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June 03, 2004 at 08:00 PM
As a widower, I do my own grocery shopping. Im determined to stick to my list of basic staples. But the impulse buying takes over, and I come home loaded with exotics. Theyre good, too!
Thats the way it is with the riders in the life and health insurance industry. They are not the staples. They are the impulse purchases, and they are usually good. (And, as is true for the grocery stores, the corporate profits come from these impulse purchases, not the staples.)
To test the waters on rider activity in the past year, I surveyed several very large insurers in the 2nd quarter of 2004. More companies responded this year than in 2001 when we did our last survey on riders. That was my first clue that the riders market is on the move.
The results indicate that rider variety is very strong. In fact, the available selection, which has always been vast, appears to be even vaster.
That is because some “new and exotic” riders have joined the bountiful list of traditional riders. The chart illustrates the point. These are among the riders that caught my attention in the 2004 survey. The list includes both old and new designs, but all received frequent mentions. Ill discuss a few that have piqued my interest.
Paid-up additions riders for whole life are not new, but they are now getting more mentions in my surveysa possible indication that insurers may be using these riders more than in the past. That tracks with the renewed interest in whole life insurance, which has emerged in some markets.
Another example: In the past several years, universal life carriers have been offering no-lapse protection in periods of 1 year, 5 years and more. But now, the carriers increasingly are offering lapse protection riders at the higher issue ages, too. This is designed to correct a long-time design flaw in ULits tendency to lapse at very high ages, somewhere around 100.
The unemployment rider is really exotic. A few of those showed up during the recession in the early 1990sallowing penalty-free withdrawals from annuities in the event of unemployment, for examplebut they seemed to go off the radar screen as the economy exploded in the mid-1990s. Now, a new variant is back, showing up as riders for whole life policies.
