Big data, technology, and demographic changes have increased competitive pressures to the point where innovation has become essential for insurers. However, innovation is often at odds with many insurers’ governance structures. Governance seeks to define a framework under which business decisions are determined and executed.
In contrast, innovation by definition seeks new methods, ideas, and products. Viewed by many as a natural, or even acceptable, state of affairs, this tension can edge out a potentially profitable initiative, recasting it into a familiar mold with few growth possibilities.
In this article, Milliman’s Paul Fedchak and Stacy Koron discuss if the process really has to be that way.
The new reserve framework outlined in Chapter 20 of the Valuation Manual (VM-20) focuses largely on term and universal life insurance with secondary guarantee products. The VM-20 aims to “right size” the reserves by employing a principle-based approach.
This new approach allows companies to use mortality, surrender rates, and discount rates that reflect their experience, and that are based on their actual investments and strategies. Starting in 2020, this framework is now the required reserving approach for all U.S. life insurance products issued.
The new framework outlined in VM-20 will likely create some fundamental changes in the products available on the market. Some of these changes are clear, while others are yet to be explored or even contemplated. In this paper, Milliman’s Paul Fedchak, Ian Laverty, and Uri Sobel explore some of the possibilities.
The Tax Cuts and Jobs Act was signed into law in December. Tax reform will lead to either changes in projected profitability, changes in product design or pricing, or both. In this analysis, Milliman actuaries measure the impact of the tax code changes on a range of different insurance product types.