Why Your IUL Illustration Looks Worse Than Your Friend's Did in 2021 (AG 49-B)

Here's a conversation I have almost every month in my Naples office. Someone sits down with an indexed universal life illustration, then mentions that their brother-in-law bought "the same kind of policy" a few years back — and that person's projection showed way more retirement income for what looks like the same premium. So why does the one in front of you look worse? I'm Ali Taqi, an independent Florida-licensed agent (license #W393613), and the honest answer reassures most people once they get it: your illustration looks worse because a rule called AG 49-B forced it to be more honest. This post explains what AG 49-B changed, walks through a before-and-after example, and shows you how I stress-test any illustration at the 0% floor before I'd let a client sign.

The Short Version

• AG 49-B is an actuarial guideline from the NAIC that took effect on May 1, 2023. It governs how IUL illustrations are allowed to project the future — not how the policies themselves work.
• It capped the headline number agents can show and folded "bonus" rates into that cap instead of letting them stack on top. (A related crackdown on the loan math that used to make projections look magical came earlier, under AG 49-A in 2020.)
• The result: the same policy, illustrated today, shows lower projected cash value and income than it would have under the old rules. That's the point.
• A lower-looking illustration is not a worse policy. It's a more truthful picture of what the policy was always likely to do.
• None of this changes the actual contract — the 0% floor, the cap, the tax treatment, the death benefit all survived untouched. Only the sales projection got reined in.

First, What an Illustration Actually Is

An IUL illustration is a multi-page projection of what your policy could look like over 30, 40, even 60 years. Every illustration carries two anchor columns: a guaranteed column (the contractual worst case the carrier is legally on the hook for) and a non-guaranteed or "current assumed" column built on a crediting rate the agent selects. That assumed rate is the single most powerful — and most abused — lever in the whole document; small changes in it compound into enormous swings over decades. I wrote a full breakdown of how an over-aggressive assumed rate quietly collapses a policy years later in The IUL Illustration Trap; AG 49-B is regulators trying to fence in that exact lever.

The Decade-Long Cat-and-Mouse Game

AG 49-B is the third move in a long chess match between regulators and the carriers' product designers:

• AG 49 (2015). Before it, illustrated rates were a free-for-all — one industry analysis found pre-guideline rates running from 5.60% to 8.50%, averaging around 7.38% (Advisors Resource: The Impact of Actuarial Guideline 49). AG 49 tied the maximum illustrated rate to a benchmark index account so agents couldn't just type in a dream number.
• AG 49-A (late 2020). Carriers had bolted on multipliers and bonuses that juiced projections without touching the headline rate. AG 49-A ruled that designs with multipliers can't illustrate better than designs without them.
• AG 49-B (effective May 1, 2023). The next workaround was engineered, volatility-controlled "exotic" indexes paired with fixed bonuses. AG 49-B closed that door (FIG Marketing: AG 49-B & Life Insurance Illustrations; NAIC: Life Insurance Illustrations).

Notice the through-line: not one of these rules attacked IUL as a concept. Every round targeted the same thing — projections that flattered the product beyond what it was likely to deliver.

What AG 49-B Actually Changed — Two Specific Things

Strip away the actuarial jargon and AG 49-B did two concrete things to the illustration on your kitchen table. (A third lever you may have read about — the limit on loan "arbitrage" — was actually tightened by the earlier AG 49-A in 2020, not by AG 49-B; I cover it below because it's part of the same story, but it's worth getting the timeline right.)

1. It Capped Illustrated Index Credits at 145% of What the Carrier Actually Earns

Under AG 49-B, illustrated indexed credits for the Benchmark Index Account can't exceed 145% of the carrier's Annual Net Investment Earnings Rate — essentially the return the insurer earns on the bond portfolio backing your policy (FIG Marketing). In a low-to-moderate rate environment, that math produces a lower ceiling than the numbers carriers showed in 2018–2021, and no index account may be illustrated above that benchmark.

2. It Folded Bonuses Into the Cap Instead of Stacking Them On Top

This is the change you can see most clearly. Before AG 49-B, a product might illustrate a 6% rate and then advertise a 1% "bonus" on top — effectively showing 7%. AG 49-B says the maximum illustrated rate must already include any bonuses. So a carrier that wants to keep showing a 1% bonus has to drop its base illustrated rate to 5%, landing back at 6% all-in — or drop the bonus entirely (Advisors Resource: AG 49-B and 2023 IUL Products). The bonus didn't vanish from the contract; it just can't be used to inflate the picture anymore.

The Earlier Crackdown on Loan "Arbitrage" (AG 49-A, 2020)

IUL retirement income comes from policy loans. Older illustrations could assume you'd be charged, say, 5% on a loan while the borrowed money kept earning 6% credited — a 1% "free" spread the policy supposedly earned on money you'd already taken out. Multiply that phantom spread across decades and it manufactured income out of thin air. The original AG 49 (2015) capped that illustrated spread at 1.0%; the follow-up AG 49-A, effective December 14, 2020, cut it to 0.5% (50 basis points) (InsuranceNewsNet: AG 49-A Goes Into Effect Dec. 14). I mention it here because people often lump it in with AG 49-B, but get the timeline straight: the loan-spread squeeze was already in force before AG 49-B arrived. That single change deflated a lot of the "tax-free retirement machine" projections you may have seen in the late 2010s.

A Before-and-After You Can Picture

Here's the kind of simplified side-by-side I sketch for clients. These are round numbers chosen to show the mechanism, not a quote for any specific product — your real figures depend on the carrier, your age, and your health. Imagine the same 45-year-old funding the same policy with the same premium.

• The 2021 illustration might have shown a 6.0% base assumed rate plus a 1% bonus stacked on top — effectively a 7.0% all-in crediting assumption — by routing it through one of the volatility-controlled "exotic" index designs carriers were marketing at the time. Stack the inflated headline rate and the bonus and the projected retirement income chart looks spectacular.
• The 2026 illustration of the very same policy shows that same 1% bonus living inside the cap rather than on top — so the base drops to roughly 5.0% to land near 6.0% all-in — and the headline rate itself is held down by the 145%-of-net-earnings ceiling and the no-account-above-the-benchmark rule. The projected income falls — sometimes meaningfully.

Here's the part that matters: the policy didn't get worse between 2021 and 2026 — the chart got more honest. Industry data backs this up. One industry survey found average illustrated rates fell from roughly 7.38% pre-AG-49 to about 6.69% afterward — with the very highest rate dropping from 8.50% to 7.75% (InsuranceNewsNet: IUL Rate Projections Drop in Illustrations), and the CEO of research firm Wink estimated the lower rates could suppress IUL sales by up to 15% — because some of those sales were only ever happening on the strength of inflated charts (InsuranceNewsNet).

Why a "Worse-Looking" Illustration Is Actually Protecting You

I get the gut reaction: you walked in wanting the policy that shows more money, and the rules made yours show less. But think about what the bigger 2021 number really was. Not extra cash value the carrier promised to deliver — a bigger gap between what the chart claimed and what the policy would realistically do. That gap is precisely what fuels the IUL complaints and lawsuits now making headlines. (I covered that litigation wave, including Pacific Life's $58.3 million settlement over older illustrations, in The IUL Lawsuit Wave and AG 49-B.)

When a 2021 buyer's illustration assumed 7% all-in and the policy actually credited closer to 5% over time, the cash value arrived underbuilt. As the cost of insurance climbed in their 60s and 70s, that thinner-than-promised cash value couldn't absorb it, and the policy started eating itself — the most common IUL failure mode I see. A 2026 illustration that shows a more modest 5% is simply refusing to set you up for that disappointment. That's not a downgrade; it's the difference between a plan and a wish.

How to Stress-Test Any Illustration at the 0% Floor

One catch first: AG 49-B sets the maximum rate an agent may illustrate — it doesn't stop an agent from illustrating right up at that maximum. Even today you can be handed a perfectly legal illustration that's still optimistic; it's just capped optimism instead of unlimited optimism. The rule narrowed the danger zone, it didn't erase it. So the most important habit hasn't changed: you still have to make the agent show you the conservative and guaranteed scenarios, not just the legal ceiling. The single best protection you have is something the carrier already prints and must give you — the guaranteed column — plus your right to ask for runs at lower assumed rates. Here's the exact process I walk Florida clients through before anyone signs.

1. Ask what assumed rate is on the page, and how it compares to the carrier's AG 49-B maximum. If it's sitting at the maximum, that's a yellow flag — honest design usually runs below the ceiling, not at it.
2. Demand a run at a conservative rate. I typically re-run a policy well below the carrier's max. If the design only works at the top rate, it's too thin.
3. Read the guaranteed column like it's the only column that matters — because in a bad-enough world, it is. Find the age where the policy lapses on the guaranteed column. If that age is in your 70s or 80s, the design is fragile. I want it holding to at least the mid-90s before I'm comfortable.
4. Picture a string of 0% floor years. The floor protects you from market losses, but a run of flat 0% credited years still means your cash value isn't growing while costs keep climbing. Ask: "If I credit near the floor for several years early on, does this policy still survive?" A robust design says yes. A trap says "only if the market cooperates."
5. Request an in-force illustration if you already own a policy. It re-projects from today using your actual cash value — the truest stress test there is. It's free, and the carrier must provide it.

If a policy clears all five of those, you've got a real plan that AG 49-B and a 0%-floor year can both survive. If it only works at the maximum illustrated rate with the loans timed perfectly, you're looking at the illustration trap wearing a 2026 suit.

What This Doesn't Change About IUL

So you don't walk away thinking AG 49-B broke the product: it didn't touch the contract at all. A well-designed IUL still offers a 0% floor, tax-deferred growth, tax-free access through properly managed policy loans, and a permanent death benefit — and for Florida residents, no state income tax plus statutory protection of cash value from creditors. For a high earner who has maxed their 401(k) and IRA and can fund the policy honestly for decades, it remains a genuinely useful tool. I lay out that full balance sheet in my honest IUL pros-and-cons guide, and if you're starting from scratch, begin with what IUL actually is. AG 49-B just made sure the chart tells closer to the truth.

The Bottom Line for Florida Buyers

If your IUL illustration looks worse than your friend's did in 2021, congratulations — you're shopping in the most honestly-illustrated IUL market that has ever existed. The number went down because a decade of regulation took away the tricks that pumped it up: AG 49-B reined in stacked bonuses and inflated index credits, and the earlier AG 49 and AG 49-A had already cut the phantom loan spreads that powered the wildest projections of the late 2010s. A smaller projected number from a policy that's funded to survive the guaranteed column and a stretch of 0% floor years beats a bigger number that lapses while you're trying to retire on it.

If you'd like a second set of eyes on an illustration — a new one you're being pitched, or an older one you already own — request a free quote and illustration review or call me directly at (239) 800-8508. I'll show you exactly which AG 49-B levers are in play, run the conservative and guaranteed scenarios, and tell you honestly whether the design holds up. If the honest math says IUL isn't your tool, I'll tell you that too.

Key takeaway: AG 49-B (effective May 1, 2023) made IUL illustrations look worse by capping illustrated index credits at 145% of the carrier's net earnings rate and folding bonuses inside that cap instead of stacking them on top; the earlier AG 49-A (2020) had already cut illustrated loan arbitrage to 0.5%. The policy didn't get weaker — the projection got more honest. Judge any illustration by whether it survives a conservative rate, the guaranteed column, and a stretch of 0% floor years, not by how big the best-case chart looks.