Overcoming 2020: PBR/2017 CSO, Low Interest Rates, COVID-19, and AG 49-A

by Sydney Presley, Director of Product Innovation

Through COVID, the economy, and more, it’s hard to think back to the beginning of the year and believe that it was only 12 months ago. While the low interest rate environment and COVID clearly affected all, 2020 was also packed with other major themes for our industry, like PBR/2017 CSO tables and AG 49-A. We’ll take a look at all of these to review this past year that seemed to last a decade.

PBR/2017 CSO (Jan. 1, 2020)

Who remembers the beginning of the year where the main buzz was compliance with PBR and the 2017 CSO mortality tables? The first day of this year, January 1st 2020, was the deadline for life insurance products to apply these changes. We saw many products race to that finish line – and after the dust settled, we saw just over a quarter of the life products we track, phase out. To explain this, we found some carriers prioritize certain products in their portfolio to meet the deadline with plans to revive products who would initially phase out, while others made conscious decisions to retire some uncompetitive products. The vast majority of these were in the protection markets with CAUL and GUL products losing the most players. For more insights on what we saw in individual markets, take a look at our December 2019, POINTS piece.

One other thing we noticed early this year was a significant drop in protection based indexed UL premiums in the market. While this wasn’t directly tied to the new requirements of either the PBR or 2017 CSO switch, it was the most apparent pricing trend seen at the beginning of this year. Looking at a typical scenario at conservative rates, we saw an almost 20% decrease in the average IUL protection premium in 2019. Similar to the IUL accumulation market trends of 2019, this was driven by the addition or enhancement of bonuses within these policies.

Low Interest Rate Environment

While the low interest rate environment has persisted for a long time now, the Fed dropping interest rates to 0.25% in March quickly took the spotlight away from the aftermath of PBR and the 2017 CSO tables. After the Fed announcement, two major and quick changes we saw were 1) pricing hikes to no lapse guaranteed products and 2) lower caps on indexed accounts. Since the beginning of April, the traditional no lapse guaranteed market saw the majority of products make (typically substantial) pricing hikes, ending with only four traditional products without pricing increases this year. Additionally, in that same period, we’ve seen over 80 IUL cap drops in one or more account (many products saw drops more than once). Our May POINTS piece, Interest Rate Interplay: A Chief Actuary’s View, takes a look at the relationship between interest rates and the pricing of life insurance products to help explain to professionals as well as clients what was happening to various parts of the life insurance market.


No discussion of this year is complete without addressing the elephant in the room. Similar to the Fed change, March was also the month we started to see life insurance carriers make temporary (and sometimes permanent) changes because of the pandemic. Carriers, like the rest of us, didn’t know what would happen and the uncertainty caused many carriers to enact age restrictions, premium limitations, table limits, among other changes. While the outlook was grim early this year, now that we are at the end, we have seen an expansion of technology solutions, from distribution and carriers, beyond what many in the industry would have thought possible in this short period of time. Read our September POINTS piece, The Pulse Of The Industry: COVID-19 Responses, for success stories from a few of our partners. The general message of all was advancement and cooperation with a like minded goal of better serving the end customer.

AG 49-A

While generally there is no talking about this year without COVID-19, in the life insurance world, the discussion is not complete without mentioning AG 49-A. At the beginning of this year, not much was known about how the guideline would change. Fast forward to June and the direction was established with a November 25th compliance date (this was since extended to a December 14th compliance date). Read our July POINTS piece, What to Expect When You’re Expecting AG 49-A, to get an overview of where the regulation settled. Now that we are at the end of December, carriers have complied and here are some of the directions carriers landed.

  • Little/No Change – A handful of carriers didn’t need to make revisions to their illustrations beyond applying the newly limited 0.5% participating loan advantage.
  • Stripped Out Multipliers – Some carriers decided they weren’t worth keeping and removed any multipliers from their products.
  • Keep Multipliers, Hinder Performance – Some carriers kept their multipliers, but illustrating them only makes illustrated performance fall.
  • Keep and Prioritize Multipliers – Some carriers kept their product mechanics the same, multipliers and all, though illustrations were limited. In this strategy multipliers and other enhanced accounts can perform better than the ‘non-multiplier’ option though illustrated performance is still capped.

Beyond the products that fall in the “Little/No Change” category, accumulation IUL products saw significant drops in illustrated performance. Like last time around, we anticipate this is just the first swing at compliance and expect many changes to come (to IUL as well as potentially other product lines). Stay tuned for a more in depth look at how AG 49-A has changed the life insurance landscape.

As you’ve felt and seen, a lot has happened this year. While 2019 marked the most new products or reprices that LifeTrends had seen in a single year, in full 2020 fashion, we have seen more turnover (despite losing a quarter of products at the beginning of the year), in the form of new products, reprices, illustrated rate changes, and regulation compliance, to pass the high set bar of 2019. As changes continue to roll down, you can count on us to be your source for product news and trends in the life insurance world. #thankyouandgoodnight