Truth About Acturial Guideline 38 (AG 38)?

The most popular question we have been receiving over the last month is, “What is Actuarial Guideline 38 (AG 38)?”  Although many consumers aren’t as familiar with the term or the definition, we are quite certain that every life insurance agency, distribution channel, and life insurance carrier have spent countless hours trying to make changes and ensure that it doesn’t affect their business negatively.  So what does all of it mean for the industry?  Let me explain.

In layman’s terms, AG 38 attempts to resolve reserve issues (in particular, under-reserving) for universal life insurance that have secondary guarantees in place.  As you can imagine, regulators want more reserves in place and the most of the carrier’s believe that they have been setting aside the correct amount of reserves.  The big question is where can everyone meet in the middle and protect both the consumer and the insurance company from having insolvency issues down the road?  The National Association of Insurance Commissioners (NAIC) believes that they have struck the correct balance, thus a revised AG 38 was just recently adopted and will go in force Jan 2013.

The big question here is will this slow down universal life insurance’s dominating momentum and shift some back to whole life policies?  Only time will tell…


Life Insurance Research

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