Analysis tools designed specifically for life insurance already do exist, and are in limited use by professionals who don't fall under NASD regulation. Financial Profiles, for example, launched a product called Insurance Insight about three years ago.

As with Monte Carlo analysis applied to other investments, the product uses historical market data to calculate a range of possible outcomes for a VUL policy and premium, says Charles Davidson, Financial Profiles' vice president of product management and marketing. "We think there will be a significant demand for it," he says. "It helps and assists the client in assessing risk and failure. That is the true value of this type of analysis."

If properly used, Weber says, it gives advisors and their clients substantive information with which to make decisions. If, for example, a Monte Carlo analysis were to show a 10% chance of the policy lapsing before the policyholder reaches the age of 90, "that doesn't make the policy wrong," he says. "The most important part is it helps us figure out whether or not the money the client is willing to put into the policy is sufficient to meet expectations," Weber says.

It's also useful for running checkups on existing policies that, without any changes, are on course to lapse, he adds.

In light of the underfunding problem, insurance companies are coming out with guaranteed premiums. The tradeoff for clients is the policies will use conservative investment return assumptions and carry heavier expenses.

MassMutual Financial Group, for example, launched a VUL Guard product in August of last year. The product has produced $9.1 million in sales year-to-date as of April 30, according to Jeff Carlton, the company's vice president of life sales.

The company also has a transition program that allows holders of MassMutual variable universal life policies to convert them into a VUL Guard policy, he says. "I think it's the right product at the right time," Carlton says. "There are a lot of underfunded policies."

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