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  • What to consider when dealing with interest, dividends
  • July 23, 2013
  • Tony Steuer

    By Tony Steuer, CLU, LA

    Basically, what you are looking for is whether or not the company is using realistic numbers and facts, while also considering the company’s history.

    Basis questions for dividends, interest rates, and non-guaranteed factors:

    Are any of the underlying experiences factors significantly different from current experience? If so, examine which ones and how do they differ?

    If the policy is participating, is there a substantial probability that the current illustration dividend scale cannot be continued, if current experience holds?

    Ask yourself these questions when you are dealing with interest rates, dividends and non-guaranteed factors.

    If the policy is non-participating, is there a substantial probability that current illustrations cannot be supported by currently anticipated experience?

    Is the policy of the traditional participating variety, or does it contain non-guaranteed pricing elements using a means other than dividends?

    If the policy is not participating, what are the non-guaranteed elements involved? There are usually non-guaranteed interest crediting rates, mortality charges, loading, etc.

    If the policy is participating, does the company state that the contribution principle (i.e. aggregate divisible surplus should be distributed in the same proportion, as the policies are considered to have contributed to the company’s divisible surplus) is being followed on the illustrative dividend scale? If it is not, how does it differ?

    If the policy is non-participating, what is the company’s practice with respect to determination and re-determination of non-guaranteed pricing elements, with particular reference to (a) the degree of discretion reserved by the company and (b) whether any of the elements are guaranteed to follow an outside index?

    If need help answering these questions, please email me at

About Tony Steuer

Noted insurance author Tony Steuer has spent over 25 years in the life insurance industry. Steuer’s leadership roles include serving on the California Department of Insurance Curriculum board and the National Financial Educator's Council Curriculum Advisory Panel as well as having served as President of the San Francisco Chapter of the American Society of CLU & ChFC, President of the leading Life Insurance Producers of Northern California, and as a board member of the San Francisco Life Underwriters Association. Mr. Steuer is the author of Questions and Answers on Life Insurance: The Life Insurance Toolbook, The Questions and Answers on Life Insurance Workbook and The Questions and Answers on Disability Insurance Workbook - the first two were awarded the “Excellence in Financial Literacy (EIFLE) Award from the Institute of Financial Literacy. Steuer holds a Chartered Life Underwriter (CLU) designation and also holds the Life and Disability Insurance Analyst License, a designation that is held by less than thirty people in California.

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Questions & Answers on Life Insurance by Tony Steuer, CLU, LA, CPFFE is licensed under a Creative Commons Attribution 3.0 Unported License.

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