X-Message-Number: 33159
Date: Wed, 29 Dec 2010 20:31:00 -0600 (CST)
Subject: Non-grandfathered pricing and insurance

Grandfathering prices provides some assurance to new members that they will not 
need to purchase additional insurance, which is good.  However, because of the 
cross-subsidy from new members to grandfathered members, it increases the price 
for new members, which is bad. Further, if growth is slow in the first place, 
then grandfathering has a significant impact on the price faced by new members 
and further retards growth.

As Rudy Hoffman will attest, if grandfathering were eliminated (at least 
prospectively) there are ways for new members to deal with it.  One way is 
through a paid up addition rider.  Under this rider, a portion of the annual 
premium is used to purchase a paid up addition that increases the death benefit 
each year.  The paid up addition can be sized so that the death benefit grows 
fast enough to beat likely inflation.

Mark Mugler

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