BCG Companies’ Jeri Turley, President and Eric Hieber, Principal, understand the complexities of life insurance products and gladly share their insights. The article below explains Dividend Interest Rates (DIRs) for policyholders. We hope you find it helpful.
“Life insurance products are complex financial vehicles with many variables that impact the long-term performance of the policy. One of the least understood variables is the Dividend Interest Rate (DIR) insurers declare for their participating whole life products. DIRs mean different things to different carriers and may incorporate pricing and expense components in addition to the carrier's investment performance. As a result, it is not possible to evaluate the performance of a whole life product simply by comparing the DIRs. Depending on the expense structure, a product with a 5% DIR could have superior performance compared to a product with a 6% DIR.
Because a DIR may mean different things to different companies, many insurers have stopped publishing DIRs adding to the lack of transparency for these products. While it is difficult to elicit much information from DIRs, changes in the declared rates tend to align with new money interest rates. The following commentary provides insight regarding DIRs that is helpful for policyholders.”