The great debate is what rate to illustrate in an index proposal. The carrier 30-year look back crediting rate may be unrealistic. The index construction design crediting rate is around 2.0 percent above the carrier’s current assumption universal life crediting rate. As an example, let’s say it’s currently paying 4.5 percent, so the total illustration crediting rate is 6.5 percent. The 100 percent probability crediting rate of 5.5 percent is based on historical returns for the 20-year holding period based on 40+ years (285 periods) of rolling monthly index segments, with 20 years of S&P 500 return data in each segment, assuming one-year point to point crediting methodology. First segment start date is January 1968. Last period ending is September 2011.
Today on the Business Insurance Zone, national insurance columnist Steve Savant and co-host Eric Palmer discuss the crediting rates of carrier 30-year look back, the 200 basis point design, the probability models and touch on actual dividend history of par whole life.
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Steve Savant is the host of the daily producer show, Let’s Get Down to Business, and the weekly consumer show, Steve Savant’s Money, the Name of the Game. Steve is the number one online author and videographer of insurance content. During his 30-year career in the financial services industry,... More