Selling VULs in a Volatile Market | November 2001... -
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Published on: 5/26/2001
Last Visited: 4/8/2002
Ben Wolzenski, FSA, CLU, executive vice president of product and corporate strategies for General American Life Insurance Company in St. Louis, estimates that VUL is now generating 40 to 50 percent of new life premium revenue.Wolzenski says that the emergence of the VUL market in the U.S. "has been the result of more and more individuals becoming familiar with the stock market through their 401(k) plans or through the ownership of mutual funds."
VUL issues
But there is disquiet about VUL among some advisors, who are concerned about its dependence on a stock market that can be volatile.VUL sales across the industry were down by about 8 percent in the second quarter of this year, compared to the same period in 2000.This was the first such decline in six years.The dip has been blamed largely on the poor performance of the stock market in recent months.
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Wolzenski believes it is important to have some perspective about the tapering off of VUL sales this year."The extraordinary bull market of '97, '98 and '99 probably caused variable sales to go up faster than they otherwise would have," he says."They went from about 20 percent to 45 percent."
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Wolzenski is aware of such objections.He says that term coverage or universal life, with secondary guarantees emphasizing the death benefit, is an appropriate vehicle for customers who are buying insurance purely for protection."I would never try to make the case that it [VUL] is for everybody," he says, "but it's natural for some people to think about their insurance program as having both a savings and an insurance element."Careful explanations at the point of sale can help limit customer dissatisfaction that may result from a drop in stock prices.He says that the same approach applies to the sale of products that are linked to interest rates.
Targeting the wealthy
Despite these issues, the wealthy are generating enough business to keep insurance companies busy developing and adjusting products to meet their needs.
Hartford Life has been a leader in the VUL market.
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Wolzenski says that General American's status within the MetLife organization provides valuable resources in the potentially costly area of product development.He notes that policies can be created to meet specific needs such as accumulation, long-term protection and the provision of income streams."If you try to build a product that does everything for everybody," he says, "you usually end up with something that doesn't do the best job for anybody."
Hartford Life has two core VUL products.One is for the death benefit market.The other is designed for accumulation.In 2002, the company plans to introduce a third product aimed at lower-faced transactional business.
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