Transamerica withdrew their TransACE life insurance products on February 4th citing a difficult interest rate environment. Carriers at times discontinue or change products, but Transamerica’s decision was unusual in that they stopped processing current applications. Usually carriers give prior notice and accept applications up to the cut off date and give a processing deadline for submitted applications, but here Transamerica even pulled the plug on current applications except where the 1035 cash exchanges had already been sent to the existing carrier, or those out for delivery.
The low interest rate environment is an ongoing concern for life insurance carrier. Here’s an overview from the NAIC, National Association of Insurance Carriers on its impact.
How to know this was coming? Transamerica has strong independent financial ratings. They have a 92 Comdex ranking which is a composite percentile rank of all carriers. However, Fitch had given Transamerica a negative outlook in February, 2014, but revised it to stable in October.
Take Away
Transamerica’s abrupt decision to withdraw TransACE probably did applicants a favor, given the encountered difficulties. Applicants can simply apply somewhere else using the same paramed results and medical records. Current TransACE policy holders may wish to reevaluate. One may surmise the plan’s projections were not favorable. Considering replacement calls for careful review; the burden of proof for replacing should be fairly high. Requesting an inforce illustration from the carrier is the first step.
Choosing a carrier is a key component in selecting a permanent life insurance policy. I favor mutual life companies or those privately held over publicly traded stock companies. Stock companies have to subject the pressures of shareholders; publicly held or mutual companies do not.
The product affects the importance of carrier choice. Whole life is the traditional province of mutual companies. With guaranteed Universal Life (GUL), the lowest premium with a lifetime no lapse guarantee is the key driver. The company offering a Guaranteed UL are on the hook for the guarantee. How the carrier performs over the time is not of strict importance, assuming the historical resiliency of the life carriers. With a current assumption UL or an Indexed Universal Life (IUL) consumers are advised to closely review the relative merits of the carrier’s financial strength, since the policy’s performance will depend on interest crediting and cost of insurance charges. Carrier ratings matter but also trends indicating stability and financial strength. Veteran life insurance agents since the Great Recession of 2008 have witnessed many.
