The National Association of Insurance Commissioners has approved a new set of regulations that could lead to an increase in the reserves on certain life insurance products. These changes have necessitated the move by the insurers as well to increase the reserves in order to comply with the new guidelines.
The new guidelines that have been approved by the NAIC is related to the life insurance products such as term life insurance products (universal life – UL) and products that offer secondary guarantees (ULSG). As a result of this move, the insurers in the United States have to increase their reserves on these products that they offer. All policies that will be initiated after the 1st of January, 2013 will have to comply with these regulations.
Insurers experts opine that this could herald certain major changes in the life insurance sector. Insurers may come up with newer policy offerings in order to minimize the impact of the new guidelines that have come into play. The insurers feared that the new guidelines would make it necessary for them to have very high reserves. However, since the impact was not as much as they feared, the response to the new guidelines has been positive this far.
The new principles based approach for universal life products has to be brought into effect for all policies that will be issued on or after January 1, 2013. Insurance companies will be given the authority to determine the level of reserve based on the analytical reviews of the products they are offering. Experts says that the reserves on certain products will increase significantly starting next year. Therefore, insurers have begun working round the clock to come up with new offerings in order to reduce the impact of this move.
One of the principle actuaries at Milliman, New York, Steven Schrieber, says that it is imperative to insurance companies to come up with new offerings at the earliest. He also says that the time available is extremely limited since it is not enough to just draw up the policy requirements. insurers also have to submit the policies all the states that have their presence and seek their approval before setting up a system in place to issue these new policies. However, Schreiber also says that it is impossible to determine the impact of the new guidelines at the moment since it is company specific and product specific.
