Index Universal Life (IUL) appeared around 1977. Around 2015, the original AG-49 regulation sought to bring uniformity to illustrations of policies tied to an external index or indices by providing a reasonable cap on the illustrated credited rate.

Over time, regulation AG-49 was modified and was referenced AG-49A. The changes limited how carriers can illustrate their IUL products in an effort to provide more transparency to consumers purchasing this type of life insurance.

Before AG-49A, insurance carriers could illustrate certain product features used to enhance interest crediting rates such as indexed multipliers, cap buy-up accounts, and any other type of indexed-linked bonus structures funded through policy charges.

Financial professionals are aware of IUL’s unique advantages – providing death benefit protection plus potential cash value growth based on the movement of a stock market index while being subject to a floor and a cap, participation, and/or spread rate.

Not all IUL products are created equally, and neither are their illustrations. Generally, illustrations don’t include the negative effects of a down year. However, AG-49A also only applies to the illustration. It does not impact the IUL policy’s actual performance or features.

The performance of the cash value account may be dramatically different in down years. While a zero percent floor protects from negative cash value growth due to index performance, policy expenses can result in negative growth.

Keeping that in mind, are you ready for the Revised AG-49B? NAIC has adopted AG-49B (also called AG-49A Revised) effective May 1, 2023. This regulation impacts illustrations (including bonuses), and the illustrations will be limited to regulatory guidelines. Full implementation of AG-49B seems likely to take some time as insurance agents should contact their contracted carriers for more information on how this update could affect their IUL product illustrations.

In conjunction with Corebridge Financial, AIP Marketing Alliance is inviting our valued independent wholesalers and agents to attend Corebridge’s educational session on Tuesday, April 11th at 1:00 p.m CST. This informative webinar will cover how the AG-49B federal regulation will impact the life insurance product landscape and is open to agents only (not consumers).

If you have questions about the revised regulation, AIPMA encourages you to contact your specific insurance carrier. You also can contact AIPMA’s Business Development team at (800) 783-5206 Press #2 or marketing@aipma.com.