Incorporating Historical Investment Performance in Projecting Life Insurance Cash Values
DOI:
https://doi.org/10.1016/S1057-0810(97)90010-XAbstract
The projection of current investment experience in life insurance sales illustrations dur- ing the historically high interest rate environment of the 1980s in the U. S. has led to consumer dissatisfaction and lawsuits against life insurers and agents. As interest rates fell after 1985, insurers were unable to credit returns near the maximums illustrated earlier. New regulations still allow projections at essentially the latest current invest- ment returns, along with showing guaranteed and intermediate values. The question raised in this article is: Can history help the financial planner determine a range of credible investment return assumptions for projecting cash values? Conclusions are based on the results of basing projections on historical investment experience.
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