Leslie Scism

speaker

504 appearances 9 recordings 1 series first heard Sep 2017 last heard May 2023

Leslie Scism’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · The Hottest Thing in Life Insurance Has Serious Risks · 6 Jan 2020 podcast

Also, the insurers typically have the contractual right to raise the rates they charge for the death benefit portion.

So the cost can go up and your interest can come down.

And that could spell disaster for people if they don't have extra money in their budgets to pay a bigger premium.

That could happen.

It hasn't happened in general over the past decade because the stock market has been performing so well.

So people have been earning decent amounts of interest in these policies.

But if the market flattens or crashes and then flattens,

There could be years with little interest being credited.

And separately, as we discussed, the market could be performing relatively well, but the insurer, for whatever reason, decides under contractual provisions it's going to pay less interest to these policies.

These policies took off in sales as the stock market was rebounding from the 2008, 2009 deep, deep slide during the financial crisis.

So by 2015, regulators were becoming concerned that sales were booming, but people were not understanding the dangers.

So the regulators created some new regulation.

Now the regulators are back at the drawing board and they are working on regulation that will restrict the way that insurance companies can illustrate some new features known as multipliers, where they promise enhanced or greater interest to be credited.

But again, that comes at a cost.

to the consumer just in the, you know, it's sort of built into the fee structure.

So the regulators, again, are concerned that consumers don't realize the downside of some of these features for which they will be paying extra money.

Basic universal life policies to

took off in the 1980s when interest rates were in the double digits.

The 10-year treasury at one point was earning in the mid-teens.

So the insurance companies sold this type of insurance where they promised interest credited to the policy based on current interest rates.

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