I tried (not very hard) to get a prof interested in letting me do a masters on this. I’d welcome your thoughts on the benefit of the following, and the approach.
Term insurance is easily comparable by premium; there’s a ton of places you can sort term policies by premiums. Not so with UL, there’s no directly comparable way to do this. That makes the UL marketplace, at least in Canada, uncompetitive - consumers can’t tell if one product is better than another. They could do so, if there was a metric.
Here’s the metric I think might work. (by way of background, Canadian UL has discrete and explicit YRT insurance costs, and a discrete investment. I think US UL is more merged, or the investment part is less defined). Given a defined premium, the YRT insurance costs, an end date, and an assumed return on the investments, run a monte carlo simulation in the policy and end up with a probability of failure (investments=0 and premiums<YRT insurance cost = policy fails because there’s no more money). Then take 1- that probability and we end up with a metric between 0 and 1 where the higher the number, the less the policy is likely to fail.
(Aside, the criticism will likely be that the returns are not comparable across UL policies so using a fixed return for all policies is an unfair comparison. So there may be some additional work on how better model the various investment options available in each policy).