The National Association of Insurance Commissioners (NAIC) on June 18 approved updated, more reasonable guidelines for the illustrations that insurers, agents and brokers can use to market indexed universal life (IUL) products. The new guidelines are set to take effect Sept. 1.

Adoption of Actuarial Guideline XLIX for Indexed Universal Life Illustrations (AG 49) represents the work of the Life Actuarial Task Force to develop realistic credited rates for illustrations of IUL products. It is expected to take effect for all IUL policies sold on or after on Sept. 1, 2015.

“The guidelines approved today by the NAIC are the result of a considerable collaborative effort between regulators and industry,” the American Council of Life Insurers (ACLI) said in a statement issued shortly after the NAIC approved the new guidelines on a conference call of the Executive Committee/Plenary last Thursday.

The new guidelines offer uniform rules for the development of illustrations of IUL products that will benefit consumers, the ACLI statement continued, providing guidance in determining the index-based crediting rate for the currently payable scale and the disciplined current scale; limit the policy loan leverage shown in an illustration; and require additional consumer information (side-by-side illustration and additional disclosures) that will aid in consumer understanding.

“Moreover, the guidelines would set a maximum rate that could be illustrated based on a standardized formula. The maximum rate could vary depending on product design,” the ACLI statement added.

The new guidelines are intended to solve the current lack of uniformity in how carriers and agents illustrate the potential performance of IUL policies, and how hypothetical historical index returns are calculated. The NAIC had asked the ACLI to provide industry input for the development of the guidelines, leading to ACLI establishing a task force to develop an industry-supported recommendation. After extensive deliberation and a vote by ACLI member companies, ACLI delivered a recommendation for the guidelines to the NAIC that was supported by a super-majority of the ACLI Life Committee, the CEO Steering Committee, and the ACLI Board of Directors.