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.

A turn in public opinion, law enforcement, a leaked email, video or recording, a whistleblower with documentation, another gun are all counterweights that help bring power back into equilibrium.

Your Client vs. A Global Industry

How does this relate to the life insurance industry? The client, an individual with maybe an advisor or two, is going up against a multi-trillion dollar global industry with over a century of experience in a space he visits maybe a couple times in his entire life. This would be a company that’s a part of an industry with access to data mining, predictive analytics, generations of human behavior studies and much more. An industry that employs more actuaries and lawyers than the number of people a given consumer knows in the world. You tell me how you think this is going to end.

It’s not difficult to think of a transaction you know little about but nonetheless a situation in which you must participate. Legal and accounting counsel, lenders, appraisers, inspectors and consultants of many types may all be a part of the deal. The larger the transaction, more may be involved and a greater cost of due diligence. After all, you don’t want to buy a house infested by termites, a commercial property on contaminated land, a company valued by inappropriate bookkeeping or a private equity transaction sold by a shyster. We all know this. Furthermore, if you don’t take the right steps to protect yourself, you aren’t going to get much pity when things go wrong.

A Dangerous Duo

Why in heaven’s name does life insurance play by a separate set of rules? I’ll watch someone move forward on a transaction for millions or tens of millions of premium dollars with no input from anyone other than the agent. In fact, I’ve watched them do so while their counsel frantically begs them to no avail to slow down and bring in an expert. Conventional wisdom can be exceptionally powerful and rational decision making seems to have a switch many can flick on and off at will.

Ignorance and arrogance are a mighty dangerous duo. “I’ve seen these life insurance schmucks; some of them aren’t bright enough to smell their way to an outhouse under a full moon. I’m a successful business owner/doctor/fill-in-the-blank. Clearly I can understand this as well as or better than them.” Maybe you can. But the truth is that your client knows almost nothing relative to what he needs to know to make sound decisions and protect himself.

Salespeople vs. Professionals

It’s important to remember that there are insurance salespeople and there are insurance professionals, and it can be very difficult to tell the difference. Remember that the best life insurance salesman isn’t just selling life insurance. The best and the brightest get duped regularly. Some of these salespeople and professionals are exceedingly bright and capable and ethical, putting together powerful strategies that will be very beneficial. Unfortunately, a certain percentage of these people are also very good at developing programs and building contracts that may look great but will be even more effective at lining their pockets, separating consumers from their wealth and leaving them high and dry. Tell me you can tell the difference, and I’ll try to stifle my laugh.

There’s a small circle of talented insurance consultants that we talk and work together regularly. For even a life insurance expert, there’s too much to know to be an expert in every niche. When an incredibly high-end, niche situation hits my desk, though I may know more than 99 percent of anyone out there (if someone knows more about it than me), I bring her to the table if an aspect of it is over my head, just as she may be calling me on the next case. Isn’t that what you would want, even if you didn’t expect it? We’re all sharing war stories and one-upping each other on the latest disaster to come across our desks. We’re constantly shaking our heads when smart people are so stupid. We’re all aware that it’s way to often a “pay now or pay later” deal, but too few people will accept this.

Understand the Uneven Balance

Back again to the balance of power issue. The powerful can take advantage of the weak. That’s not news. What is unfortunate is how few people understand when they’re powerful and when they’re weak. The powerful businessman is as fragile as a piece of china when it comes to the internal constructs of a policy. The requisite talents of the revered surgeon are anemic relative to the requirements to parse the ledgers and modeling. Even the mind of a finance guru is relatively feeble when it comes to interpreting the intricacies of these mind-numbing complicated contracts. The carriers build some incredibly powerful financial instruments, but they’re not all the same and they’re not for everyone.

To those who believe they have the power, they can be toyed with and not have a clue they’re really the mouse. An age-old sales strategy is to control you by getting you to believe you’re in control. To rebalance the inevitable power inequity you need to buy it. You might not think you need it, but by the time you realize you’re mistaken, you’ll be calling me for all the wrong reasons—and I’m cheaper today.

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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. For full post, click here…

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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 1 comment

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.
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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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