Guaranteed universal life prices to drop 25 percent
By Jeff Reed
Kestler Financial Group
Do you think a headline like the one above would motivate producers and their clients to consider purchasing a new life policy? Absolutely it would. While prices may not be dropping, the fact that the entire industry has to deal with AG 38 means prices are increasing by as much as 25 percent. The result is that clients who take action now will effectively receive a 25 percent discount versus waiting until next year. That's right, as much as 25 percent less premium if they take action now. Pricing is changing quickly. Waiting another day can literally mean paying 25 percent more for coverage.
There are some additional, more subtle but equally important results of these changes. Some carriers — ING for instance — are getting out of the guaranteed UL space entirely by suspending sales. While they may re-enter the market at some future date, the fact that more price increases are expected industry-wide next year and the United States is the only country in the entire world that offers this type of product makes me question if they will. In fact, other carriers may follow their lead right out of this market altogether.
Further, we have talked before about needing to understand the fine print around conversions. One of the points that is frequently lost in the decision-making process when purchasing term insurance based on the laser focus on price is the conversion option. Many carriers already restrict conversion to products other than the currently available guaranteed UL. It is not a big leap to think that this trend will continue. Combine that with the fact that some carriers may elect to exit the space altogether and you have some rather significant motivation to convert your term insurance now while a guaranteed product is still available.
Producers who understand that this is essentially a fire sale on guaranteed UL are having a huge fourth quarter. They are systematically reviewing their clients' term insurance for possible conversion and re-visiting clients who wanted to wait and see on new purchases with excellent results. The trick is knowing all of the transition rules and deadlines that accompany the price changes.