Enhancing Clarity in Universal Life Insurance Premiums: A Call to Action
The Life Insurance Consumer Advocacy Center (LICAC) is calling on life insurers and their agents to enhance clarity and communication regarding flexible premium policies within universal life insurance plans. These plans allow policyholders to adjust their premium payments, often creating confusion about how adjustments affect the policy's longevity. This initiative underscores the need for transparent dialogue to prevent policyholder misconceptions, contributing to unexpected policy lapses.
Current industry regulations categorize all incoming payments as 'premiums,' misleading many policyholders to assume regular payments will sustain the policy until the insured's death. Unlike traditional plans, universal life insurance lacks a fixed, guaranteed premium. Initial illustrations depend on factors like age and health, yet these can fluctuate due to changes in crediting rates and market conditions, leaving consumers needing to adapt their understanding of required premium adjustments.
AI-Driven Solutions and Communication Strategies
LICAC stresses the importance of regular communication and transparency between insurers and policyholders. They advocate for the use of annual disclosures to remind customers that maintaining policy coverage may necessitate evolving premium payments over time. John Hancock has already introduced a Life Track feature that annualizes policyholders' original goals and financial assumptions, allowing automatic premium adjustments to meet initial objectives.
LICAC suggests that flexible premium options in universal life insurance offer significant benefits but can lead to misunderstandings without proper consumer education. Enhancing transparency and communication can mitigate unexpected policy lapses and align policyholder expectations with policy realities. To tackle these issues, LICAC has published a white paper aimed at clarifying flexible premium policy nuances for consumers and financial professionals.
Advocacy and Industry Engagement
The Life Insurance Consumer Advocacy Center continues to operate as a nonprofit entity dedicated to safeguarding life insurance consumers. They advocate for beneficial legal and regulatory compliance changes within the industry, ensuring that risk management practices align with consumer needs and carrier capabilities.