing out there worth considering : Variable Universal Life ( VUL ).
The need for downside protection
Charles Arnold is the Chief Marketing Officer for The Leaders Group , Inc . located in Littleton , Colorado . The Leaders Group is a national , independent broker-dealer servicing wholesale distribution firms , independent insurance agents and financial professionals for over 25 years .
1 . LIMRA article : https :// www . limra . com / en / newsroom / news-releases / 2021 / limra-u . s . -lifeinsurance-policy-sales-increase-2-in-2020 /
With a 6 % rise in new premium figures in 2020 , 1 VUL appears to be an attractive product for a variety of reasons . The lifetime , no-lapse guaranteed VUL products continue to be popular for protection-oriented sales , and improved pricing has increased competition and indicates continued product development . The slow integration of IUL into VUL the past 18 months may also be fueling some of this growth on the accumulation side .
The multiplier and bonus driven IUL market enjoyed a strong run until 2020 . However , AG 49-A put a damper on the enthusiasm and only a few carriers saw an opportunity to move their traditional and leveraged indexed options into their VUL offering . As a registered securities product , variable life insurance can be a more appropriate home for complex , leveraged index strategies that require some advanced knowledge and oversight . It also adds a great deal of flexibility to the product .
Other than a fixed bucket or money market account , there generally has not been a downside protection option for many VUL investment lineups that also feature any upside potential . For the lifetime , no-lapse VUL product , these IUL sub-account options make little sense in most instances but can be useful in accumulation products
It is important to note there may be restrictions on quantity and / or timing of transferring . Most of the carriers do not have restrictions past a single year , but regardless , sales professionals and clients alike will need to make sure they are aware of these restrictions and decide if these IUL options are the right choice for downside protection .
Now , instead of being forced to select a single indexing strategy within IUL , a customer can mix and match from a menu of IUL strategies , investment funds , and fixed accounts all within a single product .