LATEST NEWS

On 10/20/09, FINRA published a proposed rule change (SR-2009-070) regarding variable life insur­ance sales illustrations.  Among the proposed changes is a new maximum assumed investment return of 10.0% (reduced from 12.0%). 

The proposed changes also permit multiple rates of return provided they are “based on the actual performance of a broad-based securities market index for the period shown by the illustration”, e.g., S & P 500 Index.

Both of these proposed changes are welcome and long overdue.

Interesting Case No. 1

A counterintuitive lapse provision caused a large universal life policy to lapse prematurely for insufficient value, despite having plenty of cash value. This case was the basis for an article entitled "Lapsing on Surrender Value: Counterintuitive to Most Perceptions" published in the May, 2006 edition of Journal of Financial Service Professionals (reprint is available on Articles/Resources page).

Interesting Case No. 2

Variable life insurance was exempted from having to provide a revised illustration if the insurance company issues the policy with a less favorable risk classification than originally illustrated. But an NASD arbitration board determined that one should have been provided anyway, and that was the basis for an article entitled "A Revised Illustration for Variable Universal Life: The Right and Proper Thing to Do" published in the July, 2007 issue of Journal of Financial Service Professionals (reprint is available on Articles/Resources page).