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2000: Term Life & Regulation XXX - A Straw in Search of a Camel's Back

Regulation XXX was adopted in 36 states during 2000.  A dramatic increase in term rates and an attendent decrease in sales were expected - but never materialized.  What really happened in the term life market?  Conning has cut through the complexity of the market and examined the factors that have muted the regulation's impact to date.

Table of Contents

  1. Introduction
  2. Summary and Conclusions
  3. The Term Life Market and Regulation XXX
    • The Term Life Market
    • Regulation XXX—History Adoption and Impact
  4. Regulation XXX Survey Results
    • Strategic Issues in the Term Life Marketplace
    • Industry Responses to Regulation XXX
    • Initial Industry Price Changes in Response to Regulation XXX
    • Industry Sales of Term Life Post-Regulation XXX
  5. Key Learnings and What We Can Expect Going Forward
    • The Term Life Market
    • Critical Success Factors


  1. Conning & Company Ratings on Companies Covered in This Study
  2. Conning 2000 Term Life Survey

"'Regulation XXX' will make term life insurance premiums soar."

"(The introduction of Regulation XXX) will almost immediately trigger a whopping boost in premium rates, up to 50% on term policies offering rate guarantees of ten years or more …"

These and other similar quotes described the expectations of insurers agents and industry observers about the potential impact of a new insurance regulation called Revised Regulation XXX which raised the reserving requirements on hot-selling term life products. Such increases were expected to reduce sales sharply in the term life market as term rates rose toward those charged for universal life and whole life policies. These fears also fueled a frenzied sales environment at the end of 1999 which likely carried over into early 2000 and were reflected in very high rates of sales growth which have since slowed to more normal rates. Life agents were positioning term policies as the last insurance bargain of the millennium and term writers were setting up procedures to capture at least the initial term premiums in 1999 so that the policies would not be subject to the new regulation.

January 1 2000 the effective date of Regulation XXX has come and gone. During the first and second quarters of 2000 Conning did not detect any significant disruptions in the term life market – lack of product availability dramatic increases in prices or significant reduction in sales. How could this be given all the hype just six months earlier? To understand better what really happened Conning decided to study the impact of Regulation XXX on term life rates and sales. To develop information for this study Conning surveyed prominent term writers on a variety of issues – both those relating to the term life market generally as well as some specifically related to Regulation XXX. Further as survey results led to more questions Conning conducted extensive interviews with a number of the major term life writers in order to understand better how they planned to respond to challenges in the term life marketplace and Regulation XXX.

This study seeks to cut through some of the complexity of the term life market. Chapter 3 examines the marketplace paying particular attention to some of the factors that ultimately served to mute the impact of Regulation XXX up to this point. Chapter 3 also closely examines key provisions of Regulation XXX – some that are widely known and understood as well as a number of lesser-known provisions that have had a significant impact on the term life market.

Chapter 4 discusses the results of Conning's survey. Responses were received from two dozen of companies that together accounted for roughly 35% of the industry's first-year term life premiums. The discussion of survey results is augmented by information gained from the more detailed follow-up interviews. The primary purpose of Chapter 4 is to identify the strategies that guide the management of the term writers' lines of business and then explore the tactics that insurers plan to employ in response to Regulation XXX within the context of those strategies. The chapter concludes with a review of the changes that have occurred thus far in 2000 in insurers' term life prices and sales.

Chapter 5 describes Conning's views on the future of the term life marketplace and outlines critical success factors for insurers that seek to operate in what promises to be an increasingly challenging marketplace.


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