Are all discounts beneficial? – John Hancock Vitality Program

November 13th, 2017 No comments

Many readers may be aware of Hancock’s Vitality program. I’m not going to attempt to do the program justice but you can click here to read about it. The short story is that the program offers different levels of discounts on your clients’ life insurance premiums based on their healthy lifestyle as measured by a variety of metrics and activities. It also incorporates discounts from partner companies and allows your clients to earn a steep discount on an Apple Watch or a complimentary Fitbit to track healthy activities.

Agents and consumers are taking advantage of it, and it’s billed as revolutionary in the industry. I can get behind the program and support those who qualify and will keep up with the requirements to main-tain the discounts.

You knew there was a however coming, didn’t you? I specialize in an industry that seems to have a knack over the years for too often disappointing clients. Some of this is due to a multi-decade slide in the interest rate markets, which isn’t the industry’s fault, but it’s so much more than that.

The life insurance industry is reasonably innovative and regularly coming up with new marketing initia-tives. There’s nothing wrong with that. It does seem, though, that every new great idea can be used rightly or wrongly and is used both ways every time. I’m not for a moment questioning the appropriate-ness of John Hancock rolling out this program. It’s likely a competitive edge for them, consumers can financially benefit and if this win/win promotes a healthy lifestyle, that’s all the better.

Don’t Oversell Strategy

What worries me is the opportunity to oversell this strategy, especially to people who may not be apt to follow through from year to year on the activities required to maintain the discounts. This wouldn’t be Hancock’s fault, but advisors should be aware of this.


I was recently working with an attorney on a situation in which the client was putting a six-figure annual premium into a life insurance policy for tens of millions of death benefit. The reasons the agent was recommending John Hancock don’t matter for the purpose of this conversation but it wasn’t because of the Vitality program. In fact, the agent didn’t originally illustrate the Vitality discount.
One of the reasons I was hired for this engagement was as a devil’s advocate. I explained the discount program to the attorney and asked, given his familiarity with the clients, how likely it would be that they would follow the program and take the steps to continue the pricing as presented. His answer was an immediate and sure “Almost no chance of that happening, Bill”.

We then precisely recreated the ledger on our Hancock software. When we removed the Vitality dis-count, the premium wouldn’t hold the contract as structured. My independent modeling and stress test-ing indicated the policy wasn’t originally built appropriately and had very little chance of sustaining with the discount, increasing the chances of everything falling apart. It may be better to look at this benefit as a performance booster to an otherwise responsibly structured contract rather than a discount for competitive purposes. The consuming public simply can’t get it through their collective skulls that life insurance generally isn’t a transaction for which the goal should be to pay the least amount possible. They never will as long as the sales aspect of the market perpetuates the myth. Price and cost are two very different metrics and are too often conflated.

Use Caution

To reiterate, I’m not criticizing this program. I am only offering a tale of caution. We all know we have clients who’lll be able to stay with the program and clients who’ll have almost no chance of doing so. I’m in the business of removing hurdles from the path to success. I’m afraid that in some cases, this will add a hurdle. Include that in the T-chart when helping them make decisions.

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Understanding Life Insurance Performance – Part 1

October 31st, 2017 No comments
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Don’t Underrate Term Insurance

October 31st, 2017 No comments

It can be a good, cheap solution for many clients.

A younger attorney asked me some time ago to get some term numbers for her clients. Her question was “Is this premium monthly or annual?” When I told her it was annual, her next comment was “Could you quote some term for me and my husband?”

Pretty much every statistic shows most people are meaningfully underinsured. Sure, this is easy to say when it’s someone else’s money you are spending, however, I don’t think most people understand just how cheap term insurance is. Yes, some people can’t get it, and some people just don’t have any money, but that isn’t the case in most situations. For full post, click here…

The Problem with Spreadsheeting and Commoditization

October 11th, 2017 No comments

Recently I was brought into a case by an estate-planning attorney who had relatively young clients who handed over an insurance policy and said “Tell us if this is good”.

The short story is that the policy was only a couple of years old, it was a guaranteed survivor universal life (UL) from a reputable carrier and it was doing fine. The pricing was now unduplicable, and if they keep paying the premiums on time, then the death benefit will assuredly be paid someday. For full post, click here…

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The Truth Behind Whole Life Premiums

September 20th, 2017 No comments

Last September, I wrote a response piece to a New York Times article titled “Skyrocketing Premiums.” I was taking issue with some aspects of the article, which was interesting and made some valid points, but wasn’t entirely accurate. As expected, I got some interesting responses.

They came in two flavors:

1 Though I was somewhat blaming carriers for some of the problems with underperforming and collapsing life insurance policies, I was also deflecting blame directed at carriers, which was unwarranted. In response, I received fervent notes about how wrong I was. This response further proved much of the ignorance in the market regarding how life insurance actually works.

2 The other response came from some agents who specialize in whole life (WL) policies, as opposed to universal life, variable life and indexed products. I often hear from this constituency that their products don’t have the problem of rising premiums because WL premiums are guaranteed. I feel sad for these agents for they’re either appallingly ignorant regarding the polices they sell or they very well know better but purposefully keep up the façade for sales and marketing purposes.

Here’s my disclaimer… WL isn’t bad. Not all WL works the same way. I don’t have anything against it. It can be a good tool when understood, properly implemented and well managed. I even own some. There! I’m not trying to dis WL. What I am going to do is tell the truth. For full post, click here…

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Success Story: Details of a Life Insurance Fraud Case

September 5th, 2017 No comments

Details of a Life Insurance Fraud Case

Some success stories are more fun to share than others. This is one of them. Sometimes this work is so fun that I (almost) feel guilty getting paid for it.

I want to start with the premise that there is a difference between idiots and criminals. Some-times the end results don’t differ but the path taken varies widely. I deal with the results of a lot of “professionals” who don’t know what they are doing but, fortunately, I don’t deal with a lot of criminals. However, they exist.
Here’s my story. As a result of a piece I wrote, an accountant in the Chicago area called me asking for advice. He was trying to accomplish something for his client and it was within my ex-pertise so we agreed on a modest engagement and moved forward. For full post, click here…

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Life Insurance at 100

August 15th, 2017 No comments

Different Policies Have Different Features

When it rains it pours. I have multiple cases on my desk now regarding age 100 and/or “endow-ment” issues. Also, recently a Wall Street Journal addressed this same issue.

Historically most policy owners didn’t concern themselves too much about what happens when an insured individual turns 100 years old. This is partly because most people didn’t expect to live to 100 and partly because people didn’t know there was anything to concern themselves with. However, it seems to be on people’s minds more often lately. For full post, click here…

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How Do Professional Group Term Contracts Stack Up

August 7th, 2017 No comments

If you’re a professional, chances are you’ve looked at group term rates through a professional association. For example, many CPAs have their term insurance through the American Institute of CPAs (AICPA) which has served many people well over the years. However, I like to say that there is a difference between having something done and having it done as well as it can be. Being informed can pay off. For full post, click here…

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The True Meaning of the S&P 500 Index

July 19th, 2017 No comments

DECK: It may not be what you think

Have you ever heard something often enough that you take it for fact but you don’t really under-stand what it means? What if I told you the S&P 500 Index wasn’t really what you thought it was? Would you believe me versus everything you ever understood it to be? Probably not. For full post, click here…

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Is Term Insurance a Commodity?

July 13th, 2017 No comments

Hopefully the message that life insurance cannot be treated as a commodity is slowly getting through to advisors and consumers. I see signs here and there that it is but it seems to be a painfully slow process.

Even when that realization sets in, the perception of term insurance is often different. I have to admit that I haven’t always viewed the details of term insurance on par with permanent insurance but there are aspects to keep in mind which may not surface for years to come. For full post, click here…

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