Incorporating Historical Investment Performance in Projecting Life Insurance Cash Values

Authors

  • S. Travis Pritchett W. Frank Hipp Professor of Insurance, College of Business Administration, University of South Carolina, Columbia, SC, 29208

DOI:

https://doi.org/10.1016/S1057-0810(97)90010-X

Abstract

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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Published

1997-09-30

How to Cite

Pritchett , S. T. (1997). Incorporating Historical Investment Performance in Projecting Life Insurance Cash Values. Financial Services Review, 6(3), 155–167. https://doi.org/10.1016/S1057-0810(97)90010-X

Issue

Vol. 6 No. 3 (1997): Financial Services Review

Section

New Original Submission

License

Copyright (c) 1997 JAI Press Inc.

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