Is Working For One Life Insurance Carrier Ethical?

May 23rd, 2018 No comments

In some cases, agents may be crossing the line.

The life insurance world is certainly a lot different today than it was decades ago. Rather than just whole life and term insurance, there’s a wide menu of products available. Some products are driven by interest rates, some by market returns and some by indexes. Some are guaranteed while other aren’t.

Distribution models vary widely. There are internet marketing models, traditional agencies and independents who work though brokerage general agencies (BGA) that represent multiple insurance carriers, among others. One can get life insurance from financial advisors, banks, those predominantly in the property and casualty and health insurance market, traditional agents, etc. It seems the most unique way to get insurance today is through a dedicated life insurance agent. Times change.

Most career agents (a term traditionally used to identify agents who work for one insurance company and are often housed in a branded office) state that they’re free to sell outside insurance carriers and aren’t limited to proprietary products. Except for newer agents, this is largely true but it’s often a bit of a red herring. When a significant majority of placed policies are with mother mutual or whatever company is on the front of their business card, pay attention to substance rather than rhetoric.

Some of these carriers realize the inevitable, that no one can be all things to all people so they have a special department to funnel non-core business to an affiliate to capture these otherwise lost dollars. However, generally, the agents are incentivized to place their business with proprietary products through the home office.

Is there anything wrong with this? After all, a Ford salesman doesn’t sell his client a Chevy. That being said, many dealers cross multiple brand lines because the reality is you can’t control consumers as easily nowadays, at least in some industries. Theoretics and practice can differ. If theoretically the agent can sell what’s “best” for his client but almost always sells what the home office provides, does it mean anything? The eternal question is “What does best mean?”

Crossing the Line

Let’s be clear, putting a million bucks of term insurance on a breadwinner to provide for the family in a worst case scenario is the important thing, not whether that product wins the spreadsheet war. But where’s the line? There’s always a line. A couple percent higher premium? 10 percent? 25 percent? How many would agree that paying a 50 percent premium for term coverage over and above a competitive, quality carrier is appropriate? Is it always worth a significant premium increase just so the policy can be converted to proprietary whole life down the road? There’s always a line.

A Bad Deal

I had client in my office the other day who was referred to me by his estate-planning attorney. He had questions for her about his life insurance portfolio and, realizing this was outside of her expertise, she directed him to me. He had a handful of policies on his wife and himself, including permanent, term, single life and second-to-die contracts. All of the contracts were with two well-known mutual companies. There were a few very seasoned term policies from the carrier the agent used to work with. The husband was 27 years into an increasing premium term policy and the wife, 35 years. I want to make sure you understand what that means. These annually renewable term (ART) or yearly renewable term (YRT) policies have premiums that are generally higher than 10-year level term premiums by the second or third policy year. Can you imagine where they stack up a few decades later? This guy could get new 10-year term or even 20-year term moving forward from today for less than this year’s ART premium he just paid that’s growing dramatically every year and terminates in five years. In other words, he has been hosed. Badly.

But why? Likely, because the agent’s proprietary level term simply wasn’t competitive, he sold the ART to compete. If you think that’s unconscionable, just wait. The strategy is often to go back to the client in a couple of years, show him how the premium is growing so quickly (which is too often glossed over or ignored completely at the point of sale) and urge him to convert to (much more expensive and higher commission paying) permanent insurance to level out the premium and keep it from growing annually. Though purportedly the term coverage was purchased because there was a term need, sometimes the client is routed to permanent insurance. Other times, he doesn’t bite or the relationship with the agent fades and then, voila, you’re 27 or 35 years into an ART contract and pissing your money away.

If this was always the result of working for a single insurance company, then I would think, yes, selling a single company is wrong. But this isn’t always the case. I know many good career agents who work tirelessly for the benefit of their clients and go outside when it best serves them. Besides, reasonable minds can disagree regarding the best tools to satisfy needs.

Let’s go back to my client. When he shows me the paperwork on his and his wife’s policies, I see he’s a standard risk and she’s Table 2. At this point, I have no ability to know if this is good or not. Maybe the agent worked hard to come up with these offers and beat what was available in the market. I can’t help but assume this isn’t the case. After all, given scores of quality carriers out there competing for business, really, what’s the chance this agent’s company was the most competitive this time for this specific client? Was another carrier even approached? Yes, I realize strong relationships are important and often get things done, and career agents often have strong relationships with home office underwriters, but relationships can only take you so far and competition can be very motivating.


For any given case, a ridiculous number of variable drive what’s “best.” How old are you? Gender? Health? Family history? Travel plans? Are you a pilot? Do you scuba dive or race motorcycles on the weekend? What about build, blood pressure and cholesterol? Anxiety meds? Moving violations? Smoke? Drink? Did mom or dad die before age 60 from cancer? What kind? It keeps going, but you get the idea. Change any single one of these things and you can reshuffle the entire deck. You can quickly see the combinations can become innumerable. Most consumers simply don’t realize how niche oriented the market is. It’s a given in the industry that different insurance companies will look at the exact same medical records and insurance exam and sometimes come away with wildly different takes on a potential insured risk. Even if it’s only the difference between a preferred and a standard classification, which is commonplace, it can be a meaningful difference. Somewhere, a given carrier is going to be the most aggressive. Do you really think it’s going to be the agent’s home office? Every time?

We haven’t even rolled in the variable of product styles. What if the agent’s primary carrier specializes in term and whole life? Is the agent being shown universal life, guaranteed universal life, indexed universal life and variable universal life? What if it was the other way around? If I’m looking for a minivan and walked into a Ford dealership, what would happen? Ford doesn’t have a minivan so I’d be sold on the benefits of an Explorer or an Expedition. Maybe that would suffice. Maybe, once I understood, it might even be better. What if I’m pressured to go with a 15-passenger Transit van? You know someone is going to drive that off the lot who really needed and wanted a minivan? If the salesman doesn’t have a minivan to sell, many will do almost anything to keep from seeing the backside of a potential customer.


One more issue revolves around competitiveness. Carriers take turns on this merry-go-round. Their respective product pricing goes up and down compared to the competition based on many factors. The last thing I’m suggesting is to play the spreadsheet game, but the vagaries of pricing are complex. Your client likely has precisely zero chance of understanding these intricacies but he certainly understands down the road if he realizes he’s been snookered.

Many of you have had clients hold portfolios of entirely ABC or XYZ Insurance Company. But would you ever recommend putting all $20 million of what they want to invest into bonds into one bond? (Say, Lehman Brothers?) What about other companies? What about other risk profiles? What about diversification? It’s shocking to see how often consumers take at face value a comforting line from an insurance company or agent they would never accept at face value in another transaction.

Open Your Mind

This isn’t a manifesto to categorically proclaim the ultimate right way to conduct business but I wouldn’t be passionate about it if I haven’t repeatedly witnessed the damage resulting from narrow minded players in the market blinkered by the institutional indoctrination of home offices systematically beating home a self-serving message. I urge you to open your minds and to help your client’s analyze this appropriately and with some healthy cynicism. Tradition isn’t always holy. Sometimes things need to be questioned.

Bill Boersma is a CLU, AEP and LIC. More information can be found at,, or email

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Why Fund a Buy-Sell Agreement?

May 14th, 2018 No comments

Let’s take a look at the numbers.

Occasionally, I run into the business owner who questions the merit of funding a buy-sell agreement with life insurance. Some people are so anti-insurance they’ll say no regardless of what’s put in front of them.

I understand this sentiment. We’re sold on so many things so regularly that our automatic defense mechanism is often to say no. I’ve been there. However, there have been a number of times when I caught myself doing this and then challenged myself to listen, and every once in a while I came away with a different mindset. For example, this happened when I discovered that a commercial lawn service would treat my lawn several times a season for less than I was paying for the product to do it myself. For full post, click here…

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Defined Benefit Life Insurance

April 17th, 2018 No comments

Clients need to pay attention, as the world has changed
By Bill Boersma

In my ongoing effort to educate people on how life insurance works, I seek out new analogies and examples on a regular basis.

Along with others, I’ve written exhaustively about underperformance and management of life insurance. Charlie Ratner is fond of saying it isn’t underperforming, it’s under-explained. I completely agree. If your car runs out of gas and stops along the side of the road, is it really underperforming? Life insurance policies need gas, and if they don’t get it, they stop too. Fortunately no one at the dealership needs to explain this to society because a critical mass of people understand this and help educate others as they come along. For full post, click here…

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Life Insurance with an Infinite Return?

April 9th, 2018 No comments

Warn clients not to bail on policies.

An advisor recently called me regarding a client who has a $2.5 million second-to-die guaranteed universal life policy. The contract was put in force in 2012, so those who are familiar with the market understand that was near the bottom of the pricing curve. Nonetheless, the clients want to bail on this policy, purportedly due to the change in estate tax laws.

Given the fact that this policy is an unduplicable contract with a premium so relatively modest they probably can’t notice it, and noting the sunset provision and probable estate tax uncertainty moving forward, I’m not sure this is a wise choice, but it’s not for me to say. Maybe the kids have been ticking them off lately. For full post, click here…

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Life Insurance in Today’s Estate Tax World

March 22nd, 2018 No comments

What to do with existing policies
By Bill Boersma

As might be expected, I’m getting more calls lately from advisors, on behalf of their clients, asking what should be done about life insurance no longer needed for estate liquidity purposes.

I generally answer the same way every time; “Let’s evaluate the policy and then talk about options.”  Depending on the client situation, the first issues I discuss with the advisor is what happens when the current estate tax law sunsets, and does your client really want to bank on what the tax laws will be, 17, 28 or 42 years from today?  With life insurance, it seems many people will jump on a reason to walk away. For full post, click here…

How Not To Evaluate Life Insurance

February 27th, 2018 No comments

I’m a life insurance guy and I feel a properly researched, constructed and managed life insurance policy can be an exceedingly powerful financial tool. However, my daily life is spent trying to find solutions to problems policy owners are experiencing. Decreasing crediting rates and increasing expenses are obviously issues but we deal with these kinds of things in many areas of life on a regular basis. For full post, click here…

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Help Mitigate Life Insurance Fraud

February 6th, 2018 No comments

Three rules to remember for layering in a basic level of protections for your clients.

While there’s likely no way to ultimately ensure your clients won’t be victims of fraud, there are a few things to be done that may help prevent it, as well as assist in recovery efforts if they’re victims. For full post, click here…

Understanding Life Insurance Performance – Part 2

January 19th, 2018 1 comment

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Digging Into the Black Box of Life Insurance

December 19th, 2017 No comments

Referring to life insurance as a “black box” goes back a long way, but just because life insurance may seem like a black box to you or your clients doesn’t mean it has to be. Some people understand it. It may not be healthy to foster an “us versus them” mentality, but it’s most certainly not healthy to ignore reality. When individuals don’t understand something, they seek out an advocate to ensure they have the information they need to make decisions in their best interest. Life insurance shouldn’t be any different. For full post, click here…

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Rebalance Power Inequity in Life Insurance Industry

November 30th, 2017 No comments

In the news, we currently have a number of stories of bad behavior. Political shenanigans, sexual harassment, corporate malfeasance, gun violence, the media, etc. It doesn’t take much to understand what connects much of this. I’m thinking about power. Those with the power can take advantage of those without the power. It’s not complicated.

Think about a serial sexual harasser or a congressman or a corporation or the guy holding the gun or the talking head. They’re all in a position of power and, unfortunately, often go unchecked until another who gains power can level the playing field. For full post, click here…

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