Abstract
The growing concern over market conduct issues in the life insurance industry necessitates adequate disclosure of important factors in the generation of life insurance surrender values. Although Chung and Skipper (1987) show that credited interest rates are significantly positively correlated with universal life insurance surrender values for durations of ten years, the multivariate analysis here demonstrates the importance of examining all credits and charges when analyzing universal life insurance contracts. The effects of various charges (expense, mortality, and surrender) outweigh the effects of credited interest rates for the oneyear and five-year periods. However, surrender values are. more sensitive to variation in credited interest rates for the ten-year period. The results have important implications for marketing of universal life, for analysis of competing universal life policies, and for regulation of life insurance policy illustrations.
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