A team of MCFAM students ( Songyu Yang, Yifei Luo, Meggie Wen and Ameya Phadke) participated in a research project with MCFAM Faculty and an industry mentor to complete some research on Indexed Universal Life (IUL) Insurance. Their research was selected for presentation at the largest Actuarial Research Conference in North America-ARC. Their project taught them that IUL, developed to harness the power of equity market returns with downside protection, is currently illustrated using a static credited rate. This masks market return volatility inherent in its structure.
In their research, they modeled the pricing algorithms of major IUL products and applied scenario testing using Monte Carlo simulation of indices used in IUL products. They found that the statistical variance of indices leads to vastly different results than what is currently demonstrated in many cases, and this variance may cause the failure of the policy. Their research indicates a better method for demonstrating policy performance would be based on an outcome analysis rather than the static method currently in use.
To see the full presentation, go to: https://mcfam.dl.umn.edu/student-research-0
Photo From Left to Right: Yifei Luo (MFM Student) Sonyu Yan (Actuarial/Computer Science Student) Breanne Richins (FSA/Instructor/Research Adviser)