Life insurers have the ability to raise expenses within non- guaranteed life insurance products (whole life, universal life, variable life and index universal life insurance). Transamerica announced on June 8^th, 2015 that it will be increasing the monthly charges within several inforce universal life insurance products sold between 1987 to 1998[1]. Transamerica indicated that these cost increases are needed “to address [the] expectations as to the future costs of providing coverage [for these policies]. The percentage of the increase varies by policy, but [Transamerica] does expect some of the increases to be substantial”. This cost increase will start with policyholders with contracts that have an anniversary date of August 1, 2015.

The pricing of all products is a function of costs and interest. When it is harder to make money on one block of business, the only options often become increasing costs on other blocks of business to make up losses on these lower performing blocks of business. Payments of claims are referred to as the Cost of Insurance or COI and are the largest single cost factor. With life insurance, COI charges can account for 75% - 85% or more of the total premium. Do you have clients who do not know what they are actually being charged for cost of insurance charges (COIs)? Would you know if the costs of your (client's) policies have been increased?

The National Association of Insurance Commissioner (NAIC) reports that 62% of people who own life insurance do not really know what they have or why they bought it[2]. In order to reassure your clients that they made the appropriate choice in life insurance products and/or reveal when there are opportunities for improvement, it is important to inspect what you expect out of our client’s life insurance portfolios.

INSPECT WHAT YOU EXPECT! Use a Veralytic Research Report to measure policy expenses and know if a particular insurer is increasing or decreasing policy expenses. If you(r clients) do not know what they are paying for cost of insurance charges (COIs), fixed administration expenses (FAEs), cash-value-based "wrap fees" (e.g., M&Es) and premium loads in their life insurance policy holdings now, then there will be no way to know if or when such policy expenses are increased. Now is the time to find out. Don’t wait until there is a class action suit to make you aware of a change in your policy.

The appropriateness of a policy should be re-evaluated when the insurer announces product changes.  In order to fully assess the impact of recent changes on your clients’ permanent life insurance portfolios, or to establish a baseline by which to judge the impact of future shifts in cost, request a Veralytic Research Report now.  Just fax the detailed expense report along with the policy illustration toll free to 800-409-3222 or email to reports@veralytic.com to request a Veralytic Report for your client's policy.  If the policy illustration is not available, download a sample Request for Information (RFI) letter to gather the necessary policy information. 

Veralytic would like to offer Transamerica policy holders one complementary Veralytic report. Submit an inforce illustration and most recent annual statement. Submit the one illustration that most closely corresponds to client expectations and mention this e-newsletter for one free Veralytic report on your Transamerica policy. Offer expires August 1, 2016.