Getting up to speed on the NAIC’s AG 49: What you need to know

Actuarial Guideline 49, two backers of the model act say, levels the playing field for sales of fixed indexed universal life.

On September 1, 2015, the first phase of Actuarial Guideline XLIX (AG 49) became effective for all Fixed Index Universal Life (FIUL) insurance policy illustrations. Jason Wellmann, senior vice president of life distribution at Allianz Life Insurance Company of North America (Allianz Life), and Todd Petit, assistant vice president actuary and illustration actuary for Allianz Life, offer their perspectives on the new guideline.

Q: What was your initial reaction to the proposed AG 49?

JW: AG 49 was originally proposed by manufacturers of FIUL policies — including Allianz Life — that wanted to develop a consistent methodology for determining maximum illustrated rates. In its initial stages, the proposed methodology was simple and straightforward, and could easily be understood by consumers.

But as certain non-FIUL companies questioned the proposal and proposed alternatives, the conversation became more actuarial in nature. At that point, we relied heavily on our actuaries to demonstrate the strong value that FIUL provides to consumers and help shape a compromise that we could support. At Allianz Life, we wanted a level playing field, and we think that was achieved.

Q: Todd, can you describe your role as the illustration actuary for your company?

TP: The illustration actuary performs a series of tests to ensure that the illustrated scale used in a life insurance policy illustration is compliant with insurance regulations and guidelines. Many financial professionals know that illustrated values cannot exceed the current rates and charges in effect at the time of the illustration (called the “currently payable scale”), but some may not know there is a secondary limit placed on illustrated values (called the “disciplined current scale”).

The purpose of the disciplined current scale is to prevent a company from showing an illustration of a product that they cannot afford. My job as the illustration actuary is to determine the disciplined current scale for each policy we illustrate, and then set the maximum illustrated scale.

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