In a move that can only be described as ironic, Lincoln National (or Lincoln Financial Group, if you prefer) recently announced they are limiting the amount of first year premium relative to target premium they will accept on their 2009 Universal Life product portfolio (the updated 2011 portfolio is unaffected, as the current economy was factored in to the product pricing.). Why the limitation, and why is it ironic? First, the limitation.

Why would an insurance company turn away business? Look no further than the economic environment we are in. Interest rates and Treasury yields are so low that they have decided it is better to turn away premium than have to deploy it in the current economy, particularly if they give a discount on their product in the process (as is the case with any design with heavy funding in the first year). In the process they have eliminated themselves from consideration for many 1035 exchange sales. Of course, they have done this knowingly, and realize that they will see less business as a result. They are OK with it.

Now for the irony. It turns out they are not the only carrier to think this way, and are not the first to announce this new policy of limited first year funding. The one carrier that comes to mind is the "other Lincoln" - Lincoln Benefit Life. The fact that they have similar names is only part of the irony. The kicker is that they recently announced they were removing their limitation on first year premium relative to target premium on their SGUL product. While I was not privy to the internal discussion about the reasons for ending this restriction, it does not take a rocket scientist to figure out at least part of the equation - The decline in sales that followed the implementation of this first year premium limitation was steeper than they expected it to be, and it was time to turn the premium spigot back on.

So where does that leave us, aside from enjoying yet another of the foibles of our business? What does it mean for you and your clients? The Lincoln National announcement impact is clear. If you are working on any 1035, single pay or heavily funded first year designs using the 2009 Lincoln National SGUL or GUL you better know your transition rules! Obviously, we can help with that. If you are not in that situation, you still need to pay attention. The Lincoln Benefit product that has had the restriction lifted is very, very well priced, and its return to the market is a very welcome occurrence for us, and by extension, should prove to be very good news to you and your clients.

How good? Try if you have written a survivorship policy in the last decade we should take a look at this product as a possible upgrade good. Seriously. Go look at your book. Find a case, run an in force ledger, pick up the phone and call me. Let's find a case to make the fourth quarter a good one for you.