AG 38 is a hot topic in the life insurance business right now. So what is it?
AG 38 stands for “Actuarial Guideline 38.” It’s a new requirement for life insurance carriers to hold more reserves for products that contain a “secondary guarantee” (long-term death benefit guarantee).
Actuarial Guideline 38 was created in 2003 to clarify Valuation of Life Insurance Policies Regulation (#830), commonly referred to as Regulation XXX, which set forth reserve requirements for all universal life products that employ secondary guarantees.
In 2011, insurance companies, state regulators, the American Council of Life Insurers (ACLI) and the National Association of Insurance Commissioners (NAIC) joined together to make changes to AG 38, addressing the potential problem of inadequate reserves among life insurance companies that issue universal life policies with secondary guarantees. These changes were adopted on September 12, 2012 and will go into effect for new products dated on or after January 1, 2013.
The changes will not affect policies that are already in force before that date. But for insurance carriers with a sizable existing book of ULSG business, the new reserve requirements could increase as much as two to seven times from current levels.
It’s clear that the industry is in the midst of a significant price and benefit adjustment cycle. In fact, nearly all insurance carriers will be going through multiple price increases between now and the end of this year. While there are still no definitive estimates of how much rates will increase, many industry professionals estimate that the increase will be at least 5 to 10 percent, and could be as high as 20 to 25 percent. Most carriers are making these changes now, while others plan to wait and make the necessary changes after the first of the year.
What does this mean for your disability insurance clients?
In short, premiums are going up for consumers looking to purchase new life insurance policies. And since you may be working with clients and prospects to get low rates locked in before AG 38 kicks in, this could be the perfect time to review income protection and discuss disability insurance quotes.
After all, your clients need a multi-pronged approach to long-term financial planning, and protecting their paychecks is just as vital to their overall financial strategies as life insurance or long-term care insurance.
Higher insurance premiums will never be popular. But AG 38 represents another opportunity for you as an insurance professional to help clients review their needs, and find the insurance products that best meet those needs.
When you’re talking to clients and prospects about AG 38, use the opportunity to offer them added income protection by providing disability insurance quotes. If you’d like to keep the underwriting process simple, offer simplified issue plans. Since income protection is something they need anyway, this is just another way you can be an invaluable partner enhancing clients’ financial well-being.
Not sure how to start the income protection conversation? Download the Wealth Preservation Plan Sales Script today. Need disability insurance quote? Our online quote engine is ready to help.