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Budget Rates Life Insurance |
Term Insurance Rate War
Term life insurance rates are at an all time low. There are a number of factors driving this drop. One of the biggest factors is a proposal passed by several states' life insurance commissioners called Triple X. The bottom line is that life insurance companies cut rates to gain market share, with the promise of fatter future margins. When Triple-X was implemented, rates stayed low, but long term rate guarantees were removed.
Triple-X
Twenty and thirty year guaranteed term policies (i.e. where the premiums are guaranteed for the ten or twenty year term) have become more expensive because of Guideline XXX, or "Triple-X". This guideline, which was pushed by the National Association of Insurance Commissioners (NAIC), requires insurance companies to substantially boost the amount of cash reserves for any term insurance premiums guaranteed beyond 5 years.
According to Bob Barney, President of Compulife® Software, Inc., "Triple-X will strengthen the position of life companies at the expense of the consumer, by transferring the risk of pricing errors from the life company to the consumer." Mr. Barney led an aggressive campaign against this regulation on the grounds that it is anti-consumer and unnecessary. Following are excerpts from Mr. Barney's press release.
Compulife's® Position
The NAIC believes that insurance companies are pricing their policies too cheaply and are not adequately reserving. The NAIC argues that this could lead to future insurance company insolvencies. Insurance companies initially fought this law until the NAIC agreed to a compromise, a 5-year exemption. Providing a life company does not guarantee a premium more than 5 years, companies can ignore the law.
Consumers won't know what hit them. The industry will be selling term life policies that will mislead consumers into thinking that they'll be buying 20 year level premiums, but which allow companies to dramatically increase premiums later. Life companies will say "trust us" and the NAIC says its OK to "trust them". Does anyone remember the vanishing premiums that didn't?