LIFE INSURANCE TRUST COMPANY
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Feb 24, 2016 | By Warren S. Hersch | lifehealthpro.com
Cost of insurance charges for universal life policies are on the rise. That has big implications, not only for long-time UL policyholders, but also for life settlement companies and institutional investors that are looking to buy older UL contracts.
These were among the chief takeaways of an afternoon session of the 6th Annual Institutional Investor Life Settlement Conference, held at the Ritz-Carlton in New York City on Monday. Hosted by the Life Insurance Settlement Association (LISA), the session featured two life settlements experts: Michael Brohawn, managing director of ITM TwentyFirst; and Ann Marie Juliano, co-founder of Demeter Investments Ltd.
Conseco Life Insurance Company has begun sending letters to policyholders announcing a cost increase on some Universal Life insurance policies. The letters which, according to the carrier, started coming out earlier this month, reference the fact that any change in COI charges can be based on “our future expectations for such elements as investment earnings, mortality, persistency and expenses.”
The letter goes on to tell the policy owner that Conseco is “increasing the cost of insurance rates because the Company now expects higher rates and numbers of insured deaths than we had anticipated for policies such as yours. We have been experiencing higher claims costs for these policies and expect this trend to continue in the future.” The scheduled increase will begin next month.
At this time we are unaware of the percentage increase in cost and the number of policies affected, but we will be actively reviewing the situation and will report back as further information becomes available.
COI Update 12/14/2015: Policy Owners Begin Receiving AXA Notification Letters For COI Cost Increase Deferral On Athena II Policies
As we reported last week, AXA has decided to postpone the increase in monthly COI charges on specific Athena II policies. Originally, the increase was set to begin January 1, 2016. AXA notified policy owners that they “decided to defer the effective date for this change to March 8, 2016.”
This deferral does not change the impact on the policies going forward, just postpones it. For a full analysis of the cost increase see our blog entry,Taking a Look Under the Hood of the AXA Athena II Universal Life Cost of InsuranceÂ Increase.
December 9, 2015
ITM TwentyFirst has been informed by AXA that the Athena II COI increases that were written about in our Blog dated November 16th that were originally scheduled for January 1, 2016 have now been pushed back until March 2016.
Frank Tomasello in our New York office spoke with representatives of the carrier who confirmed that the postponement of the increase will affect all of the policies originally set to increase.
ITM TwentyFirst is monitoring the situation and will provide updates as information is released.
Insurers are raising costs of ‘universal life’ coverage sold years ago, as they confront low interest rates
By LESLIE SCISM
Major insurers are breaking a long-standing industry taboo of raising rates on lifeinsurance policies they sold to consumers years ago, in the latest fallout from a prolonged stretch of low interest rates.
In recent months, several insurers have notified tens of thousands of people who own a type of coverage known as “universal life” that they are exercising little-used contractual rights to raise costs.
Read Full Article Here: Surprise: Your Life Insurance Rates are Going Up
At ITM TwentyFirst, it is our goal to keep our clients informed of industry wide news that may affect how life insurance assets are managed now and in the future.
Voya Financial, in letters to clients that began about a month ago, announced cost increases in some of its Universal Life (UL) policies. According to information from the carrier, the increases were in three areas: Monthly Cost of Insurance, Percent of Premium Expense Charge – the “charge assessed as a percentage of each premium paid” and Monthly Expense Factor – a charge “based on the Accumulation Value of your policy”.
Voya, which rebranded from ING US in April of 2013, noted in an FAQ to clients that they “periodically review costs associated with their policies” and that the increases were “being made in response to an increase in the anticipated costs of providing future coverage”. They noted that the increase will take effect on the “first Monthly Policy Date on or after October 1, 2015” and, like other carriers who have raised costs, provided options for the policyholders that include: taking no action, paying a higher premium, reducing the death benefit or surrendering the policy.
In conversations with representatives from the carrier we have been told that the policies affected were “all Universal Life policies issued before 2009”. We were also given the following list of policies affected by one or more of these increases:
- Security Design I & III
- Estate Design (RL) and NY
- Life Design GUL
- Premier Design
- Strategic Accumulator UL
- Select Design
- GPUL (version 1, 2, and 3)
In reviewing the client letters that we have received so far the highest increase in monthly Cost of Insurance we have seen is 42.3%, but we are still analyzing the policies we manage to determine actual increases. This is another notice from a major carrier of a cost increase and we will be monitoring the situation as we move forward.
ITM TwentyFirst is a leading provider of ILIT administrative services, life settlement portfolio services and medical underwriting. We are monitoring the impact of these changes for all ITM TwentyFirst clients.
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