Milliman UL/IUL Survey Results

Transcription

1 Milliman UL/IUL Survey Results AICP New England Chapter 21 st Annual Education Day Session 4 Sue Saip, FSA, MAAA May 12, 2017

2 Comprehensive survey covering: ULSG, Cash Accumulation UL (AccumUL), Current Assumption UL (CAUL) IULSG, Cash Accumulation IUL (AccumIUL), Current Assumption IUL (CAIUL) Sales by UL/IUL Product Type Profit Measures By Distribution Channel Target Surplus By Issue Age Group Reserves By Premium Type Risk Management By Gender Underwriting By Underwriting Class Product Design By Death Benefit Option Compensation By 7702 Option (CVAT/GPT) Pricing With Chronic Illness Riders Administration With LTC Riders Illustrations 2

3 32 Participants in the 2016/2017 survey Allianz Global Atlantic Principal American Family John Hancock Protective Life Americo Kansas City Life Sammons Financial Group Ameriprise Lincoln Financial Securian AXA Modern Woodmen of America State Farm Bankers Life Mutual of Omaha Symetra Cincinnati Life Nationwide Thrivent Financial Columbus Life New York Life TIAA-CREF Equitrust Ohio National Voya Financial Fidelity & Guaranty Life Pan American Washington National Foresters Penn Mutual 3

4 UL/IUL Sales Summary Sales Mix by Year Universal Life Sales Mix Indexed UL Sales Mix tal Individual UL ales Percent of Tot Sa 70% 60% 50% 40% 30% 20% 10% 0% 68% 66% 64% 62% 22% 17% 21% 17% 18% 16% 15% 15% YTD 9/30/16 Percent of Tota al Individual IUL Sa ales 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 86% 86% 87% 80% 14% 5% 8% 5% 8% 5% 8% 6% YTD 9/30/16 ULSG Cash Accumulation UL Current Assumption UL IULSG Cash Accumulation IUL Current Assumption IUL ULSG dominates Cash Accumulation IUL dominates 4

5 UL/IUL Sales Summary UL Average Amounts Per Policy UL Weighted Average Premiums Per Policy UL Weighted Average Face Amount Per Policy Average Pre emium Per Policy (1000s) YTD 9/30/16 Total Individual UL ULSG Average Face Amo ount Per Policy (1000 0s) YTD 9/30/16 Total Individual UL ULSG Cash Accumulation UL Current Assumption UL Cash Accumulation UL Current Assumption UL Highest average => ULSG in 2013 & 2014 and Current Assumption UL in 2015 & YTD 9/30/16 Highest average => ULSG in all periods 5

6 UL/IUL Sales Summary IUL Average Amounts Per Policy IUL Weighted Average Premiums Per Policy IUL Weighted Average Face Amount Per Policy Average Pr remium Per Policy (1000's) YTD 9/30/16 Total Individual IUL IULSG Average Face Amount Per Policy (10 000's) YTD 9/30/16 Total Individual IUL IULSG Cash Accumulation IUL Current Assumption IUL Cash Accumulation IUL Current Assumption IUL Highest average => Cash Accumulation IUL Generally higher than UL products Highest average => Current Assumption IUL, except for Cash Accumulation IUL in 2014 Generally higher than UL products, except for IULSG 6

7 UL/IUL Sales Summary UL Weighted Average Issue Ages Gender Total Individual Secondary Guarantee Cash Accumulation UL YTD 9/30/16 Weighted Average Age by Premium Current Assumption Male + Female Male Female UL YTD 9/30/16 Weighted Average Age by Face Amount Male + Female Male Female

8 UL/IUL Sales Summary IUL Weighted Average Issue Ages Gender Total Individual Secondary Guarantee Cash Accumulation IUL YTD 9/30/16 Weighted Average Age by Premium Current Assumption Male + Female Male Female IUL YTD 9/30/16 Weighted Average Age by Face Amount Male + Female Male Female

9 UL/IUL Sales Summary Expectations Regarding Future Mix of Business Item ULSG Cash Accumulation Current Assumption Mix of Business Averages IULSG Cash Accumulation IUL Current Assumption IUL Current (31) 28% 12% 9% 3% 42% 4% Current (24) 17% 12% 2% 3% 61% 4% 2 Years (24) 11% 13% 3% 6% 62% 6% 5 Years (24) 9% 14% 3% 6% 62% 6% 9

10 UL/IUL Sales Summary YTD 9/30/16 Distribution by Death Benefit Option UL by Premium UL by Face Amount IUL By Premium IUL by Face Amount 5.8% 0.4% 0.2% 0.9% 14.9% 0.4% 94.1% 84.7% 38.0% 61.0% 38.7% 60.8% Option A/Option 1 Option B/Option 2 Option C/Option 3 10

11 UL/IUL Sales Summary YTD 9/30/16 Distribution by 7702 Option & Death Benefit Option Death Benefit Option Premium UNIVERSAL LIFE Face Amount Cash Value Accumulation Test (CVAT) Option A/Option % 53.8% Option B/Option 2 1.7% 3.2% Option C/Option 3 0.4% 0.4% All Options 71.4% 57.4% Guideline Premium Test (GPT) Option A/Option % 29.7% Option B/Option 2 4.4% 12.9% Option C/Option 3 0.1% 0.1% All Options 28.7% 42.7% Death Benefit Option Premium INDEXED UNIVERSAL LIFE Face Amount Cash Value Accumulation Test (CVAT) Option A/Option % 12.7% Option B/Option 2 3.3% 2.9% Option C/Option 3 0.5% 0.3% All Options 20.3% 15.9% Guideline Premium Test (GPT) Option A/Option % 47.9% Option B/Option % 35.9% Option C/Option 3 0.6% 0.3% All Options 79.7% 84.1% 11

12 UL/IUL Sales Summary Chronic Illness Rider Sales Chronic Illness Rider Approaches Discounted death benefit approach (7 participants) Lien approach (5 participants) Dollar-for-dollar approach (5 participants) 12

13 UL/IUL Sales Summary Chronic Illness Rider Sales as a Percent of Total Sales Calendar Year Total Individual Secondary Guarantee Cash Accumulation UL Sales with Chronic Illness Riders as a Percent of Total UL Sales Current Assumption % 19.1% 9.3% 9.1% % 18.3% 11.6% 7.2% % 18.4% 14.9% 3.9% YTD 9/30/ % 18.5% 18.8% 5.0% IUL Sales with Chronic Illness Riders as a Percent of Total IUL Sales % 10.2% 34.4% 15.9% % 26.0% 32.7% 25.1% % 29.6% 34.3% 22.1% YTD 9/30/ % 39.1% 36.7% 19.5% 13

14 UL/IUL Sales Summary LTC Rider Sales as a Percent of Total Sales Calendar Year Total Individual Secondary Guarantee Cash Accumulation UL Sales with LTC Riders as a Percent of Total UL Sales Current Assumption % 15.8% 1.1% 0.6% % 24.0% 1.0% 0.1% % 30.3% 1.4% 12.0% YTD 9/30/ % 31.4% 0.7% 12.4% IUL Sales with LTC Riders as a Percent of Total IUL Sales % 10.6% 8.6% 5.5% % 22.0% 11.1% 7.5% % 15.6% 10.6% 10.0% YTD 9/30/16 9.2% 7.8% 8.9% 14.1% 14

15 Profit Measures Predominant measure is after-tax, after-capital statutory ROI/IRR Median ROI/IRR is 10% for all UL products, 9.8% for IULSG, 12.3% for AccumIUL, and 12.8% for CAIUL During YTD 9/30/16, 63% of participants were short of their profit goals for ULSG, and 78% of participants were at least meeting their profit goals for all other UL/IUL products combined Primary reasons for not meeting goals were low interest earnings and expenses Target Surplus Majority set pricing assumptions as a percent of the NAIC company action level Ranged from 250% to 425%, with a median of 350% for most UL/IUL products, except 338% for AccumUL, and 388% for CAIUL 15

16 Reserves Principle-based reserves (PBR) implementation Timing 94% over the 3-year phase-in period Rationale for timing primarily based on resources issues, financial impact/cost/benefits, impact on reserves and capital, the need for preparation and research, and competitive reasons 16

17 Reserves Pricing new UL products in a PBR environment 8 of 29 participants did not know how they will reflect reserves in pricing in a PBR environment Remaining participants reported they will not change current approach, will reflect VM-20 reserves in pricing, will use a reduced subset of stochastic scenarios, and will use approaches that estimate additional reserves 17

18 Reserves (continued) Effectiveness of PBR in making reserve financing arrangements obsolete Rating # of Responses Very Ineffective 0 Ineffective 4 Average 9 Effective 6 Very Effective 2 18

19 Reserves (continued) 2017 CSO Mortality Table (new valuation mortality table) No participants anticipated implementing immediately 69% anticipate implementing over the 3-year phase-in period 31% implementation is product dependent 2017 CSO and PBR Implementation at the same time 28% Implement 2017 CSO, then PBR at a later date 16% Implementation is product dependent 47% Other (PBR, then 2017 CSO, 2017 CSO only, TBD) 9% 19

20 Underwriting Table-shaving programs are used by 7 of the 32 participants 13 of the participants use a credit program or other type of program that improves ratings for favorable risk factors Use of scoring models relative to life underwriting 11 participants use; 8 use for fullly underwritten UL/IUL business; 1 uses for simplified issue business; 2 use for both fully underwritten and simplified issue business 8 of the 11 use scoring models with automated rules Scoring models used include lab scoring models, credit scoring models, scoring models relative to motor vehicle records Ten participants reported utilizing fluid-less underwriting programs 20

21 Underwriting Use of supplemental underwriting tools on fully underwritten business: Prescription drug database searches (30) Tele-underwriting/telephonic screening (21) Cognitive impairment testing (20) Activities of Daily Living (ADL) measures (15) Additional questions on applications (10) 21

22 Underwriting Simplified issue underwritten UL/IUL 17 of the 32 participants offer Top markets where offered => individual middle/upper income market and low/middle income market Most popular channel where offered => brokerage channel with 14 of the 17 offering products here Most common underwriting tools used are: a) Medical Information Bureau (MIB) Group reports (15), b) Prescription drug database searches (15), and c) Motor vehicle reports (13) Knock-out underwriting is used by 22 of 31 responding participants for preferred UL/IUL products Debit/credit underwriting by 6; and a combination of knock-out & debit/credit by 3 22

23 Product Design LTC rider 8 participants offer a LTC ABR on either a UL or IUL chassis (5 offer it on both) 3 of the 8 expected to develop an enhanced version of the LTC combo product in the next 24 months, with 2 additional participants expected to enter the market, and 1 other is considering the possibility Chronic illness rider 16 participants offer a chronic illness ABR on either a UL or IUL chassis 4 of the 16 expected to develop an enhanced version of the chronic illness product in the next 24 months, with 4 additional participants expected to enter the market, and 2 others were considering the possibility Nearly 78% of survey respondents may market either an LTC or chronic illness rider within 24 months 23

24 Compensation Structures are quite varied among participants 58% that offer multiple UL/IUL products vary commissions and/or marketing allowables by product type, and 42% do not vary them Component First Year (up to target) First Year (excess) ULSG Cash Accumulation Current Assumption Average Compensation IULSG Cash Accumulation IUL Current Assumption IUL 93% 90% 90% 110% 98% 104% 3.53% 3.64% 3.96% 3.64% 3.51% 3.67% Renewal 3.43% 3.67% 3.90% 3.86% 3.29% 3.01% Marketing Allowable 37.4% 25.4% 39.3% 16.6% 37.8% 25.8% 24

25 Pricing UL/IUL earned rates Item ULSG AccumUL CAUL IULSG AccumIUL CAIUL New Money vs. Portfolio Crediting Strategy 63% vs. 37% 33% vs. 67% 40% vs. 60% 50% vs. 50% 16% vs. 84% 0% vs. 100% Average Net Earned Rate: New Money Portfolio 4.43% 5.76% 4.27% 5.10% 3.84% 5.31% 4.12% 4.63% 4.38% 5.36% N/A 5.58% Change over the prior year (in bps): New Money Portfolio -27 bps +1 bps -14 bps -12 bps -14 bps -11 bps -65 bps -45 bps -51 bps -6 bps N/A -7 bps 25

26 Pricing (continued) 2017 CSO Mortality Table impact on pricing None have repriced/redesigned UL/IUL products under this table Impact on UL/IUL product development relative to guideline premium policies to be sold Development of more CVAT products? 26

27 Illustrations Actuarial Guideline 49 Benchmark Index Account rate Rates range from 5.29% to 7.92%, with an average of 6.79% The average maximum illustrated rates pre-ag 49 ranged from 5.60% to 8.50%, with an average of 7.38% The average maximum illustrated rate post-ag 49 ranged from 5.02% to 7.75%, with an average of 6.69% 27

28 Available reports If your company name was listed as a participant, you can receive the full report (including individual company responses on an anonymous basis) Alternatively, go to and search Universal Life, and select the 2016 survey Download the complimentary Executive Summary; or Download the order form for the Detailed Report (similar to the full report, but without the individual company responses) available on a subscription basis Contact me if you have any questions at sue.saip@milliman.com 28