Warning: Be Prepared for AG38

If you’re not up to date on AG38 (actuarial guideline XXXVII), do some research.  It will change the landscape or our term and guaranteed UL business in the coming months.

AG38 was formed to govern the reserve requirements on universal life products with secondary guarantees (GULs).  Most of the carriers who are selling GUL’s are using “shadow accounts” within their GULs.  This allows them to put less money in reserves and be more competitive.  AG38 will force them properly reserve these products.  This will be effective on 1/1/2013.

In a nutshell, reserve requirements will be tighter which will result in insurers having to increase premiums or get out of the GUL and “long term” term market.  Carriers are making steps to implement now.

You’ll start seeing MAJOR announcements from carriers within the coming weeks regarding LARGE rate increases and probably a mass exodus from GUL market and probably the 25 and 30 year term market as well.

What does this mean for agents?

FIRE SALE!  Seriously.

Get educated on AG38 and be ready to explain it to your clients and prospects.  I think rate increases will happen by December.

Also, keep a pulse on the GUL and term market over the next few months so you’re not blindsided by these changes when they happen.

Just be prepared.