Summary
Purchasers with a permanent need for large amounts of life insurance coverage to fund estate liquidity or business succession requirements are turning more and more to the Secondary No Lapse Guaranteed Universal Life product. The traditional guarantees of Whole Life are provided by this product at an annual cost savings of 25-40% depending on age and health of the insured. This product does not pay a dividend; and, depending on the product chosen, does not generate significant cash surrender values. It does exactly what it was designed to do - delivers a guaranteed death benefit in most instances, through age 120. Individual consumers with large life insurance requirements, in our experience, generally do not care about anything other than the financial strength of the issuing carrier and the viability of the product design, not the cash value. Cash value enhancements are available via policy rider where there is a corporate purchaser and earnings impact concerns.
Analysis
Major issuers of secondary guaranteed Universal Life are benefiting from this market trend. The Hartford, Lincoln Financial, AIG, AXA and others have seen substantial market penetration. The loosers here are the traditional Whole Life marketing organizations like New York Life, Northwestern Mutual and the Guardian. It is interesting to note that these companies lobied strongly; but unsuccessfully to have the NAIC change the reserve requirements for the Universal Life product portfolio which would have forced an increase in rates.
