InsuranceNewsNet Magazine - September 2019 by InsuranceNewsNet

September 2019

2019 LIFE INSURANCE

STATUS REPORT

BUSINESS IN THE AGE OF TIGHTER REGULATIONS AND WIDER DEMOGRAPHICS p.18

HOW TO MARKET TO EVERY GENERATION p.12

D.I.Y. ESTATE PLANNING WAR STORIES p.48

FREE BONUS INSERT p.17 September 2019

WHO, WHEN, WHY

A Guide To Life Insurance Buyers Recent data from the LIMRA Center of Excellence for Analytics answers questions

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In addition to the presentation system, you will learn strategies to improve your fact-finder interviews with clients. 80% of all clients who end up not doing business with you are most likely the result of a poor first visit or “discovery visit.” Curt will help you develop probing strategies that you use on the first visit with a client. You will be able to comfortably dig deep into what your client wants most and therefore present a “hard to resist” close on the next visit.

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Once you have mastered the presentation sales process, it’s critical to increase the number of people you have the opportunity to see and share your story with. Not only will you improve your current lead system, but you will be introduced to other lead systems that you may have overlooked or missed in the past, such as Fishing in a Different Pond. Most advisors are marketing to the 55- to 70-year-old age group. In addition to having tremendous success with this same demographic, Curt and his team have brought in millions of target life premium by presenting Life Insurance Retirement Plan (LIRP) presentations to the 45- to 55-year-old age group. This is a group that seldom is invited to any advisor meetings, so you can be one of the few who does so. Finally, you will learn from Curt a “DRIP” system that can turn a “no” into a “yes.” When put together, it means more appointments, more selling opportunities, and thus more closes and more income for you, your practice and your family.

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Now that you are seeing more prospects and closing larger sales, as well as obtaining more leads and referrals, it may be time to learn the office systems and operational practices that help you build a smooth-running machine. You are the advisor. Your job is to see more people, close more sales and better service your clients. Your job is not to be in charge of employee issues or micromanaging what is happening in your firm. Curt and many other advisors all feel the same way. Luckily, Curt’s office has been referred to as the “Henry Ford assembly line for financial advisors.” Learn things such as

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IN THIS ISSUE

View and share the articles from this month’s issue

» read it

SEPTEMBER 2019 » VOLUME 12, NUMBER 9

FEATURE

28 Life Insurance Thought Leadership Section

Life Insurance Status Report

By Steven A. Morelli Business in the age of tighter regulations and wider demographics.

INFRONT

8D em Hopefuls Fine-Tune Health Care Ideas As 2020 Draws Closer By John Hilton and Susan Rupe Will “Medicare for All” get rid of private health insurance once and for all? How will Americans pay for Medicare for All?

IN THE FIELD 42 Boxes And Cubes

By Susan Rupe Guy Baker has spent 42 years as a Top of the Table advisor by helping his clients understand the complexity of finance.

LIFE

12 How To Market To Every Generation

Father and son David and Jonah Stillman are helping the business world get ready for Generation Z, the youngest age group. In Part 2 of their interview with Publisher Paul Feldman, the Stillmans explain how marketing to Gen Z will require different tactics than those required to reach older generations.

Respected minds share their leading thoughts on trending products, cutting-edge technology and unique sales techniques.

HEALTH/BENEFITS

56 Long-Term Care Claims: Marketing Vs. Reality By Tricia Pilone Looking at the differences between indemnity and reimbursement models.

ADVISORNEWS

60 Caution: Offer On Table May Not Be As Good As It Appears By Ashley Folkes Some things to consider when a new firm makes an effort to recruit you.

INBALANCE

48 Mind Your Mouse Clicks: DIY Estate-Planning War Stories By David Szeremet Do-it-yourself is not always best when it comes to clients doing their own estate planning online.

INTERVIEW

online

www.insurancenewsnetmagazine.com

ANNUITY

52 A nnuities: Strategy Vs. Product By Susan Rupe If you want to convince someone of the need for an annuity, position it as part of a strategy.

64 Dinner Is Served: Impress Your Guests Without The Stress By Bryce Sanders People don’t throw dinner parties anymore because they think there’s too much work involved. But there are some simple tricks to getting together for a meal that’s more fun than fuss.

BUSINESS

66 Even The Middle Of Nowhere Is Somewhere For A Business By Vanessa Bucklin You can be successful wherever you are by meeting clients on their own terms.

INSURANCENEWSNET.COM, INC.

275 Grandview Ave., Suite 100, Camp Hill, PA 17011 717.441.9357 www.InsuranceNewsNet.com PUBLISHER Paul Feldman EDITOR-IN-CHIEF Steven A. Morelli MANAGING EDITOR Susan Rupe SENIOR EDITOR John Hilton ADVISORNEWS MANAGING EDITOR Cassie Miller VP SALES Susan Chieca

VP MARKETING AD COPYWRITER AD COPYWRITER CREATIVE DIRECTOR SENIOR MULTIMEDIA DESIGNER GRAPHIC DESIGNER QUALITY MANAGER

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MEDIA OPERATIONS MANAGER NATIONAL ACCOUNT MANAGER NATIONAL ACCOUNT MANAGER NATIONAL ACCOUNT MANAGER OFFICE MANAGER | BOOKKEEPER BUSINESS DEVELOPMENT

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Copyright 2019 InsuranceNewsNet.com. All rights reserved. Reproduction or use without permission of editorial or graphic content in any manner is strictly prohibited. How to Reach Us: You may e-mail editor@ insurancenewsnet.com, send your letter to 275 Grandview Ave., Suite 100, Camp Hill, PA 17011, fax 866.381.8630 or call 717.441.9357. Reprints: Copyright permission can be obtained through InsuranceNewsNet at 717.441.9357, Ext. 115, or reprints@insurancenewsnet.com. Editorial Inquiries: You may e-mail editor@insurancenewsnet.com or call 717.441.9357, ext. 117. Advertising Inquiries: To access InsuranceNewsNet Magazine’s online media kit, go to www.innmediakit.com or call 717.441.9357, Ext. 115, for a sales representative. Postmaster: Send address changes to InsuranceNewsNet Magazine, 275 Grandview Ave., Suite 100, Camp Hill, PA 17011. Please allow four weeks for completion of changes. Legal Disclaimer: This publication contains general financial information. It should not be relied upon as a substitute for professional financial or legal advice. We make every effort to offer accurate information, but errors may occur due to the nature of the subject matter and our interpretation of any laws and regulations involved. We provide this information as is, without warranties of any kind, either express or implied. InsuranceNewsNet shall not be liable regardless of the cause or duration for any errors, inaccuracies, omissions or other defects in, or untimeliness or inauthenticity of, the information published herein.

InsuranceNewsNet Magazine » September 2019

WELCOME LETTER FROM THE EDITOR

Finding The Problem

“I

haven’t found a problem, so there is no solution I can provide to you.” I can assure you that I have problems but the insurance agent had spent the past hour sitting at my table talking at me and asking me one question in several ways: “How much do you want to spend a month?” In fact, he had not actually identified himself as an insurance agent but said he was a “medical underwriter.” I was reminded of this conversation during my research for this year’s Life Insurance Awareness Month feature. During that process, it became clear that the industry is still facing the problem of trying to sell more life insurance as the field force shrinks and consumers change. The meeting with this agent revealed some issues in life sales. But more troubling was the path that led the agent to my table. I am not suggesting that all agents are conducting themselves as this one did. In fact, I usually speak with highly accomplished agents and advisors, who are typically the ones doing things right. Even random agents I meet at industry conferences are likely to be high-level professionals for the sheer fact that they care enough to attend the event. But what about the agents who typically serve clients of modest incomes and assets — people like me? When I got a curious envelope in the mail, I decided to find out.

IMPORTANT!

The white, address-window envelope looked important. And in case I did not recognize that, it even said: “OPEN IMMEDIATELY/ I M P O R TA N T I NFO R M AT IO N ENCLOSED.” That accompanied “DATED M AT E R I A L” and for good measure, “SECOND NOTICE/TIME SENSITIVE” — in red so that I knew it was super-duper urgent. Inside was an official-looking form with the heading “2018 B E N EFI T INFORMATION FOR PENNSYLVANIA CITIZENS ONLY.” The text said, “You may qualify for a state-regulated program to pay for your final expense” and that “This benefit will 6

pay for 100% of all funeral expenses up to $35,000. This payment is tax-free for Pennsylvania residents.” Although I recognized that this was a life insurance lead generator, I could see how a typical, older consumer would think this was an actual government program. (That would particularly be the case with a version I received recently that looks like an IRS form.) I was intrigued to see what would happen next, so I filled it out and mailed it. About two months later, somebody identifying himself as a medical underwriter followed up with a call. He was not clear about what he wanted but asked for a meeting, which we set up for the next day at my apartment. [Although the agent allowed me to film, I am not identifying him. He never asked me about my job and I did not volunteer that information.] He started by telling me that the form did not refer to a government program. He was going to talk to me about a state-regulated benefit — life insurance. He said he also wanted to make clear that it was not free, because people often misunderstood the form.

Roundabout Straight Shooter

The agent said he wanted me to know that he would be talking about a safe alternative and that he was not licensed to trade equities. About five minutes of describing reasons people typically send in the form, he asked me, “Where do you find yourself?” I have term life, I told him.

He showed me marketing material from companies such as AARP and MetLife, which he later said he only used for comparison (“They’re too expensive”). At 10 minutes in, he asked me how much term I had and for how long – $250,000 and fewer than 10 years left on a 20-year policy. I also added that my ex-wife was the beneficiary. After he explained whole life some more, he asked me who was responsible for me when I die. “I haven’t figured that out yet,” I answered, feeling just a tad more alone in the world. “You’re not really interested in this, are you?” he asked.

InsuranceNewsNet Magazine » September 2019

I assured him that I returned the form because I wanted to know what the benefit was. But I was thinking that I was in fact interested in retirement security and a little anxious about my exposure to long-term care risk. I figured he would get to that. He described the details of whole life and the application process for another 15 minutes until he asked me how much I wanted to spend each month on life insurance: “So do you have a budget in mind? $50? $75? $125? $200?” It is one of the oldest sales techniques in the world — find a monthly payment and figure out something that will fit that number. It is a textbook car sales tactic. But in this case, we did not even have a vehicle to talk about. We had established I did not need whole life. I asked if he sold term. He said he did but it was a hybrid.

Dizzy From The Ride

That “hybrid” turned out to be universal life, which he had pivoted into variable UL and described the intricacies of VUL. That turned into a discussion of indexed UL and that product’s details. Even though I knew what he was talking about, my head was spinning. I could not imagine what his typical prospect felt. After an hour of basically asking me what I wanted to spend on life insurance, he said he could not find a problem to solve. But I am in my 50s with some savings and plenty of longevity anxiety — basically an ideal prospect for something that says retirement security on it. As Americans struggle with the retirement crisis, the insurance industry is a logical source of solutions. But if deception continues to be a marketing method, the industry is only going to be yet another problem.

Steven A. Morelli Editor-in-Chief

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INFRONT

Dem Hopefuls Fine-Tune Health Care Ideas As 2020 Draws Closer Democratic candidates are fine-tuning their plans for the future of heath care. By Susan Rupe and John Hilton

ill “Medicare for All” get rid of private health insurance once and for all? How will Americans pay for Medicare for All? The Democratic presidential candidates are refining their positions on the

Harris issues as each political hopeful tries to stand out. Health care is one of those issues where some of the candidates are clarifying their views. Sen. Kamala Harris, D-Calif., originally had come out in favor of a Medicare for All plan that abolished private health insurance. Then she stepped back from that position to propose that Americans could opt for Medicare Advantage coverage from a private insurer. Her plan would allow for a 10-year transition period while all Americans would opt into either Medicare or Medicare Advantage. Private insurance plans could participate, but would have their own set of rules to follow. More recently, Harris announced how she would pay for the plan. She proposes a 0.2% tax on Wall Street stock trades, a 0.1% tax on bond trades and a 0.002% tax on derivative transaction. She said 8

she also would tax offshore corporate income the same way domestic corporate income is taxed. Harris said she would not raise taxes on households making less than $100,000 a year to pay for her health care plan. This is where she parts ways from another Medicare for All proponent, Sen. Bernie Sanders, I-Vt. Sanders still wants to see private health insurance go away, and he wants the middle class to pay more taxes for a government-run health insurance system.

Sanders

Income-Based Premium

Warren

In a white paper he issued earlier this year, Sanders proposed a 4% “income-based premium” on household income above $29,000, a 7.5% “income-based premium” paid by employers that exempts the first $2 million in payroll, a wealth tax and an expanded estate tax. Sen. Elizabeth Warren, D-Mass., also favors Medicare for All, but hasn’t specified who will pick up the tab for it. She has stated publicly that she believes billionaires and large corporations should pay more in taxes to fund her health care proposals. Meanwhile, another front-runner among the Democrats, former Vice President Joe Biden, is not ready to let go of private health insurance. Biden’s plan would establish a public option while allowing private, employer-based coverage to remain. Biden estimates that cost of this would be about $750 billion over

InsuranceNewsNet Magazine » September 2019

10 years, and would be funded through increased taxes on high earners. Would Americans be OK with paying higher taxes if it meant they would pay less out of pocket for health care? The Kaiser Family Foundation conducted two surveys on that issue — one in January and one in July. The January survey found that overall support for Medicare for All drops when people hear that it would require most Americans to pay more in taxes. At the same time, more people are favorable toward the

Biden plan when they are told it would eliminate premiums and reduce out-of-pocket health care costs. But in July, Democrats and Democratic-leaning independents told Kaiser they would rather see lawmakers build on the Affordable Care Act instead of replacing it with Medicare for All. Similarly, a Monmouth University survey released found that a majority of likely Iowa Democratic caucus-goers prefer a health plan where people can opt-in to Medicare over Medicare for All.

Regulators Focus In On LTCi

Long-term care insurance pricing remains incredibly difficult to stabilize and state insurance regulators are making it their top 2019 priority. The Long-Term Care Insurance Task Force formed in April with two main goals, said Scott White, Virginia insurance

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INFRONT DEM HOPEFULS FINE TUNE HEALTH CARE IDEAS AS 2020 DRAWS CLOSER commissioner: to develop a consistent, national approach for reviewing LTC rate requests, and to make sure consumers have options when presented with costly rate increases. Thirty-six states joined the By Cassie Miller task force, which met last month during the National Association of Headlines about the SECURE Act have been a Insurance Commissioners’ summer little dramatic, particularly related to the stretch meeting in New York City. IRA provision. “It’s very clear the members are » “Congress Is Coming for Your IRA,” Wall Street quite serious about coming up with Journal meaningful solutions,” White said. Work groups have been formed » “The Stretch IRA Is About To Snap Under The SECURE Act,” Barron’s focusing on six topics, he added: how states can coordinate multi-state » “SECURE Act Sucks Life from Stretch IRAs,” rate reviews; state guaranty fund 401(k) Specialist coverage cap issues; LTC benefits All of these headlines would lead industry prooptions offered consumers facing fessionals and investors to fear the Setting Every rate hikes; evaluation of insurer reCommunity Up for Retirement Enhancement serves; non-actuarial variances afAct’s elimination of stretch IRA provisions since fecting how states respond to LTC it was passed by the House. So, is Congress rate hike requests; and additional really coming for your stretch IRA? Yes and no. data gathering for the task force. But clearly the main focus of the Congress is planning to eliminate the provitask force is rate reviews. Two apsions that make stretch IRAs the tax-deferred proaches are on the table, White said: havens they’ve been. Under the SECURE Act, if amending the Interstate Insurance the Senate passes a similar version, the nonProduct Regulation Compact, or despouse beneficiary would have 10 years to pull all of the funds from the IRA. The reason? veloping a rate-review model law. Congress has to pay for the legislation someA popular product in the 1990s, how, and it found its means through making the LTCi was badly underpriced. Many inherited IRAs subject to higher taxes. insurers sought, and continue to seek, significant rate hikes to stabiIt is actually in keeping with precedent. In 2014, lize their books. the Supreme Court issued a ruling in Clark v. For example, Blue Cross Blue Rameker that stretch IRAs or inherited IRAs Shield of Florida policyholders have are not retirement accounts because they were been notified by mail in recent weeks not created by the recipient for the purposes that annual premiums for their covof retirement. erage will increase by an average of “From a public policy standpoint, this is actually 94 percent through 2021. pretty consistent with existing law,” said Jamie The company originally requested Hopkins, director of retirement research at the a 280 percent hike but state reguCarson Group. lators refused to grant that, telling AdvisorNews Managing Editor Cassie Miller may be reached the company the request was not at cassie.miller@Adnewsfeedback.com. Cassie has an exten“adequately demonstrated to be reasive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM. sonable in relation to the benefits provided,” according to a consent order by the state Office of Insurance well-documented that insurers mispriced Regulation. their products. The mispriced products Birny Birnbaum, executive director of sold briskly during the first two decades.” the Center for Economic Justice, urged the task force to hold insurers and their Annuity Model Law investors accountable for price increases. The Annuity Suitability Working Group “When an investor purchases a also met in New York and chairwoman share of an insurance company, they Jillian Froment vowed to complete its understand that it’s not a risk-free in- annuity sales model law by the NAIC fall vestment,” Birnbaum said. “It’s been meeting in December.

Stretch IRAs And

SECURE

InsuranceNewsNet Magazine » September 2019

The group met in the state where a tough best-interest standard took effect Aug. 1 for the sale of annuities — a fact not lost on some members. New York regulators are pushing colleagues to adopt its standard, which also covers life insurance, as the national model. But there is plenty of resistance, which isn’t likely to go away, Froment acknowledged. “What best interest means to us as a working group does not mean that every state around the table will support that,” she said. “We’ve already established that it’s going to be less than a fiduciary standard, but is more than suitability. That’s what our goal is — to define what that means.” Iowa Insurance Commissioner Doug Ommen wrote much of the draft the working group is tweaking. The “Iowa draft” was introduced earlier this summer in a bid to harmonize the NAIC effort with the Securities and Exchange Commission rule, Ommen has said. Ommen’s proposal articulates a best interest standard through the following four obligations: care, disclosure, conflict of interest and documentation. The working group is in the final stages of defining each of those obligations. Once the “wordsmithing” is completed, Froment said, a tentative draft model will be ready “by mid-September.” That will be followed by “a very aggressive call schedule” to iron out the annuity sales model, she added. InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH. Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback.com. Follow her on Twitter @INNsusan.

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INTERVIEW

HOW TO MARKET TO EVERY GENERATION Appealing to every generation is not as easy as you think

AN INTERVIEW WITH PUBLISHER PAUL FELDMAN 12

InsuranceNewsNet Magazine Â» September 2019

HOW TO MARKET TO EVERY GENERATION INTERVIEW our mom and dad were hopelessly out of touch. It doesn’t matter whether you are a member of the silent, baby boomer, Generation X or millennial generation — at some point in your youth, you probably thought your parents were lame. Then you went on to your work life and were convinced that the older generations really needed to get out of the way. It’s the same story for every generation, right? Well, not so right with Generation Z. They apparently talk to their parents as if they were fellow human beings. Yes, hard to believe, but David and Jonah Stillman are living proof. David has made a career of observing generational differences as a marketer, speaker and co-author of books such as When Generations Collide. He often appears in national media as a generational expert. Although the Gen Xer has done research, perhaps his best project was bringing up his very own Gen Zer, Jonah, who now collaborates with David in the generational business. Besides speaking together at events and consulting, they wrote the book Gen Z @ Work. As a classic Gen Xer, David admits he can be a little blunt yet pointed in his remarks. Those are some of the characteristics observed of his generation — cynical, jaded and serious. So, when they had children, Gen Xers tended not to mollycoddle their kids like their boomer siblings might have done. Technology also made an earlier impact on Gen X, so they tended to be more facile with the latest tech than boomers and certainly more than the silents. Gen Z entered a world of tech and evolved with it. So we have two wisecracking, tech-savvy generations that relate well and are ready to take over the world. As Gen Xers move into the upper echelon of society, Gen Zers are just starting to take a seat in the work world. Just as everybody was thinking of getting a handle on millennials, a whole new dynamic has arrived. David and Jonah are helping companies understand that they cannot take their understanding of one generation

and project it on the next just because they both are young. In Part 1 of this interview, they discussed the identity of Gen Z. In this month’s segment with Publisher Paul Feldman, David and Jonah talk about how the generations can work together for mutual benefits. FELDMAN: How did we start naming generations and what were some of the implications of doing that? DAVID: We had had a boom in the population, and the government named this cohort born between 1946 and 1964 the baby boomer generation. Marketers realized that looking at generational cohorts not only had merit but also a lot of opportunities. The previous generation was named retroactively the silent or traditionalist generation. Then people started to notice with the baby boomers that there was enough change in the population that we clearly had a new generation. People had assumed that it was going to keep on being the baby boom generation. Then Douglas Coupland wrote a book called Generation X. It was the late ’80s when there was a recession, and Gen X wasn’t finding jobs right away, and it was predicted we’d do worse than our parents. We were labeled as being lost. X came about because X is a variable. This lost, undefined generation. Sort of negative, but marketers loved “Gen X,” it had a nice tone to it, so it stuck. Then when it came time to name another generation, the first one that popped up was Gen Y, but millennials didn’t like that name because it suggested “we followed Gen X.” A group of generational experts, including me, started doing some surveys to find new names for this generation, and “millennials” rose to the top of that list. When it came time for Gen Z, we had learned from millennials — let’s not name them, but let them name themselves. We did a huge national study and put out a bunch of names, and Gen Z was picked. As we followed up in focus groups, the reason Gen Z was chosen was Gen Z believes in

generational cohort, but they didn’t want a label like a baby boomer or a millennial or even Gen X — X the variable. They said, “We are going to be called Gen Z because there was X, there was Y, now there is Z.” It honors where they are in the generational continuum but doesn’t give them a label, just a name. FELDMAN: What are some of the differences in marketing to these generations? Let’s talk about influence in particular. DAVID: If we look at traditionalists, I think there are a lot of people who assume that this generation will keep buying from us. But what’s happening is traditionalists have time, they definitely have money, and they have a desire to experiment. We see that with things like cars and vacation spots, but now it’s time to feel it even with service providers — financial planners, insurance brokers, lawyers. Two big reasons: One is that they’re starting to make a change — they don’t feel appreciated. They get the same “thank you” every year. They’re like “All of your attention seems to be going after new business, and you still don’t have any. Now the last person who called me didn’t even know how long I had been a customer. I do not feel appreciated for long-term loyalty.” And for the first time, those relationships with insurance brokers are at risk. I would say don’t assume you have that customer forever. The other reason is they have the younger generations influencing them. The younger generations are saying, “Hey, Grandma, Grandpa, Mum, Dad; come check out our broker.” They’re starting to listen to the younger generations. Don’t assume you have their loyalty forever even though they’ve been the most loyal generation. The baby boom generation wants to do a lot, believes in insurance, but right now they’re burnt out. They’re picking service providers that are easy to work with. They might have been working with an insurance person for a long time and loved that person, but there were too many steps in working with them. And then, “Hey, we can stay friends, and we can go out for lunch, but I’m going with somebody else.”

September 2019 » InsuranceNewsNet Magazine

INTERVIEW HOW TO MARKET TO EVERY GENERATION The baby boomers are going to be the easiest to work with. You don’t want to give them 10 choices trying to prove that you have a lot and know about a lot. You want to give them one or two choices showing that you’ve done your homework, and you’re only going to make it easier for them. Those who are easy to work with are going to be the ones to win with the baby boom generation right now. What I would tell you about Gen X is that it’s the most skeptical generation ever. But that does bode well for insurance. If you’re skeptical that things are going to turn out OK, then you’re likely to believe in insurance. However, this is a generation that is really used to all the fine print hiding things. It’s an era of transparency with Gen X. Even if you make a mistake, even if you’re more expensive, those who are going to be transparent are going to find they have a less skeptical customer who’s more likely to connect with them. It’s really about learning to embrace the skepticism, not get offended by it, and be willing to work with it. Be as transparent as possible. Good, bad, ugly, all of it. Then with the millennial generation, this is a generation that also buys insurance but is probably thinking they’re more invincible than anybody else. If anything, life insurance might be a harder sell to this generation. But it is the generation that grew up with very communicative parents, so they’re used to consulting with their parents on anything from where we go on a trip to how we buy a car, these big decisions. They’re used to a very collaborative approach, and they don’t like service providers who think “I’ll do all the work and tell you what you need.” It’s a generation that’s going to want to be a part of the decision, the research, the discovery. They’re looking for collaborative relationships and not a relationship like the baby boomer, where they want someone to have made it easier and have done a little bit of the work. That’s the high level for those generations. FELDMAN: When you speak to insurance audiences, what engages them? What are they interested in? JONAH: Exactly the conversation we’ve 14

Silents or Traditionalists

Roles were crystal clear. Men brought home the bacon and women cooked it. Basically, the household had structure with a lot of rules and very little, if any, room for leeway.

Baby Boomers

This generation truly rebelled, and it was an era of civil rights, human rights and voters’ rights. As for who should bring home the bacon? Boomer women were not going to settle for black and white. Boomers’ rebellion against the structure they grew up in carried right into how they were going to operate when they became parents themselves.

Gen Xers

Unlike the boomers, Xers didn’t grow up with parents who were so focused on drilling rigid structures into them. In fact, Xers craved any parenting. Gen X was the first generation of latchkey kids, coming home from school to an empty house. Xers’ childhoods resulted in an independent and survival mentality that was loaded with a healthy dose of skepticism. Gen X parents threw boomers’ main focus on quality time out the window. They felt it was a cop-out, and that quantity is equally as important. They were not willing to sacrifice their time at home for the next promotion at the office.

had today. Typically, when we go to a presentation to a group like that, we’ll pick one of two paths. We’ll go down the employee route or the consumer route, but it’s all about how you engage the future generation. As the insurance industry is very aware, they’re about to face some major talent shortages, so how do they focus on recruiting? And while it is very early to look at Gen Z as insurance consumers, how do we start to pay attention to that? FELDMAN: Isn’t the industry still trying to figure out millennials?

InsuranceNewsNet Magazine » September 2019

Millennials

If we look at how millennials are parenting, it is clear that their bond with their boomer parents is playing out. Millennial parents were given a megaphone with social media. It’s fine if you want to see which high chair to buy, but it can also have a negative impact, as parents watching these reels can’t help but compare themselves. In a Time survey of 2,700 U.S. mothers, they found that 80% of millennial moms said it’s important to be “the perfect mom.”

Gen Zers

It is understandable that managers might be nervous about the impact of the tight bond between Gen X parents and their Gen Z kids. But one of Xers’ proudest parenting traits has been to let their kids fail, as they feel some of your best life lessons will come from it. If something doesn’t go so well on the job, it will be Gen Z’s job to fix it.

Gen ?

Could our future workforce after Gen Z take perfectionism to a whole new level? Adapted from Gen Z @ Work: How The Next Generation Is Transforming The Workplace, David Stillman and Jonah Stillman, 2017, Harper Business.

DAVID: I think the biggest mistake people are making is they’re lumping millennials and Gen Z together. They look at someone who is 30 and younger and assume they’re all the same. I’d say another mistake is they assume if they have an X or even a baby boomer client, they are going to be handed off to their kids. Then the children get their insurance from someone else who had them on the radar a long time ago and didn’t take for granted that the book of business would be passed on.

HOW TO MARKET TO EVERY GENERATION INTERVIEW FELDMAN: In this industry, we see many agents and advisors struggle to get the next generation as clients. What should we do to change this? DAVID: If you want a new book of business, go after it. I have seen it with Jonah and me. They’d say, “Hey, I’d really love to meet with your son.” I’d say, “That would be fine, here is the phone number, meet with him. And I would suggest doing a really good job selling him because there’s a good chance if he doesn’t like you, he’ll convince me not to like you.” FELDMAN: Is there a connection between parents and kids and X and Z, where they take each other’s ideas into consideration more? I don’t know whether boomers and their millennials kids have that same relationship. DAVID: The difference that you have between boomers and millennials is more of a tech divide. Millennials are going to go on to do something that’s got more technology — they are a little bit more innovative on that front. Boomers are a little bit more techphobic, so they might not jump in these weeds. But with Gen X and Gen Z, we are both very tech savvy. A technical solution is going to be less scary for a Gen X. But I definitely would not underestimate millennials in doing something for their boomer parents. FELDMAN: Jonah, you coined the term “phigital,” which I found very interesting. What is it, and how have you seen that developing? JONAH: Yes, to me it’s not even a concept — it’s reality. For example, Gen Z was the first generation native to a world with technology, to have only known a world with innovation. We’ve only known a world of iPads and iPhones. Phigital isn’t necessarily a theory, it’s a state of mind that Gen Z is going to bring for every stage of life, and it will impact every single industry. DAVID: Phigital is where baby boomers, Xers and millennials have, over time, blurred the lines between physical and digital. What’s different with Gen Z is they see no line at all.

Whether they’re talking to an insurance broker on Skype, or sitting face to face, it is one and the same. Whether they’re filling it out online or filling out a paper, one and the same. Here is a generation that sees no difference. Most companies are just now trying to figure out their digital strategy. In health care, for example, you have doctors who are like, “Hey, can I text you an appointment reminder?” Gen Z is like whoopdee-do, big deal. They assume that companies will have a digital equivalent for every physical equivalent.

My method for finding new customers is very precise

FELDMAN: If you went to an insurance agent and the agent gave you a paper application and said, “Here, fill this out,” what would you think?

FIND NEW

JONAH: I would think that there would be a perception of being outdated. Why wouldn’t you have a digital copy of this? I would say that in today’s age, most people would prefer a digital copy. FELDMAN: It seems insurance and health care are still trying to catch up. DAVID: I think in any industry, if they have a paper-based thing, it’s going to end up electronic somewhere. Someone somewhere is going to have to reenter all of that. Just seems like a waste of everyone’s time. FELDMAN: Yes, and studies have shown how much time and error that paper applications add to the underwriting process. DAVID: It’s an era of speed; it’s in an era of fear of missing out. If there is a legitimate reason for paper-based, you are going to explain why: “Here is why we have you fill this out this way. This is how we do it.” If it doesn’t make sense, Gen Z might say, “You know, have you ever thought of doing it this way?” They’re all about helping you innovate, but it is going to be assumed that there is technological sophistication.

Find more information on Gen Z at the Stillmans’ website, GenZGuru.com.

September 2019 » InsuranceNewsNet Magazine

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QUOTABLE Tariffs are taxes paid for by U.S. consumers, not China’s government. — Gary Shapiro, president and CEO, Consumer Technology Association

Fed Chairman Je rome Powell cut the Re serve’s lending rate and might trim it even more in September.

Fed Cuts Rates, S&P 500 Hits New High The Federal Reserve cut interest rates for the first time since the Great Recession,

and Wall Street responded. The S&P 500 hit 3,000 for the first time, after Fed Chairman Jerome Powell hinted at the Fed’s decision to cut interest rates by a quarter point. The Nasdaq also hit an all-time high, rising 0.9%, and the Dow Jones Industrial Average jumped 162 points. The Fed dropped rates for the first time since 2008 in an effort to protect the record-long economic expansion. The last time the Fed cut rates, it slashed them to near zero in 2008 in response to the worldwide economic slowdown.

SCALIA NOMINATED TO LEAD DOL

Eugene Scalia

STEPHEN VOSS FOR THE WALL STREET JOURNAL

President Donald Trump nominated attorney Eugene Scalia to be the next secretary of Labor. Scalia is the son of the late Supreme Court Justice Antonin Scalia.

The nomination came after the previous secretary, Alexander Acosta, resigned amid criticism of his handling of a 2008 secret plea deal with wealthy financier Jeffrey Epstein. Epstein was indicted on charges of sexually abusing underage girls and pleaded not guilty. DID YOU

KNOW

As an attorney, Scalia represented the U.S. Chamber of Commerce and played a major role in convincing an appeals court judicial panel to vacate the Obama Labor Department’s fiduciary rule. The rule requires agents to consider only the best interests of the client, as opposed to commissions or fees, when providing retirement advice.

4 THINGS MAY KEEP ECONOMY EXPANDING

The U.S. economy can continue to expand as long as four things happen, Bank of America CEO Brian Moynihan said. 1. Get the U.S.-Canada-Mexico Agreement passed. 2. Congress needs to address ongoing debt ceiling negotiations.

3. U.S. seals trade deal with China. 4. The U.S. has to “get through” Brexit in order to “ultimately make sure it doesn’t disrupt too much.” Moynihan made his comments during a recent interview on Fox Business Network.

DOL EXPANDS MULTIEMPLOYER RETIREMENT PLANS

The Department of Labor is making it easier for some employees to access a workplace retirement plan. The DOL issued a final rule expanding the availability of some multiple employer retirement plans. The multiple employer plan rule is aimed at helping the millions of employees who do not have access to a workplace retirement savings plan. The U.S. Bureau of Labor Statistics estimates that about 38 million private-sector workers — about 23% of the private-sector workforce — do not have access to a retirement plan through their employers. In addition, small businesses are less likely to offer retirement benefits. In 2018, approximately 85% of workers at private-sector establishments with 100 or more workers were offered a retirement plan, the Bureau of Labor Statistics reported. In contrast, only 53% of workers at private-sector establishments with fewer than 100 workers had access to such plans.

1/3 of U.S. workers have considered quitting their jobs in the past three months. Source: CNBC

InsuranceNewsNet Magazine » September 2019

September 2019

WHO, WHEN, WHY

A Guide To Life Insurance Buyers Recent data from the LIMRA Center of Excellence for Analytics answers questions about life insurance buyers.

Life Buyer’s Surprise Findings Guide: Who, from LIMRA’s When, Why Buyer Study PAGE 3

PAGE 9

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2019 GUIDE TO LIFE INSURANCE BUYERS

Who, When, Why?

The LIMRA Center of Excellence for Analytics compared results from different studies to answer questions about life insurance buyers. This report is a look at some of the centerâ&#x20AC;&#x2122;s findings. The following characteristics are all part of our likely buyer profile, which we derived by looking at the features of the people in the highest decile, and comparing them to the overall population. Young to Middle Aged: People in the top decile tend to be younger than the general population. Decile 10 has a median age of 42, as opposed to 50 in the full sample. Upper Middle Class With High Income/Assets: People in the top decile tend to be wealthier than the general population. They have a household income of over $100,000 and total investable assets of over $100,000. High Debt: However, these people may not consider themselves wealthy, because they are carrying over $50,000 in non-mortgage debt. Employed Full Time: The most likely buyers tend to be employed full time. Seventy-four percent of the people in the top decile are employed full time, compared with just 49% of the full sample. Have a Financial Advisor: Seventy percent of the most likely buyers have a financial advisor, as compared to 32% of the general population.

Source: The Drivers of Life Insurance Purchase Behavior: Predicting Who Will Buy, LIMRA

September 2019

WHO, WHEN, WHY Own Their Home: People in the most likely buyer group are more apt to be homeowners. Married: Eighty percent are married, as opposed to 57% in the full group. Have Children: Seventy-three percent have children, versus 36% in the general population. Have a College Degree or Better: The overwhelming majority of people in the top decile have a college or graduate degree. Have Had Significant Life Event(s) in the Past Two Years: The rate of people having one or more significant life events in the past two years is higher in the top decile. Additionally, people in the top decile are more likely to have had multiple life changes. Such changes include marriage, starting a business or retirement. See page 6 to find out which life events make consumers more likely to buy. Please note what is not included in this profile of the most likely buyers: It does not include any particular gender, ethnicity or orientation. All types of people could fit this profile, as long as they have some of the other characteristics that we have listed. Also, a person does not need to fit all elements of the likely buyer profile in order to be considered a likely buyer. They need to fit just some of them. The more of these characteristics a person has, the more likely they are to buy. However, there is no guarantee that a person who fits this profile will definitely buy, since even in the top decile, 47% didnâ&#x20AC;&#x2122;t buy. It just means it is more likely that they will buy. This offers a big lift over the baseline buying rate.

September 2019

Source: The Drivers of Life Insurance Purchase Behavior: Predicting Who Will Buy, LIMRA

2019 GUIDE TO LIFE INSURANCE BUYERS

THE INDIVIDUAL LIFE INSURANCE PURCHASE FUNNEL

25% 15%

of U.S. households “recognize the need” for life insurance over a 24-month period

of households move on to “seriously shop” for coverage

11%

of households apply for life insurance quotes (over 500,000 households per month)

of households go on to buy life insurance coverage

RECOGNIZE NEED

31 million households

SERIOUSLY SHOP

19 million households EVALUATE QUOTES

14 million households

PURCHASE COVERAGE

9 million households

Source: The Purchase Funnel: Tracking Consumers Through the Life Insurance Purchase Process, LIMRA, 2018

September 2019

WHO, WHEN, WHY

INCREASE IN BUYING LIKELIHOOD DUE TO LIFE CHANGES Several different life events can greatly increase buying likelihood.

Birth/Adoption

Marriage

2X 2X 1.75X

Purchase Home

1.5X

Inheritance/Windfall of Assets

Starting a Business

Death in the Family

1.5X Retirement

Job Loss 6

September 2019

2.5X 1.5X Source: The Drivers of Life Insurance Purchase Behavior: Predicting Who Will Buy, LIMRA

2019 GUIDE TO LIFE INSURANCE BUYERS

SIGNIFICANT LIFE EVENTS TRIGGER PURCHASE Finding: People who have had significant changes in their lives recently are more likely to buy up to two years afterward. This is something that life insurance companies and agents have known intuitively for decades. But now we can prove it definitively with our model, as well as quantify the size of the effect. We have also found that there are more life changes beyond just the obvious ones of marriage and childbirth that trigger this higher likelihood of purchase.. Additionally, these effects can stack upon each other; the more significant life events a person has had in the past two years, the more likely they are to buy. Recommendation: Companies should find people with recent life changes and offer them life insurance. When people have significant changes in their lives, it gets them thinking about what is most important to them and what they want to protect if the worst should happen to them. • Companies that can identify when people have that need and step in to serve it with the right product will do very well. • One way to identify people with a recent life change is through social media. People who use social media tend to be fairly open about what is happening in their lives, and they usually post about the types of life events we included in the survey. • Savvy agents could use this information to know what type of product to offer to these potential customers. Agents could tailor their message to match the life change that the prospective customer has just had.

Source: The Drivers of Life Insurance Purchase Behavior: Predicting Who Will Buy, LIMRA

September 2019

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2019 GUIDE TO LIFE INSURANCE BUYERS

Why They Buy

ealthy, but not too wealthy — and unemployed. That might not describe the perfect prospect to many life insurance sellers, but the latest analysis would beg to differ. That analysis is in the report “The Drivers Of Life Insurance Purchase Behavior: Predicting Who Will Buy” from LIMRA’s Center of Excellence for Analytics. LIMRA established the center in 2017, with Vikram Kamath as its first director. This study, conducted with University of Connecticut Center for the Advancement of Business Analytics, applied predictive modeling to existing data from LIMRA’s Individual Life Insurance Consumer Survey. In this interview, Kamath discusses key factors in buying behavior and why some consumers purchase when they might seem least likely to. Also participating in the conversation was Kate Theroux, LIMRA assistant vice president and public relations director. INN: Was there any data that stood out when you were reviewing your study?

relationship between having more in assets or debt wasn’t necessarily a linear relationship with your ways of buying, that there were some fall-offs. The more you have in assets, the more you’re likely to buy, but that was to a certain point. It’s interesting to see where that drops off [above $1 million in assets], where people start to think that they are wealthy enough to self-insure. Or they may not view insurance as a good investment. A lot of the variables that we identified as the most influential are things that agents and companies have known for decades. I think the real import of this research is that now we’re able to, using predictive models, quantify just how influential they are. For example, recent life events. If you got married or bought a house or had children in the past couple of years, you are more likely to buy than somebody who has not had those changes. Now we’re able to quantify and say that buying a house specifically makes you one and a half times more likely to buy life insurance than somebody who didn’t buy a house. Getting married makes you two times more likely. To put that in a number of times more likely they are to buy hasn’t been done before, as I understand it.

KAMATH: I thought that it was really interesting the way that some of the financial variables popped out. That the

INN: You broke down the poll-takers into 10 groups, with No. 10 being most likely to buy.

The analysis put a number on how likely someone is to buy following a life event.

September 2019

WHO, WHEN, WHY KAMATH: Yes. The way that our model my perspective, less intuitive. One is works is it generated a probability score having a high debt. So many Amerifor everybody we had in our survey data. cans say in our studies that they don’t It was able to score them by asking, buy life insurance because it’s too “How likely is this person to buy within expensive. They have other financial the next two years?” priorities, but this shows that people We cut the survey data into 10 equal who have higher debts are more likely groups. When we put down that oneto buy. through-10 scale, in group one, only 2% The other was on life events. The No. 1 of the people are buying. In group 10, life event most likely to push someone to 53% are buying. buy life insurance was job loss. But from In this report, we spike out the charthe nonscientific perspective, I would acteristics that people in think, “I lost my job. I’m group 10 tend to share, not really looking to The No. 1 life because that’s the group add a bill.” In fact, those of people who are the who lost their jobs are event most most likely buyers. the most likely to buy. likely to push For example, people in group 10 tend to be someone to buy KAMATH: I can try to married at a higher rate. address both of those, life insurance They tend to be better about what we think is educated. They tend to happening there. was job loss. It have more in assets, and As for somebody who’s was somewhat so forth. carrying more debt, When you compare we asked people surprising to see when that against the baseline in the survey, “What are that come out of some of the reasons why buying rate of 18%, you can see right away that you chose to buy?” some the research. that’s a really big lift. If of it was to guarantee you were to go randomly their family’s financial select 100 people out of the phone book situation afterward. To make sure the to try selling your insurance to, 18 of mortgage was paid off, or to replace the them would buy. income for their family, transfer wealth, things like that. INN: Are there particular differencMany of the reasons people buy these es between, say, groups eight and 10 types of products relate to protecting that heighten buying? their family’s financial future. That’s something that a lot of companies use KAMATH: It’s hard to say, because frequently in the marketing. there’s that interplay with all the multiWe’re aware of this, but what we think ple variables that are going into our reis happening here is that people who gression model. have higher debt are worried that if they were to have an untimely death, they THEROUX: There are two things that would pass some of that debt onto their stood out to me that are, at least from family. They would maybe not be able 10

September 2019

2019 GUIDE TO LIFE INSURANCE BUYERS keep up with that. That’s a huge reason KAMATH: I have received some comwhy people with higher debt do tend to ments on the work site findings that we buy at a higher rate. have. People are much more likely to buy To address the job-loss one, I agree if the products are offered at work. with Kate. It was somewhat surprisI don’t know if it was surprising, ing to see that come out of the rebut we got a lot of commentary from search. What we think is happening is people saying, “This is something I’ve that somebody who has recently lost thought before. It’s good to see you their job has also lost whatever group validate that.” or supplemental individual insurance that came with that. That makes them INN: Yes, people were two and a half more likely to realize that they need times more likely to buy at the work to buy something to resite, according to your place that. report. Why do you If somebody Even though it does think that is? gets offered seem like it will be the last thing on their mind KAMATH: In the resomething when they’ve lost their port, we mentioned that through work, job, to add another bill. we think if somebody they’re more Indeed, we do see that gets offered something likely to trust because they don’t have through work, they’re that group life covermore likely to trust the the information age anymore, they are information because it’s because it’s choosing to buy life incoming from their emcoming from surance. ployer, who presumably their employer they trust. We also think INN: Are there any who presumably that people who receive clear differences bethese offers through they trust. tween group 10 and their work site are perthe ones just below it? ceiving it as part of their employee benefits package. KAMATH: I would say that the biggest That means that they think, “I should difference between them is that, gentake advantage of this because it’s leaverally, the people who are in group 10 ing money on the table if I don’t, because have more assets than the people in the it’s a work benefit.” I think it’s explaining lower groups. It’s income and assets. at least part of the elevated buying rate We look at those separately. Household for work site selling. income and assets are both higher in group 10 than they are in group eight. THEROUX: Over the years, we have seen voluntary life benefits grow in INN: Was there anything in the data sales. It’s not just advisors or consumthat surprised your member compaers being more interested, but it’s also nies? Was there something in parmore employers offering voluntary ticular where they said, “We haven’t benefits. • really considered that.”? September 2019

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COVER STORY

2019 LIFE INSURANCE

STATUS REPORT

BUSINESS IN THE AGE OF TIGHTER REGULATIONS AND WIDER DEMOGRAPHICS BY STEVEN A. MORELLI 18

InsuranceNewsNet Magazine Â» September 2019

teven LaBroi knew that he was going into a challenging field when he got involved in life insurance, but he quickly ran into issues that were hundreds of years in the making. “There was a gap in really understanding why this industry seems to work for some and why there are so many stereotypes, so many clichés and so many misnomers in the other communities,” LaBroi said. LIMRA data on why consumers buy life insurance shows that some of those clichés Steven LaBroi still exist in some communities. Among African Americans, for example, 31% buy life insurance to cover burial expenses, a far higher percent than other groups. As an African American, LaBroi sees the legacy that led to that perspective. “That’s what was offered in the African American community,” LaBroi said. “You have to remember there were 60-some African American insurance companies in this country in the early 1900s.” Those companies focused on the concept of burial insurance because wealth was only starting to build in African American communities. As those companies died off, larger insurance companies were slow to move into that market. LaBroi wanted to shift that thinking in his Washington, D.C., home base. He saw that people in his community needed to think of generational wealth-building. He conveys that to clients directly as well as in articles and his book, Build Your Human Equity Line of Credit. “In a lot of my writings, I tell people that, ‘You are the legacy change. You’re the person who begins this process in the family. Maybe other cultures began it three generations ago, but now is your turn for your grandkids and great-grandkids to understand it,’” LaBroi said. “And I’ve been able to get people to pay attention to it.” During this Life Insurance Awareness Month, the industry finds itself being pulled in a few directions. » Underserved markets. Life insurance

2019 LIFE INSURANCE STATUS REPORT COVER STORY sellers have been moving upmarket for decades, selling fewer policies but at higher premium. To expand policy count, sellers will need to move into unfamiliar markets that have not been well-served. » Complex products. The areas of growth often involve multipliers, bonuses, proprietary indexes and riders that add value to life insurance, but also add complexity that can confuse clients and catch the attention of regulators. » High-net-worth market. Even though sales have moved upmarket, they are not hitting households with more than $1 million in assets. » Product reboots. Jan. 1 is the effective date for a few requirements, such as the newest commissioners standard ordinary, or CSO, mortality table and switching to principle-based reserving. All products will have to be restructured.

In fact, cash accumulation products such as IUL increased from 45% of all universal life products in 2016 to 57% in 2018. While IUL has been booming, the stalwart whole life product segment has also been climbing — but in a slow, steady march. “We’ve seen pretty strong growth after the recession a decade ago,” Tumicki said. “It’s leveled out a little bit, but we’re still seeing fairly steady whole life sales, and we are also predicting modest increases in whole life over the next couple of years.” The typical whole life sellers, mutual companies, have been able to market their steadiness in the post-crash years (as opposed to stock companies) and make good use of its field force. The only cloud Tumicki saw on the whole life horizon was in the form of low interest rates, which are likely to drop further after the Federal Reserve cut its fund rate a quarter point in July. The Fed may cut the rate again in September, particu-

U.S. life insurance sales forecast for the next 4 years: Life Insurance Premium Forecast 3%

3% 1%

2019

2020

2021

1% 2022 SOURCE: LIMRA

The Big Picture

LaBroi’s message on asset accumulation is one voice in a choir of agents selling indexed universal life, a bright spot in an otherwise dull market. Elaine Tumicki, LIMRA’s corporate vice president and research director, said the trends are heading in two distinct directions. “We’re still seeing growth in IUL,” Tumicki said, “and the non-indexed products are declining, particularly the lifetime guarantee products. Some companies have gotten out of that market. The persistent low interest rates and increased reserves have caused price increases on the lifetime guarantee products. So, UL is really two different stories, the index products and the fixed products, and they are kind of balancing each other out at roughly flat.”

larly if the trade war heats up with China. The lower rates would increase the pressure on whole life dividends. But coming over the horizon for all products is a larger cloud in the shape of three letters — CSO.

All Must Go!

The 2017 commissioners standard ordinary, or CSO, mortality table has been long overdue, with the industry basing rates on the 2001 CSO tables for a decade — while longevity just kept getting longer. The good news is that rates will drop. The bad news is the window closes on the old products on Jan. 1. That means products will have to be approved by the end of the year to be sold in 2020. “At that point, they can only sell products that are based on the new mortality tables,” Tumicki said. “This is a fairly

September 2019 » InsuranceNewsNet Magazine

COVER STORY 2019 LIFE INSURANCE STATUS REPORT

Total U.S. Individual Life Sales Policies (millions)

Premium ($billions)

Annualized premium CAGR: +1.62%

20 18 16

UL replacing WL

14 12 10

Weak economy

Market conduct issues

S&P ↑ 20% per yr

16 Great recession

Growth of LTG UL

14 12 10

30yr TBill 14%

2 0

77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

▬

Policies

▬ Premium 1Q19: 1%

1Q19: -3%

Source: LIMRA’s Individual Life Sales Survey and LIMRA estimates

short time frame for companies to implement the new table. We have surveyed our members on how they’re doing in that process and they’re all on track to get all of their products updated — whether all of the insurance dep artments will get them reviewed and approved is another question.” This delay creates tension in two ways. The first is that the products that follow the 2001 CSO tables being offered for the rest of this year are likely to feature higher rates than the 2017 CSO-based products. That can be a factor in depressing sales, which can be further stifled by the lack of products because of insurance department backlogs. “There will be products that companies will not be allowed to sell until the insurance departments catch up,” Tumicki said. “And it tends to be the bigger, more populous states where companies are seeing the backlog in processing.” As those products are approved, agents and advisors may find that the star of the product lineup — cash accumulation policies such as IUL — might not be able to accumulate as much cash. 20

“We are hearing that more companies are expecting an effect on accumulation focused products because typically when you have a new table with improved mortality built into it, the maximum cash values that you can have within a product decrease,” Tumicki said. “When we surveyed our members, almost half expected somewhat of a decrease in accumulation product sales.” The new CSO tables might have already affected sales inIUL, said Sheryl Moore, CEO of Moore Market Intelligence. “That’s really the Sheryl Moore biggest impact to first-quarter sales that we’re dealing with,” Moore said. “That is causing some disruption in sales because all of the insurance companies are having to pull their products and introduce new products or maybe don’t have a new product yet.”

Of Regs And Regulators

Another factor affecting prices is the Jan. 1 effective date of principle-based reserving

InsuranceNewsNet Magazine » September 2019

rather than rule-based reserving. When the new product is introduced, it can still take a few months for distributors to get acclimated with it. Given the rollout date of Jan. 1 and the lag time, the IUL business can expect disruption until the middle of 2020, Moore said. Even if the new product is the same as the old one but with different pricing, agents will need to rethink the new version. “That’s essentially an entirely new product because it means that the insurance agent has to run new illustrations,” Moore said. The agent also cannot assume that a company’s product that has been best choice for a certain kind of client is going to remain the best choice. “If it’s just a crediting rep change and not a total reprice, that’s not as big of a deal,” Moore said. “But if the actuary has changed the actual pricing of the product in terms of the rates per thousands, the target premiums, the guarantee premiums, those things will materially change the product to the fact that it’s essentially

Don’t miss our Guide to Life Insurance Buyers on page 17.

September 2019

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COVER STORY 2019 LIFE INSURANCE STATUS REPORT

How Has Product Share Changed? 2002

2008

2018 7%

12% 24%

27% 23%

27%

21%

41%

35%

22% 37%

24%

Term

Variable

Source: LIMRA’s Individual Life Sales Survey and LIMRA estimates

an entirely different product in the agent perspective.” Another source of disruption is working its way through the National Association of Insurance Commissioners is a reconsideration of Actuarial Guideline 49 — the rule on IUL illustrations. The NAIC reopened AG 49 largely because of new multipliers, bonuses and

indexes. Multipliers and bonuses allow carriers to boost crediting rates. But regulators say those devices are ways to get around AG 49 illustration restrictions. As the commissioners look at the issue, companies might change products to account for a new AG 49, Moore said. “OK, there are potential changes to AG 49, I see the writing on the wall

here,” Moore said in portraying companies’ inner dialogue. “This is repricing for 2017 CSO and PBR [principle-based reserving] anyway. Maybe I’m going to refile my products in a manner that makes me more nimble. So maybe the bonus is this or the multiplier is optional now. So, it has definitely impact on product development.”

IUL and LTG Share of UL Sales Indexed Universal Life

47% 47% 48%

10%

53%

15%

Lifetime Guarantee

AG38 reserves kick in IUL and LTG Share of 66%UL Sa Price increases due

IndexedtoUniversal Life interest rates

44%

20%

52%

39% 37% 47% 47%

27%

35% 8%

34% 53%

48%

30%

60% Lifetime Guarantee 55% 56%

44%

AG38 reserves kick i

Price increases due to interest rates

52%

39% 37%

55% 56%

34%

23% 21% 22% 27% 35% 19% 16% 21% 30% 23% 20%

22% 19% 15% Period of low interest rate + good 10% low interest rate + S&P performance Period ofS&P performance

2006 2012 2007 2008 20102015 2011 2016 2012 2013 2015 2006 2007 2008 2009 2010 2011 2013 2009 2014 201720142018 Source: LIMRA’s U.S. Individual Life Insurance Sales Survey and LIMRA estimates

Source: LIMRA’s U.S. Individual Life Insurance Sales Survey and LIMRA estimates

InsuranceNewsNet Magazine » September 2019

60%

2016 2017

YOUR AGENCY, A

Catching Up With The Times

One of the criticisms often lobbed at the life insurance industry is that it keeps looking upmarket for larger, but fewer, cases. Since 1995, policy count has been dropping while total premium has been rising. So the industry has been accused of underserving middle America. But in some ways, the industry might be missing out on two phenomena. One is the nation’s growing diversity and the other is the expanding ranks of high-net-worth families. According to a LIMRA report, “The Drivers of Life Insurance Purchase Behavior,” the more investable assets families owned, the more likely they were to buy life insurance. But not too many assets, according to the report’s author, Vikram Kamath, LIMRA’s director of analytics. “The more you have in assets, the more you’re likely to buy, but that was to a certain point,” Kamath said. “It’s interesting to see where that drops off.”

analysis and other studies. For example, a New York Life study, “Life Insurance Gap,” showed that African Americans experience more financial stress than other segments of the population but are more likely to take action to address it. Nearly 80% of African Americans surveyed said they would consider seeking professional help from a financial advisor. Of those already working with an advisor, 65% said they meet with their advisor more than once per year, versus 49% of all adults. Not only are they more likely to work with a professional, they are also more open to life insurance. According to the survey, nearly 80% of African Americans list life insurance as a priority financial goal, versus just 63% of all adults. And 93% say it helps future generations succeed. LaBroi, the agent based in Washington, D.C., said the African American com-

“It was a little bit surprising to see that it wasn’t 100% of the people in these higher wealth brackets saying, yes, they know about life insurance. They’re still somehow not being informed.” — Vikram Kamath, LIMRA analytics director That dividing line is $1 million in assets, he said: “Where people start to think that they are wealthy enough to self-insure. Or they may not view insurance as a good investment.” Kamath said that might be simply because no one has talked to those families about life insurance. “It was a little bit surprising to see that it wasn’t 100% of the people in these higher wealth brackets saying, yes, they know about life insurance,” Kamath said, including the very people his analysis showed were most likely to buy. “They’re still somehow not being informed. They reported that they had never received any information about life insurance.” It is the same situation with underserved markets, according to Kamath’s

munity has not historically had the best experience with life insurance. Death benefit is still the policy that you see a lot in our community,” LaBroi said. “A lot of them don’t carry dividends or don’t carry interest. They were called non-participating policies and they were smaller in value so a lot of people get caught spending more money on the premium than the death benefit they will be getting. So a lot of that led to the bad taste from life insurance in our community.” But, even so, there is a tradition. “I’ve talked to a lot of people in the African American community who believe in life insurance, who understand that it’s necessary,” LaBroi said. “They have had information passed down to them of how significant that it can be to a

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COVER STORY 2019 LIFE INSURANCE STATUS REPORT

Life Insurance Market Share 100% 80% 60% 40% 20%

19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02 20 04 20 06 20 08 20 10 20 12 20 14 20 16 20 18

Whole Life

Term

Universal Life

Variable Life

Source: LIMRA’s U.S. Individual Life Insurance Sales Survey and LIMRA estimates

family. So it just depends on where you sit with information and resources.” LaBroi wants to convey the wealth-building possibilities, but first he has to get past the usual objections. “It’s all about cost,” he said. “How do I add this to my expense structure in my household when the benefit of it doesn’t

“So the home equity line of credit is managed by the bank in a financial institution,” he said. “The human equity line of credit is managed by you — your ability to stay healthy; your ability to understand strategy; your ability to understand how stable and guaranteed these tools can be for your family.”

“When they began to pay attention to it and peel the onion back, they said, ‘Wow, why don’t I have this? Why didn’t I know about this? Why am I just finding out about this?’” — Steven LaBroi, insurance agent based in Washington, D.C. come until I pass away and it’s actually for my kids or for someone else?” He uses the concept of the Human Equity Line of Credit to position life insurance as another bank — one that the policyholder can control. 24

He positions life insurance as an asset that helps while the person is alive to counter that notion that it is only for the death benefit. He conveys the utility of the cash value. For one thing, just having it can help a young family.

InsuranceNewsNet Magazine » September 2019

“Those that I’m finding that are open to it are understanding that personal finance is becoming more and more important because we’re in such a credit-driven economy, finance-driven economy,” LaBroi said. “And the institutions basically manage all our lives.” But life insurance helps establish a base to build from. “You know the mortgage application will ask you what assets you own,” he said. “There’s a line for life insurance, and they’re talking about life insurance with cash value. Because when you can put it as an asset, it does boost your net worth. When they began to pay attention to it and peel the onion back, they said, ‘Wow, why don’t I have this? Why didn’t I know about this? Why am I just finding out about this?’”

Many Problems With One Answer

George Nichols III knows full well the tradition LaBroi is working with. “As a black person, here’s what I knew of life insurance,” Nichols said. “I remember a white man coming to our

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essbenefits likely to say that they wanted to transfer wealth their family. ax from owning life insurance. White buyers were to more likely to sayNative that theyAmerican wanted to replace heir income, butthat lessthey likelywanted to say that transfer wealth to their family. American likely to say to they use wanted their lifetoinsurance to help them giveNative to charity. buyers were more likely to say that they wanted to use their life insurance to help them give to charity. COVER STORY 2019 LIFE INSURANCE STATUS REPORT

Reasons for Purchase Vary by Ethnicity

Reasons for Purchase Vary by Ethnicity Reasons for Purchase Vary by Ethnicity

house and he got his work book out and he wrote down that my mother gave him $2.60. I’m holding on to her 8% 8% skirt and I said, ‘who’s that?’ and she 0% Asian 0% Asian Taxes Taxes said, ‘that’s The Insurance Man.’” 5% 5% Black Black Nichols grew up to become 0% 0% Kentucky’s insurance commissioner 2% 2% Native Native before he was recruited by New York 3% 3% Life. He saw how the company recruitOther Other 1% Charity 1% ed leaders within cultural communities 11% Charity White 11% because insurance is best sold by peers. White 0% 0% “You have to acknowledge that there 1% 1% are cultural differences,” Nichols said. 1% “And having people who look like that 1% Burial 31% group makes sense.” 31% 5% During his 17-year career at New Costs Burial 16% 5% York Life, he became executive vice Costs 19% 16% president before retiring in October 19% -- FOR IMMEDIATE DISTRIBUTION 24% -to become president of The American College of Financial Services. He is now 7% NEWS RELEASE24% Mortgage in a position to help bend the long arc of 16% 7% 16% life insurance’s history toward greater Mortgage 16% 9% inclusion of cultures but of other finanA SLOW START16% TO 2019 FOR LIFE SALES cial service disciplines. 28% 9% Nichols sees building knowledge Wink, Inc. Releases First Quarter, 2019 Life Sales Results 29% around objectives as a clear path not Income 21% 28% Des Moines, Iowa. May 24, 2019- Wink, Inc. released first quarter, 2019 life sales results in its 87th edition of only for expanding the reach of insur16% 29% Wink’sIncome Sales & Market Report. Wink’s Sales & Market Report, the insurance industry’s #1 resource for indexed ance but also of watching out for the 37% 21% life insurance sales data since 1997, expanded in 2017 to include fixed universal life (UL) and whole life product client’s best interest. 16% lines. 24% “We have to do a better job,” Nichols 37% 20% Wealth said of the life insurance industry in genNon-variable universalTransfer life sales for the first quarter were over $768.221% down 20.4% when compared to eral. “This is not just a financial transac24% million; the previous quarter and down nearly 13.0% as compared to the same period 24% last year. Non-variable universal life tion. It’s about where are you today and 20% 10% Wealth both indexed UL and fixed UL product sales include sales. where do you want to go tomorrow and 21% Transfer how do I help you get there.” Different ethnic groups have different priorities when buying life insurance. 24% Noteworthy highlights for total non-variable universal life sales in the first quarter included National Life Group That means pulling in other aspects 10% taking over as the #1 company, overall, for non-variable SOURCE: universal LIMRA life sales with a market share of 9.5%. Pacific of planning, which has been a persistent Life’s Pacific Discovery Xelerator IUL was the #1 selling product for non-variable universal life sales, for all but challenging goal for the industry in Different ethnic groups have different priorities when buying life insurance. channels combined, for the seventh consecutive quarter. general. One of the hurdles is a resisNon-Variable Universal Life Sales by Quarter tance in the financial planning world Non-Variable Universal Life Sales by Quarter (in millions) to insurance. His answer is to bring ad(in millions) visors into The American College with $1,400 broader programs that would include insurance, rather than focusing on in$1,200 surance first. He plans to redouble the college’s ini$1,000 tiative on retirement security, which in$800 cludes the Retirement Income Certified Professional designation. But he also $600 sees aligning the training with objectives such as special needs planning, in $400 which the college also has a designation. But to Nichols, special needs is big$200 ger than children with disabilities. It includes situations that affect pretty $0 much all families, such as caring for 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 elderly parent with Alzheimer’s disease, something Nichols knows well. SOURCE: WINK 26

InsuranceNewsNet Magazine » September 2019

Universal Life Sales by Quarter (in thousands) $600,000

2019 LIFE INSURANCE STATUS REPORT COVER STORY

$500,000

Universal Life Sales by Quarter

“The people I have spoken to about special needs children talk to me about the same things (in thousands) (in thousands) I went through with my father,” Nichols said of $600,000 caring for his father with dementia. “Whether it $300,000 was guardianship or all the other issues.” $500,000 Another promising area is philanthropy, which $200,000 he says is not just for the wealthy. In fact, he has friends who did not go to college but worked hard $400,000 to save up their money and took advantage of $100,000 their employer match to amass a modest amount $300,000 of money that they would like to make a differ$0 ence with. 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 $200,000 “They have $200,000, $300,000 in the bank,” Nichols said. “They don’t live a complicated $100,000 andprior flashy life and you know what they ask me? Whole life first quarter sales were $1.0 billion; down more than 17.4% when compared with the quarter, and down 3.7% as compared to the same period last year. Items of interest in the whole life market included the know how I can leave a legacy ‘George, I don’t top pricing objective of Cash Accumulation capturing 67.0% of sales. The average premium per whole lifemy policy $0 beyond family.’” 1Q17 was $2,815, 2Q17 1Q1824.0%2Q18 4Q18 1Q19 for the quarter a 3Q17 decline of4Q17 more than from the3Q18 prior quarter. The college has a designation in philanthropy as well. So, the institution does not have to invent Whole life first quarter sales were $1.0 billion; down more than 17.4% when compared with the prior quarter, new initiatives, but needs to call attention to the and down 3.7% as Whole compared to the Life same period last year. Items interest in the whole life market included ones the it already has, Nichols said. Sales bybyof Quarter Whole Life Sales Quarter top pricing objective of Cash Accumulation capturing 67.0% of sales. The average premium per whole life policy (in thousands) Weaving the financial strands into holistic (in thousands) for the quarter was $2,815, a decline of more than 24.0% from the prior quarter. planning helps underserved markets, which $1,600,000 Nichols described as an “untapped opportunity” and should include not only cultural groups such $1,400,000 Whole Life Sales by Quarter as African Americans and Latinos. (in thousands) $1,200,000 “The middle market is just as underserved,” $1,600,000 Nichols said, adding that the situation is exac$1,000,000 erbated by the steady decrease in agents and $1,400,000 Indexed life sales for the first quarter were $491.7 million, down more than 20.3% when compared with the prior advisors doing the hard work of contacting and $800,000 quarter, and up over 1.1% as compared to the same period last year. “The 2017 CSO requirements are hitting $1,200,000 everyone hard.” declared Sheryl J. Moore, President and CEO of both Moore Market Intelligence and Wink, Inc. meeting with people. “And people are having to $600,000 “If companies’ sales aren’t down because their field force isn’t up-to-date on their reprice for the fend for themselves.” $1,000,000 She continued new mortality tables, they are down because they are too busy working on new products to focus on sales.” Nichols said that companies are doing well $400,000 $800,000 providing information online, but that is not how Items of interest in the indexed life market included National Life Group moving into the #1 ranking in indexed life insurance gets sold. $600,000 $200,000 life sales, with a 14.5% market share. Pacific Life Companies, Transamerica, Nationwide, and Allianz Life “People are still not getting the same benefit rounded-out the top five, respectively. $400,000 $0 that you and I got when we were growing up be1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Pacific Life’s Pacific Discovery Xelerator IUL was the #1 selling indexed life insurance product, for all channels cause there were more agents out there knocking $200,000 combined, for the seventh consecutive quarter. The top pricing objective for sales this quarter was Cash on doors and talking to people and explaining $0 Accumulation, capturing 75.2% of sales. The average indexed life target premium for the quarter was $8,900, a the value and benefits of life insurance,” Nichols 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 decline of more than 9.0% from the prior quarter. said. “And so I don’t think we do enough of this, Indexed Life Sales by Quarter the humanistic component of how life insur(in thousands) Indexed Life Sales by Quarter ance and financial planning is done.” (in thousands) $700,000 But Nichols said he is encouraged by the changes he has seen in the decades since he first $600,000 saw The Insurance Man. “I’ll tell you, we never saw a black man walking $500,000 around with a book,” he said. “So we all learned, the psychology of it. All of that’s changing.” $400,000 $400,000

Universal Life Sales by Quarter

$300,000 $200,000 $100,000 $0

1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

1Q16

1Q17

1Q18

1Q19

Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at smorelli@ adnewsfeedback.com.

SOURCE: WINK Fixed UL first quarter sales were $277.4 million, down 20.5% when compared with the previous quarter and down more than 29.4% as compared to the same period last year. Noteworthy highlights for fixed universal life in the first quarter included the top pricing objective of No Lapse Guarantee capturing 67.8% of sales. In addition, September 2019 » InsuranceNewsNet Magazine the average UL target premium for the quarter was $4,377, a decline of more than 20.0% from the prior quarter.

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The Time Is Perfect for the Business Life Insurance Market

Are you prepared to help your client’s business continue beyond death or disability?

he death of a business owner can have dire consequences for partners, surviving family and employees if he or she has not prepared for the transition of the business. Lack of adequate planning can result in the need to liquidate a business that the deceased spent years building. To mitigate this risk, unique products and riders are available that can appeal to a variety of industries and fit companies of many sizes. Survivor purchase options (SPO), split-dollar purchasing and funded buy-sell agreements are just some of the ways financial professionals and whole life insurance can help business owners implement solutions to support the business’s surviving owners and the decedent’s heirs. “A variety of products can help fill a need that a business might have. Often, business owners don’t realize the versatility of whole life products as tools to help protect their business, as well as protect their families,” Kevin DeGray said Kevin DeGray, head of career Head of Career Distribution distribution at OneAmerica®. “In addition to base whole life policies, we also see business owners utilizing survivor purchase options, indexed dividend options, and our asset-based long-term care protection, which is a whole life policy with long-term care benefits included.” Business-oriented life insurance products can be used in multiple ways. SPO is an option that business owners might find attractive because of the flexibility it offers. When the insured dies, the survivor — another business owner or a spouse, for instance — has multiple options for how to use the death benefit. It can be used to possibly pay federal and state death taxes, or it can be used to purchase additional insurance on the survivor at guaranteed rates. Key person insurance, as another example, can be structured so that when the owner retires, it can transition to become part of the business owner’s estate preservation planning strategy. Split-dollar is a way of purchasing life insurance in which premium payments or policy benefits — or both — are divided in a predetermined way. A corporation might pay a portion of the premiums on an owner or other key person, and then receive a portion of the benefits if that person dies, with the person’s family or other beneficiary receiving a portion. There can be tax advantages to this kind of structure, particularly for C corporations.

“It’s not as much about the specific product as it is how the product is structured up front,” said DeGray. “We see businesses using split-dollar structures for a variety of reasons.” A buy-sell agreement is at the heart of many business succession plans, providing a way for the business to continue should one of the owners decide to exit the business, or be unable to continue in the business because of death or disability. In general, a buy-sell agreement without some way to fund the buy-sell — like a whole life policy — can make it too difficult for a surviving owner or owners to execute the agreement because many do not have the personal funds. “If the surviving owners are the beneficiaries of a life or disability policy, that money can be used to buy out the deceased person’s portion of the business, and life insurance benefits are generally nontaxable,” said DeGray. “Otherwise, it can really put the deceased or disabled person’s family, and the surviving owner(s), in a bad situation.” DeGray also notes that another way to think about key person protection is to think about how that person’s absence would affect the income statement. “At a basic level, a key person either brings in revenue, or they manage expenses. Their absence results in a direct effect on the bottom line. If someone suddenly can’t be there, your income statement is going to go down.” Insurance can be arranged with a variety of end goals in mind, whether it’s providing a key person an incentive to stay with a policy that will transfer to them upon retirement or some other milestone, or whether it’s funding a buy-sell agreement in order to smooth the transition to the next generation or surviving owners. Depending on a business’s structure, there may be tax advantages to paying some portion of premiums from the business, or other tax considerations for the business and employee. For complex cases, it’s important to have an advanced sales team or other resource to help determine possibilities for a client considering whole life insurance options to protect their business. Download the OneAmerica Story Selling to Business Owners at www.BusinessStorySelling.com and find out how other professionals are supporting businesses with financial strategies that align with business and human resources goals.

Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice.

September 2019 » InsuranceNewsNet Magazine

The Life Insurance Issue • Special Sponsored Section

Whole Life Insurance Strategy That Offers Retirement Edge By Dennis P. Mullen, ChFC®, CLTC, Managing Director, Fifth Avenue Financial

s an advisor helping high-net-worth clients attain their financial goals, you want to present ideas to help them avoid potential pitfalls and future financial challenges. Whole life insurance as a supplemental retirement income strategy is just such a strategy, and here’s why. Traditionally, Americans rely on equity-based investments to save for retirement. These investments offer

This is where whole life insurance comes into play. By incorporating whole life insurance, retirement savers get far more than a valued death benefit. They also could enjoy: • Diversification with guaranteed growth. Whole life insurance is market neutral; the accumulation of the policy’s cash value is guaranteed, regardless of market conditions. Therefore, clients can potentially avoid the

When owned personally, life insurance policy cash values are protected from creditor claims in most states. the potential to enjoy long-term growth and multiple years of market upside while the client continues to work and save. The market downside potential inherent in these investments, however, poses a risk. Withdrawing from retirement accounts during market downturns can significantly reduce their value over the long term. This may ultimately impact the amount of income available during retirement, as well as the amount remaining to leave for loved ones.

InsuranceNewsNet Magazine » September 2019

need to withdraw income from equity-based retirement investments during economic downturns in retirement. • Access to cash value. A whole life insurance policy can provide a stable source of income when it’s inadvisable to take distributions from equity-based retirement accounts. After meeting any minimum distribution requirements, the client can take distributions, in the form of a loan, from the policy’s cash value. This

The Life Insurance Issue • Special Sponsored Section

This is where whole life insurance comes into play. By incorporating whole life insurance, retirement savers get far more than a valued death benefit.

way, investments better positioned to rebound when the market comes back don’t have to be tapped. • Earnings that don’t count against Social Security tax. Unlike most taxable income (and even tax-free municipal bond interest), earnings inside life insurance will not increase the tax liability on Social Security income. • No contribution restraints. Clients can contribute as much as they want, as long as the policy qualifies with IRC section 7702A(b) as insurance. The availability of a death benefit is the only upward limitation. • Cash Dividends. When clients use a participating whole life insurance policy to supplement retirement income, it is generally accepted they have the policy paid up before retirement. Since all premium obligations have already been satisfied, the entire dividend can serve as income. Dividends, however, are not guaranteed and will vary from year to year.

Massachuse tts Mutual Life Insurance Company (MassMutual) helps brokers keep their clients covered through local support services, a wide array of high-quality insurance products, estate and business planning expertise, and a relationship-based approach. For more information about MassMutual Brokerage, visit www.fifthavenuefinancial.com. Dennis P. Mullen, ChFC®, CLTC, is a managing director at Fifth Avenue Financial who has nearly 30 years’ experience assisting financial service professionals help clients establish the financial security they want for themselves, their families and their businesses. dmullen@fifthavefinancial.com 212-536-6030

• Asset Protection. When owned personally, life insurance policy cash values are protected from creditor claims in most states. If your clients seek a way to create supplemental retirement income while also providing valuable death benefit protection, encourage them to consider the benefits whole life insurance has to offer. CRN202006-232278

September 2019 » InsuranceNewsNet Magazine

The Life Insurance Issue â&#x20AC;˘ Special Sponsored Section

Protecting What We Work To Provide

ne of the main reasons most Americans work is to provide for our families. At its heart, life insurance protects the security our income provides in the event of an untimely death. Life insurance can be a financial lifeline for loved ones when a spouse or parent is lost. The value it provides can immediately fill a financial void, so the family has the resources they need to move forward unencumbered by financial strain during an already difficult period. As an industry, this is our noble cause, and we must ensure that people are aware of the value our products offer far beyond dollars and cents. Though we should do this year round, September is the perfect time to amplify our message. Not only is it Life Insurance Awareness Month, but also September kicks off with Labor Day, the national holiday that celebrates the American worker. Why is Labor Day so relevant? Labor Day honors the work we do and our freedom to turn our intrinsic capital as human beings into financial capital to support ourselves and our families. Life insurance protects that financial footing we work so hard to create and maintain. Whether deliberate or coincidental, the holiday that recognizes our earnings potential as workers is a perfect match with a monthlong awareness campaign that calls attention to our need to protect it. The challenge faced by many life insurance professionals is helping prospects and clients understand the true value of their human capital over the long term to

properly insure against its loss. Simple calculators available on the internet can provide someone with a general idea of the earning potential of their working years. A worker in their early 30s earning a reasonable salary has the potential to produce cumulative earnings well into seven figures by age 65. This period, the early 30s, is critical to protect. People are typically actively acquiring assets, taking on debt and supporting a family. As such, it is also a time when disability or premature death could create a shortfall that is devastating

Labor Day honors the work we do and our freedom to turn our intrinsic capital as human beings into financial capital to support ourselves and our families. Life insurance protects that financial footing we work so hard to create and maintain. 32

InsuranceNewsNet Magazine Âť September 2019

The Life Insurance Issue • Special Sponsored Section

to the earner’s family. Yet, although life insurance can be critically important, 43% of Americans still don’t own life insurance, or they have only a small amount of group coverage.* In today’s tight labor market, skilled workers are generally aware of the level of salary they can command, and they tend to take advantage of the high demand by switching positions more freely. Workers also understand the need for continued investment in their personal human capital, as demonstrated by the millions of Americans who enroll in adult learning, continued education and development courses every year. This understanding of the need to consistently monitor one’s skills and marketability proves that the American worker has a good grasp of the ways to maintain and enhance the value of their human capital. However, people are falling short of understanding the risks of loss and how to mitigate them. It is our responsibility as life insurance professionals to take the time to help prospects understand the connection between human capital and those risks that can have a devastating impact on a worker’s family. I believe Labor Day and Life Insurance Awareness Month are intentionally aligned in September. The

have a conversation about the need for life insurance. You can start at www.globalatlanticlife.com/liam, our webpage dedicated to Life Insurance Awareness Month.

Life insurance can’t replace the person, but it can replace the paycheck and fulfill a financial plan. ability to harness our talents to provide for our families, prosper and accumulate wealth while contributing to our communities is one of the great privileges of being an American. It’s important to protect that privilege with life insurance. Life insurance can’t replace the person, but it can replace the paycheck and fulfill a financial plan. This Labor Day, as we enjoy the holiday, let’s take the time to appreciate the past, present and future generations of American workers, the stability they provide families and the enrichment they bring to our communities. That includes the life insurance professionals whose job it is to protect those workers and their families. There are many resources available to help you

Dave Wilken President, Life Global Atlantic Financial Group

*2019 Insurance Barometer Study, Life Happens and LIMRA

September 2019 » InsuranceNewsNet Magazine

The Life Insurance Issue • Special Sponsored Section

Big Changes May Be Coming Industry trend: to the FIUL Space High bonus, Allianz can help you stay ahead of the curve high charge

oday, fixed index universal life (FIUL) represents 25% of a $2.7 billion total life insurance market.1 With so much at stake, it pays to stay on top of how this product segment continues to evolve. As a leader in the space and ranked No. 4 among top FIUL carrier sales in the independent channel1, Allianz Life Insurance Company of North America (Allianz Life) has developed lengthy experience with — and a vision for — FIUL trends. Some of the company’s leading experts shared their insights into the current FIUL atmosphere and what may be in store.

What’s next with the Uniform Actuarial Guideline 49 (AG 49)

AG 49 was intended to establish consistency in the methodology used by carriers to determine maximum FIUL illustrated rates. Jason Wellmann, Prior to the guideline, FIUL was SVP, Life Distribution being illustrated by some carriers in excess of 11%. AG 49 was successful in reining in some of these unrealistically high assumptions in terms of illustrated rates, but three years after the guideline went into effect, another trend is emerging. At a recent NAIC Life Actuarial (A) Task Force meeting, a member noted, “There is illustration activity raising red flags.” A key discussion as part of the task force’s illustration subgroup is looking at carriers’ widespread use of performance multipliers on their new products and whether changes to the guideline are needed to ensure clients really understand the risk-reward tradeoffs of these new product designs.2

Why bonuses and multipliers are receiving scrutiny

“FIUL bonuses and multipliers are not new,” said Jason Wellmann, SVP, Life Distribution at Allianz. “To drive or maintain competitiveness of FIUL illustrated values, particularly if carriers are using the same illustrated

How tonavigate navigatenew newdesigns designs How to Understand sequence of returns

More and more products with higher bonuses paid for Consider multiple scenarios with higher charges Determine a client’s risk profile Set proper expectations

Utilize tools and resources 14

§ Benchmarking comparisons § Always show charges ledgers in illustration

rate as the next carrier, per AG 49, we are seeing these bonuses and multipliers increasing from what was offered in the past,” Wellmann added. “These new features are typically not free,” said Corey Luke, 9AVP Life Products Innovation Allianz. For financial professional use only – not forat public distribution. “To increase the bonus or multiplier on a product, you generally need to increase the policy charges as well. “These more expensive products with higher bonuses and multipliers may look great on an illustration,” said Luke, “and Corey Luke, they meet all the regulatory and AVP Life Products Innovation actuarial pricing parameters. But how do we make sure customers really understand the added potential risk of these products?” Most FIUL illustrations assume a flat rate — such as 6%, for example — is earned on a policy every year. If the product has a 15% multiplier on top of that, the actual

2. Meeting minutes. Life Actuarial (A) Task Force, San Francisco, California, Nov. 13–14, 2018. https://www.naic.org/meetings1811/a_la_tf.pdf

InsuranceNewsNet Magazine » September 2019

§ Illustrate multiple interest rates § Index allocation option and loan flexibility

For financial professional use only – not for public distribution.

1. 1Q 2019 LIMRA’s U.S. Retail Individual Life Insurance Sales by Channel with All Splits

§ Use a range of potential income

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Industry trend: High bonus, high charge Generally actuarially sound Simple formula: increase charges -> increase option budget Added option budget used to buy higher bonuses Illustrates well Taking advantage of risk premium being illustrated Question: What happens if the illustrated rate isn’t hit? credit to the policy is 6.9% (6 x 1.15 = 6.9). If the product has a 50% multiplier, the actual credit is 9% (6 x 1.5 = 9). “In reality — and most customers and producers understand this — customers might still average 6% in the end. But in some years, they could receive a unique

Allianz is one of the few carriers that requires the customer to review the charges page of the illustration.

mention how the impact on the policy grows the higher the policy charges go.”

Taking the lead on transparency

“Allianz has always had great concern for a customer’s risk tolerance and recognizing that not all customers are the same,” said Wellmann. “Therefore, Allianz is one of the few carriers that requires the customer to review the charges page of the illustration. Allianz also requires that a customer be provided with a sequence of returns impact on their FIUL policy when loans are illustrated. We believe this approach provides transparency to the customer.”

Getting back to the basics of FIUL

After a careful assessment of a client’s risk tolerance, Luke suggests that financial professionals consider three parts of an illustration to better understand the risk-reward trade-off of their FIUL product. “Start with the maximum illustrated rate to determine the best-case illustrated scenario, then run the illustration at 70% of that maximum rate to see a more conservative scenario,” said Luke. The greater the disparity between these two illustrations, the higher the charges and the greater the sensitivity to sequence of returns risk. To validate the disparity, look at the charges page, which will help explain it. “Considering these two scenarios and the charges page and seeing where various carriers fall can support financial professionals in helping clients select an FIUL policy that is in line with their overall financial strategy and risk tolerance,” said Luke. Providing these tools and direction are some of the ways Allianz crystallizes decades of experience into actionable assistance for professionals who want to help their clients pursue a successful future. Allianz seeks to provide competitive products that offer clients death benefit protection and accumulation potential. Allianz is proud to be a leader in indexed solutions and to use its experience and knowledge to develop unique fixed index universal life products. To learn more and to request your sales material, call the Life Case Design Team at 844.652.8352, or visit www.BestPracticeFIUL.com.

sequence of returns of 12%, 4%, 8% and even 0%, for example,” said Luke. “In fact, statistically speaking, the S&P 500 Index® — perhaps the most popular index in the industry — returns 0% about every four to five years. The impact of that 0% return year and how often it occurs is not usually disclosed in your typical illustration. Not to

September 2019 » InsuranceNewsNet Magazine

The Life Insurance Issue • Special Sponsored Section

Legal & General America’s Supercompetitive Term Options Appeal to Budget-conscious Buyers Stacked Term Riders offer a customizable way to cover clients into retirement and beyond

onsumers are looking for more affordable options for protecting their financial futures. Legal & General America (LGA) responded to that need by introducing up to 40 years of level term life insurance coverage with its new OPTerm 35 and 40 products.

New options for affordable, longer-duration coverage

“Forty-year term policies are appealing for many reasons. One large concern is that more people are refinancing mortgages.1 They may have started with a 30-year mortgage, but the refinance often pushes the debt into the traditional retirement years,” said Patrick Bowen, senior vice president, Distribution, at Legal & General America. “A study from American Financing showed 44% of people between 60 and 70 still have a mortgage in retirement. And 21% of homeowners over 75 still have some type of mortgage debt.2 ”

been favorably received since its debut.3 Consumers may want term coverage not only for increasingly longer mortgages but also for other life events that can be of shorter duration.

Debt and obligations continue beyond age 65

Combined with OPTerm 40, LGA’s Term Riders offer customizable ways to get cost-conscious clients the right amount of coverage, for the right amount of time. “A client may need 40 years of affordable coverage, but the protection need can shrink as certain financial milestones are reached,” said Bowen. “For instance, they may want coverage not only to ensure a mortgage is covered but also to have funds available to pay for college tuition or credit card debt. The key consideration is that some of these needs may disappear over time.” Legal & General America’s term products along with Term Riders offer flexibility and can be customized to

“We love the OPTerm 35 and 40 products and have seen interest intensify for proposed insureds. When consumers understand they can buy long-term, low-cost, guaranteed premium/ death-benefit coverage that can extend beyond the average American’s life expectancy — it’s an uncomplicated sale.” — Insurance Designers of Dallas The survey by national mortgage banker American Financing also found that as many as 17% of those surveyed say they may never pay off their mortgage. Part of a policyholder’s legacy can be to ensure a surviving spouse has the option to do so. “OPTerm 40 can offer peace of mind, knowing a loved one could afford to keep the family’s home, even if something were to happen to the policyholder,” said Bowen. Because it may be two to three times more affordable than a Guaranteed Universal Life (GUL) that’s set up to provide the same 40 years of coverage, OPTerm 40 has

cover those milestones until they are reached. One to three Term Riders in durations of 10, 15 or 20 years may be stacked. Riders drop off and premiums are reduced as each rider’s coverage period expires. “For instance, a client may be worried about the future of a child faced with a six-figure college bill. Tuition and room and board costs are increasing faster than the rate of inflation,” said Bowen. “But once the child graduates and the tuition has been paid, the need for that portion of their life insurance is gone. Using a Term Rider to cover that limited event for a shorter duration provides a customized solution.”

1. Over 40% of all mortgage applications are refinancing an existing loan according to Mortgage Bankers Association, 2018. 2. Consumer Financial Protection Bureau Report 2017. 3. GUL illustrations run as of March 29, 2019. OPTerm 40 is a term product that provides level term coverage for the initial term period. Premiums increase annually thereafter to age 95, at which time coverage ceases. Unlike GUL, OPTerm does not provide permanent coverage, flexible premium or potential cash value.

InsuranceNewsNet Magazine » September 2019

The Life Insurance Issue • Special Sponsored Section

“OPTerm 35 and 40 are being favorably received by our agents. Our marketers are quoting them increasingly, and we already have made numerous sales. We think the biggest advantage is that the client has many more years in which to convert as compared with the typical term. We are finding the underwriting is very consistent with all term periods, making it easier to explain offers to agents.” — Levinson & Associates, Inc. Bowen also points out that for some clients, a blend of permanent and term insurance using the OPTerm 35 or 40 may be a good solution. “They may want a certain amount of lifetime coverage, but the premium for permanent insurance can cause sticker shock. Using the two together may be the right thing to do to meet their needs at a price they are more comfortable with.” Legal & General America also sees the long-term appeal of its OPTerm products with millennials, who are often more budget conscious. “We are committed to the term market, and we’ll continue to innovate to meet customer needs,” said Bowen. “Legal & General America is a very solid company, with a long history of great service. We’re building on that foundation not only with these latest product offerings but also with plans to create a digital experience that appeals to all clients, including a younger demographic who want 24/7 convenience and online options.” The Term Riders stacked on the base policy also offers a solution that can be used to cover other education costs throughout a child’s life, including private primary and secondary school as well. “Ensuring enough coverage up through a college graduation for each child in a family is often a priority for policyholders,” said Bowen.

OPTerm 40 and Term Riders can offer multiple benefits for cost-conscious clients

A life insurance solution: the Term Rider advantage

Stacking term coverage can help your clients purchase the right amount of protection for the right length of time and may be the most cost-effective way to buy life insurance. Are you interested in helping your client customize their life insurance coverage to manage a lifetime of milestones? Find out whether a Term Rider solution may be the right strategy at www.FirstTo40.com.

Stacking Term Riders on a base policy offers other benefits over buying individual policies to achieve the same total of coverage. “Term Riders can give your clients flexibility while saving them money by avoiding additional policy fees. Multiple individual policies and associated fees can really add up, making Term Riders a great option. And riders with the base policy means one easy payment with consolidated billing.” Legal & General America life insurance products are underwritten and issued by Banner Life Insurance Company, Urbana, Maryland and William Penn Life Insurance Company of New York, Valley Stream, NY. Banner products are distributed in 49 states and in DC. William Penn products are available exclusively in New York; Banner does not solicit business there. The Legal & General America companies are part of the worldwide Legal & General Group. OPTerm policy form # ICC18-OPTC and state variations. In New York, OPTerm policy form # OPTN-NY. OPTerm premiums are guaranteed to stay level for the initial term period and increase annually thereafter. Premiums quoted include $60 annual policy fee. OPTerm does not provide permanent life insurance coverage. Premiums based on preferred plus non-tobacco and standard plus non-tobacco underwriting classes. OPTerm 40 rates are as of 05.13.19. OPTerm 35 and 40 are not available in New York. Term Riders issue ages vary from base plan and coverage ceases at the end of the term duration. Two-year contestability and suicide provisions apply. Policy descriptions provided here are not a statement of contract. Please refer to the policy forms for full disclosure of all benefits and limitations. 19-200

September 2019 » InsuranceNewsNet Magazine

The Life Insurance Issue • Special Sponsored Section

Is Whole Life the Missing Piece in Your Client’s Portfolio? Living benefits can help them fulfill their goals By James Lake, Head of National Sales at The Guardian Life Insurance Company of America®

t its core, whole life insurance offers a way for policyholders to protect their family upon their passing — via the death benefit. But whole life insurance could also be a living insurance, designed to provide benefits to your clients across the travels and trials of their lives and legacies. Guardian Life is helping financial professionals work with clients to explore the whole perspective — the value of whole life and the many ways it can support additional financial goals as an integral part of a holistic financial portfolio. “Beyond the death benefit, it’s important to help clients consider features — such as guaranteed cash value1 — that can be applied toward meeting their goals, which might include a new home, education, retirement, charitable giving or funding a business,” says Richard M. Weber, MBA, CLU, AEP (Distinguished), managing member of Ethical Edge Insurance Solutions, LLC. Since many working Americans identify their top life priorities as protecting their family, having enough money in retirement and educating their children, owning whole life insurance allows them the advantage to access a wide range of benefits to support those priorities.

Whole life insurance can be an essential piece of the retirement puzzle

Whole life can help address retirement challenges such as the unpredictable future of Social Security, health care costs and tax rates. Additionally, whole life insurance has the potential to increase your client’s income stream in retirement by providing access to cash value — tax-free (helping to reduce/eliminate their retirement income gap). Some key points to remind clients: The cash value accumulates over the life of the policy4; it’s insulated from market fluctuations with no contribution limits; and policy loans can be taken against a whole life policy at any age, for any reason, without penalty or “pre-approval”, as long as there is sufficient cash value in the policy.

InsuranceNewsNet Magazine » September 2019

“There’s no substitute for life insurance when it comes to protecting loved ones. But you can also use life insurance to build lasting assets,” says Weber. “Many people use the living benefit of whole life as a source for cash because they’ve built a permanent asset to help live life to the fullest.”

Lifetime Benefits Checklist Does your client have these priorities? • Having access to guaranteed income apart from Social Security in retirement. • Building and having access to the cash value for any reason, including college expenses, starting a business or paying off a mortgage early.2 • Creating a long-term plan for achieving financial objectives for themselves and their family members. • Protecting their family financially in case of untimely death or the inability to work. • Having options to cover unexpected expenses without incurring tax liability.3

Clients can secure a loved one’s financial future through the gift of life insurance

The lifetime benefits of whole life insurance also offer opportunities to help family members supplement higher education costs and fulfill their financial obligations. • An option for college funding: Rising college costs are a concern for most families. These days, a six-figure bill after four years of college has parents and grandparents searching for solutions. Gifting a whole life policy can efficiently transfer wealth within a family while the insured is still living, and can be structured to pay a known death benefit amount upon the insured’s death.

The Life Insurance Issue • Special Sponsored Section

The Living Benefits of Whole Life The basics your client should know

Guarantees

• Death benefit protection for your client’s entire life. • Cash value growth, regardless of market performance. • Level premiums that will never increase.

Dividend Potential

• When paid, dividends can add significant value to the participating policy.

Access to Cash Value

• Cash value can be accessed through loans and withdrawals.

Tax Advantages

• The policy typically is not taxed on cash value growth, loans or death benefits. “Using a whole life policy in conjunction with other popular college savings options offers unique opportunities to support college funding,” says Weber. “For instance, eligibility for financial aid is typically not affected by the existence of a life policy, and the policy’s cash value can start building before a child is born. “There are considerations for these strategies, such as the length of time it takes to accumulate the necessary cash value and that excessive withdrawals and loans can cause the policy to lapse,” he adds. Life insurance as part of a wealth transfer plan may provide several advantages and can provide a lasting gift, from helping defray future college costs to helping them pay for a wedding or a new home. Guardian Life offers marketing materials to educate clients on the versatile ways they and loved ones can benefit from this product.

The benefits of being mutual

“Whole life insurance policies are long-term financial instruments. The company chosen is as important as the financial product selected,” says Weber. Guardian’s focus on the long term prioritizes policyholders, which is one key benefit of owning insurance with a mutual company. Because Guardian is a mutual life insurance company, participating life policyholders share in the company’s results, in part, through the payment of annual dividends.5 Although dividends are not guaranteed, Guardian Life has paid a dividend every year since 1868. When paid, dividends can add significant value to the participating policy.

The value of whole life

Your client might not know that in addition to the death benefit, life insurance can provide so much more — namely powerful lifetime benefits. Although historically thought of as an expense, life insurance is, in fact, the opposite. Life insurance is an asset — a good one. The additional benefits of a whole life policy beyond death benefit protection can help your clients achieve their financial stability wish lists. It’s all about protection coming first, being full, and lasting forever. Whole life can serve more than one purpose: protection, college planning, tax-free access via a loan (qualified plans do not allow this until the age of 59 ½), supplemental retirement income, and in some cases could provide long-term care support. It’s a permission slip for you to have access to additional income while still leaving a legacy. Find out how to get the conversation started and access an infographic you can send to your clients at www.WholeWithGuardian.com.

1) All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. 2) Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policyholder is under 59½, any taxable withdrawal may also be subject to a 10% federal tax penalty. 3) Guardian, its subsidiaries, agents and employees do not provide tax, legal or accounting advice. Consult your tax, legal or accounting professional regarding your individual situation. 4) Some whole life policies don’t have any cash values in years one or two. Whole life insurance should be considered for its long-term value. Consult with your Guardian representative and refer to your whole life insurance illustration for more information about your particular life insurance policy. 5) Dividends are not guaranteed. They are declared annually by Guardian’s Board of Directors. Guardian® is a registered trademark of The Guardian Life Insurance Company of America®. 2019-82826 (Exp 07/21)

September 2019 » InsuranceNewsNet Magazine

The Life Insurance Issue • Special Sponsored Section

How to Capitalize on the SmallBusiness Insurance Market

here are roughly 28 million small businesses in the U.S., a staggering 22 million of which are individually owned and operated. Roughly 90% of those are currently insured with no cash-value term policies — presenting a situation that Quinn Ellis, the head of business development for Life & Annuity Masters Private Client Group, describes as one of the greatest sales opportunities a life insurance agent will ever face. In his role for this seasoned premium financing and business planning firm, Quinn is on a mission to teach motivated agents strategies to convert those millions of term policies into wealth-building and assetQuinn Ellis, Head of allocating indexed universal life Business Development plans, all for about the same or even less than business owners might be paying now. In the Q&A section that follows, you’ll discover more about this virtually untapped market, what strategies work best and how you could get started closing some of the largest cases of your career. Q: Why should an agent consider entering the small-business market? Quinn: For one thing, with 22 million sole proprietorships in the U.S., the opportunity to work with business owners is enormous. Businesses are special because they’re about more than just a single life insurance policy, estate plan or protecting a family. With businesses, you have multiple case opportunities you can close at

That’s in addition to the liability coverage businesses inherently require. Most loan obligations stipulate life insurance policies. If you have a buy-sell agreement, which has to be funded, the most cost-effective way to do that is through life insurance. Q: What’s the problem with buying term policies for businesses? Quinn: It’s true that a lot of the policies sold in the business marketplace are for term insurance. And the reason is because of the cheap premiums. But if you sell a term policy to a business, you’re doing your client a disservice. The fact is that many times a permanent policy makes a lot more sense. And if you package it right, it can be just as affordable as those low-premium term policies, with numerous benefits that outweigh the costs. For example, if someone buys a $5 million policy today to cover their business’s liability, and the business grows to $10 million — as an owner hopes it would — what do they do? Now they have to buy another term policy instead of simply structuring a permanent policy’s death benefit to cover that expected growth. And then there’s the perk of adding cash value to the business that can be used if any need arises, be it a health emergency or expansion or simply to pass a taxfree bonus off to an executive. Also, when you look at the financials, that cash value goes on the balance sheet of the company as an asset as well, which can help the owner — especially if the goal of the balance sheet is to provide an evaluation of the business or to acquire additional financing. Term policies don’t have any of that. Not only does the policy show up as an expense, but when it comes to term, you’re just renting insurance.

... if you sell a term policy to a business, you’re doing your client a disservice. the same time — like buy-sells, key man insurance, business succession, estate equalization and supplemental retirement plans. It’s a situation that you simply won’t get when working with an individual.

InsuranceNewsNet Magazine » September 2019

Q: Just how much more expensive are these policies, that business owners shy away from them?

Quinn: What a lot of people don’t understand is that you can structure permanent policies certain ways, where the out-of-pocket expense for the client would be similar to what he or she is already paying for a term policy.

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One option is to offer stepped-premium design. An even better option is to utilize premium financing with businesses, so instead of the policy owners paying the premium, the bank loans the premium to the business, and the business just makes interest payments to the bank. If that’s structured properly, those payments are

with on a regular basis — if ever. But they all deal with CPAs. The CPA partnership is great because CPAs help clients save money on taxes today, and agents and advisors can come in and educate clients on how to save money on taxes 15 years down the road. It’s about showing them how to generate tax-free income, provide

For the business market, I’d suggest spending more time networking with CPAs than with attorneys. Why? Because not every business has an attorney they speak with on a regular basis — if ever. But they all deal with CPAs. very similar to what you’d be paying for a term premium, except now the business has all the benefits of a permanent policy. At Life & Annuity Masters, we’re specialists in that field. We handle these cases all the time and take a client’s policy down to a concierge level, assessing his or her specific needs and assets, designing a policy that will perform to the strictest standards, and designing a loan for them that fits their capabilities. And the agents connecting us with businesses aren’t just helping those small businesses get infinitely better coverage for similar costs, they’re also benefiting from the massive commissions that come with premium financing cases, oftentimes keeping 90% of the commission. I am not aware of any other company in the industry that does that for agents. Q: Just how difficult is it for an agent to break into the small-business market? Quinn: It’s actually pretty easy. The best way to develop an agent’s centers of influence, from my own experience, is to join every chamber of commerce and estate planning council possible, network with CPAs and attorneys, and reach out to property and casualty firms. For the business market, I’d suggest spending more time networking with CPAs than with attorneys. Why? Because not every business has an attorney they speak

supplemental retirement income, and access tax-free dollars in case of some type of long-term care need or critical illness. For business owners, these perks are absolutely huge. Q: How can an agent or advisor learn more about tapping into the small-business market? Quinn: Since there are a lot more options available to small businesses and ways for agents to help them, we put together a useful visual aid that breaks down which categories of business best match what types of strategy, as well as a case study that details your most common scenarios. That’s all available — 100% free of charge — at www.WriteBusinessInsurance.com. Life & Annuity Masters is a founding member of AIMCOR Group, an industry-leading National Insurance Marketing Organization that focuses on enabling new distribution, engaging consumers, and delivering financial security to American families across all ages, income levels and cultural backgrounds. Simply put, Life & Annuity Masters and AIMCOR are focused on building what needs to be there as opposed to protecting what has been there.

September 2019 » InsuranceNewsNet Magazine

the Fıeld

A Visit With Agents of Change

B O X E S A N D C U B E S

By Susan Rupe

How GUY BAKER views the industry as a Rubik’s Cube waiting to be mastered.

InsuranceNewsNet Magazine » September 2019

uy Baker was becoming frustrated as he tried to educate the five members of a CPA firm on the value of buying life insurance to fund a buy/sell agreement. The CPAs were having a difficult time understanding what he was attempting to explain to them. The whole presentation could have imploded, but Baker was resourceful. He asked the CPAs, “Do you guys really know how life insurance works?” They looked at him blankly and said no. “So they had a tablet on the wall and I walked over to the tablet and taught them CLU Part 1,” he recalled. “And when I was finished, they said, ‘OK, let’s do it!’ I said, ‘Do what?’ And they said, ‘Buy the insurance!’” “And I thought, ‘Hmmm, maybe there is something more to this than I think.’” Soon afterward, Baker had lunch with a life insurance prospect and taught her the same concept that won the sale with the CPAs. Within five minutes, she agreed to buy the coverage. And so The Box was born. Baker took his presentation and turned it into a booklet called The Box, a guide to the basic mathematics of life insurance. The Box has sold 500,000 copies. Its main concept is that life insurance is like a box into which you put money. The amount of money you put in depends on factors such as mortality costs, interest rates and life expectancy. The Box is a way of explaining how life insurance is priced and what actuaries consider when setting premiums. Baker said he has used The Box as part of every life insurance presentation he has done for more than 35 years. The Box is one of five books Baker has written during his 53 years in the business. Baker, 74, is the managing director of BTA Advisory Group and Wealth Teams Alliance in Irvine, Calif. He is the recipient of the 78th annual John Newton Russell Memorial Award, the highest honor presented by the National Association of Insurance and Financial Advisors to a living individual who has rendered outstanding services to the institution of life insurance. Baker will receive the award at the NAIFA annual conference in September.

BOXES AND CUBES IN THE FIELD

In addition to working in the financial services industry for more than five decades, Baker served as president of the Million Dollar Round Table in 2010 and was MDRT Foundation president in 2000. He has also been a continuing qualifying member of the MDRT’s Top of the Table since 1977, one of only 25 agents to achieve this distinction. Baker credits his success in the business to several major factors: his passion for helping people figure out what he calls “the Rubik’s Cube of finances,” focusing on problems instead of focusing on solutions or products. And also employing a tactic from his days of playing high school football.

‘Like A Rubik’s Cube’

Baker was about to begin his senior year at McKenna College in Claremont, Calif., in 1966, when Pacific Life recruited him for a college training program. He was one of 25 rising seniors who went through a training program in the summer and then sold insurance during their last year of college. Baker was the top salesperson in the group in terms of the number of lives covered, so Pacific Life asked him to train the next group of student-agents during the summer after he graduated. “That was my summer job before I started graduate school,” he recalled. Baker went on to earn an MBA from the University of Southern California. He continued to recruit and train students for Pacific Life while he was in graduate school. After he received his MBA, Baker interviewed for a number of jobs but discovered that the jobs he sought paid much less than what he could make in the insurance business. His early success in selling insurance made him realize he had found his life’s work. “I found I enjoyed helping people think about their future,” he said. “I had a passion for it and I was good at it. I looked forward to every new engagement because it was like a Rubik’s Cube — you had to figure out how to put all the pieces together.” Baker often compares giving financial advice to solving Rubik’s Cube, although he admits he has never been able to solve the actual Rubik’s Cube. “It’s too complex,” he said. “But I think it is a great analogy because it is so complex and the

Baker’s Dozen 1. Establish a consistent savings plan. 2. Control expenditures. 3. Only use debt for leverage. 4. Set lifetime goals and investment objectives. 5. Make your house a profitable venture. 6. Guarantee your family’s security. 7. Don’t be greedy. 8. Invest wisely, and don’t spend the money that money makes. 9. Study how others have made money. 10. Invest in who you know and what you know. 11. Invest regularly. 12. Constantly review your progress and your goals. 13. Wealth is a state of mind. From Baker’s Dozen: 13 Effective Principles For Financial Success, Guy Baker and Ken Harris, 1994, Professional Sales & Marketing Ltd.

movement of one color has an impact on the rest of the colors and alignment.” As Baker progressed in the business, he made the move from what he called “kitchen-table sales” to the business market. Success began to build, and the business market remains a focus of his practice today.

‘Two-A-Days’

Baker experienced some difficulties in his early years in business. He thought back to when he was a high school football player in San Bernardino, Calif., a desert community where the heat affected everyone’s lives. “Back then, we used to have what we called ‘two-a-days,’ where we would practice early in the morning before it got too hot outside and then we would practice again late in the day when it started to cool off,” he said. “So I adopted that concept for my business, where I would find two people every day who would talk to me about financial

services, insurance or whatever. They didn’t count unless I actually asked them to talk with me about insurance. If I asked them to have coffee with me, it didn’t count. They had to know why I was coming and what I wanted to talk about. And if they said, yes, they would talk to me, I counted it as one of the two for that day. That was the way I kept myself on track. I didn’t pay attention to any other metrics. I just knew if I got two people a day to say yes to talking to me, that I would have the activity I needed to be successful.” Today, Baker said, “I have so many things coming at me from so many different directions, I really don’t have to spend time finding things to do — they find me. But I like to keep track of the fact that I’m on goal and I’m headed where I need to be.” Baker began to make a shift from life insurance sales to money management in the early 1990s. By 2012, it had become a major part of his practice. His 16-person agency has two main areas of interest, Baker said. “One is working with business owners, helping them transition their business, business succession, estate planning and retirement, attraction and retention of key people. That includes 401(k)s, pension plans, executive compensation.” The other is asset management. “So when they sell their business, someone has to manage those assets. We help clients figure out how to answer the three great questions no one can answer about retirement: What’s my number? How much do I have to save to get to my number? How do I invest it so I make sure I get my income to my number?” Baker serves the high-net-worth market, individuals who have assets of between $2 million and $50 million. Reaching this market and being successful with it, are two separate issues, he said. “Reaching this market is done mostly through word of mouth and referrals,” he said. “When you’ve been around as long as I have, people either know you or they don’t. And if they know you, you have a chance of working with them. “As for being successful with them, you need to learn a consulting process. I think that too often in the insurance industry, people are trained to be product-driven, solution-driven. I had to train myself to be problem-driven.” Baker’s clients have multiple financial

September 2019 » InsuranceNewsNet Magazine

IN THE FIELD BOXES AND CUBES

It’s like a Rubik’s Cube. And the thing that’s so attractive about this industry for me is the complexity of those problems and the ability to sort them out and figure out how to put an integrated solution together. problems for him to work through with them, and he said that’s the fun part of his practice. “As I said, it’s like a Rubik’s Cube. And the thing that’s so attractive about this industry for me is the complexity of those problems and the ability to sort them out and figure out how to put an integrated solution together,” he said. “So I think it’s the consulting integration process that makes it very interesting.”

A Lot Of Changes

Baker said the two biggest changes he has seen in the business during the more than half-century he has spent in it are the expanding variety of life insurance products in the market and the ever-shifting tax laws. “When I came into the business, the only permanent policy available was whole life,” he said. “Then it shifted to variable life, universal life, indexed UL. And now IUL is getting a lot of variations. I think understanding the complexity of all those products and how best to fit them to your clients’ needs is an important component when you’re dealing with life insurance.” As for taxes, “we’ve been in and out of estate taxes, in and out of income taxes,” Baker said. “So you must constantly keep up with the tax laws and helping people keep in perspective that what the tax laws are today are not what they are going to be the future.” In addition to his passion for the complexities of finance, Baker is driven to 44

educate others through his writing. His first book, Baker’s Dozen, is a compilation of the 13 principles that he learned at a young age that helped him manage his own personal financial circumstances. “I wanted to write them all down because I thought they were principles that would help anyone who wanted to learn them and apply them,” he said. “I thought it was important to document my own path and the things I had learned, so I at least had something to refer back to.” The follow-up book to Baker’s Dozen is Market Tune-Up, which Baker described as “all the things I learned and changed in my business to make Top of the Table 42 times.” Another book, Why People Buy, “is really the heart of the selling process,” Baker said. “It’s important for people in our business to understand that we sell problems, not solutions, and the buyer has a process that we need to understand and follow.”

Two Innings Ahead

Scott Brennan, who was MDRT president in 2013 and served on the MDRT Executive Committee with Baker, described him as having “the brain of an engineer applied to the life insurance business. “He can take a problem and break it down into three or four separate components,” Brennan said. “They say really great baseball managers always think two innings ahead. That’s how Guy operates. He is always ahead of the curve. He thinks deep, big, great thoughts, and

InsuranceNewsNet Magazine » September 2019

he is incredibly bright.” Baker and his wife, Colleen, have been married for 52 years. They are the parents of four children: Stacy (deceased), Todd, Andrew and Ellen. They have 10 grandchildren and will soon have six great-grandchildren. Todd and Ellen work with him in his practice, and Todd’s son and daughter work there as well. Baker loves to play golf and play the piano, and is active in his church. In addition, he obtained a Ph.D. in financial planning and investments from The American College in 2018. He was part of the college’s first cohort in that doctorate program. Looking ahead, Baker said he has no plans to retire soon, but he is laying the groundwork for his practice to be successful after he does retire someday. “I’m building a team that will be able to step up and take this business and run with it. So that’s my primary objective,” he said. “My secondary objective is to build retention income for that company so they don’t have to worry about how they will pay the overhead every month and they can concentrate on growing the business.” Baker has been a leader in several industry organizations, and he said associations must do a better job of collaborating and building on each other’s successes if they are to survive. “Associations need to do a better job of defining why they exist and why they are of benefit, and then use that to sell their value proposition to sell their membership.” Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback. com. Follow her on Twitter @INNsusan.

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AALU, GAMA Set To Merge Two industry associations announced they will join forces to create a new organiza-

tion representing the life insurance and financial services profession. The Association for Advanced Life Underwriting and GAMA International said they will merge into a new organization with a new name by June 2020. This new organization will be the first of its kind in the industry, M a rc Bonnie Godsman C a din representing all distribution channels, the groups said in a news release. The association will represent and serve the entire financial security profession, regardless of role, marketplace or experience. It will be built on three pillars: elevating the profession, leadership and professional development and advocacy. Marc Cadin, who took over as president and CEO of AALU in September 2018, will serve as CEO, and Bonnie Godsman, who has served as CEO of GAMA for five years, will serve as president.

SEARS RETIREES’ LIFE INSURANCE PAYOUTS COULD BE ONLY $135

You spent your working years toiling for what used to be the nation’s largest retailer, and what do you get? In the case of Sears retirees, it could be a life insurance payout of only $135. Sears filed for court protection last year and sold its stores and most of its assets to a unit of ESL Investments in January. The deal left behind the Sears estate, which is responsible for settling old debts, including the life insurance plan. The life insurance was a big deal to the retirees, with Sears providing about 29,000 former workers with death benefits ranging from $5,000 to $14,500. A smaller group of retired senior executives had life insurance policies with death benefits between $356,000 and $2.7 million. The estate terminated the retiree plan in March, although participants had the opportunity to convert the coverage to individual life insurance policies at their own cost. However, many of the retirees are u n a b l e to obtain new coverage now, because they are too old.

DID YOU

KNOW

INDIVIDUAL LIFE COMBO PRODUCT PREMIUM DOWN 2% IN 2018

Individual life combination products grew in terms of new premium between 2015 and 2017. But new premium for those combo products dipped 2% to $4.3 billion in 2018, LIMRA reported. Despite the drop in premium, 404,000 were policies sold in 2018, a 2% increase over the previous year. In 2018, UL combination products represented 27% of the overall U.S. individual life insurance market. LIMRA analysts said the decline in total premium is a result of more companies shifting to recurring premium options, with 93% of policies sold in 2018 paid for through recurring premium instead of a large lump sum. On a product level, whole life combination premium experienced the largest growth in 2018, up 34%, compared with 2017 results. WL held 27% of the combination market in 2018, up 7 percentage points from 2017. Variable universal life (VUL) combination premium also improved, growing 5% in 2018. VUL’s market share remained steady at 5%.

QUOTABLE There is no age where it’s wrong to have life insurance. — Jim Scanlon, senior research director at LIMRA

MORE ACQUISITIONS IN THE LIFE INDUSTRY

Acquisitions continue rolling through the life insurance industry. Here’s the rundown on two of them. AmeriLife Group, which markets and distributes life and health insurance and annuity products, acquired a majority interest in Brookstone Capital Management, a registered investment advisory firm. Brookstone provides fee-based asset management services. The acquisition creates “one of the largest independent marketing and RIA organizations in the U.S.,” AmeriLife said in a news release. The combined organization will have more than $3.5 billion in annual life, health and annuity premiums and $2.7 billion in assets under management. Guaranty Income Life, an affiliate of Kuvare US Holdings, will acquire Lincoln Benefit Life. The deal is awaiting approval from regulators and is expected to close by the end of the year. LBL will become the third operating U.S. life insurance business acquired by Kuvare since 2016. It will join Guaranty Income Life Insurance Company, with headquarters in Baton Rouge and United Life Insurance Company, located in Cedar Rapids. Including Kuvare’s Bermuda-based reinsurance firm, Kuvare Life Re, upon closing the Transaction, Chicago-based Kuvare will have pro forma consolidated assets exceeding $13 billion.

82% of Americans have a strong understanding of the primary need for life insurance. Source: LIMRA

InsuranceNewsNet Magazine » September 2019

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Mind Your Mouse Clicks: DIY Estate-Planning War Stories It takes just one wrong click to make a mess out of an estate plan.

By David Szeremet

o-it-yourself estate planning is officially a thing. Thanks to the internet, everyone has the ability to draft wills, trusts and a variety of other legal documents. Many documents can be produced for less than $100, requiring only a few mouse clicks and filled-in blanks. The lure of simplicity, speed and affordability is appealing. It’s no wonder LegalZoom, the largest online legal document provider, was valued at $2 billion in 2018, according to Bloomberg. That growth has been nothing short of amazing when you consider Forbes reported LegalZoom launched 48

in 1999 with a $1 million initial capital investment — not bad for a self-service business model. As an advanced-planning attorney, I review legal documents in conjunction with a client’s consultation with a financial professional concerning the potential uses of life insurance. Over the past decade, I have reviewed more than 2,000 estate-planning legal documents, and I can report that the DIY revolution is in full swing. I have seen a significant increase in DIY estate-planning documents crossing my desk. It has easily been a five-fold increase. I have also seen an increase in estate-planning glitches. When it comes to DIY estate planning, I have two words of wisdom: User beware. A few clumsy mouse clicks can derail an otherwise sound estate plan and adversely affect life insurance planning. Don’t believe me? Read on to see five real DIY examples from 2018 and 2019 (with names changed to protect the clumsy).

InsuranceNewsNet Magazine » September 2019

One: “I love me.” This mistake is one of the greatest hits of DIY planning. It goes hand-in-hand with simple wills — where both spouses want to leave everything to each other. It goes like this: John’s will: I leave everything to my wife, Jane. Jane’s will: I leave everything to my wife, Jane.

This appears to be a cut-and-paste job gone wrong — unless Jane subsequently marries someone named Jane. A simple will is supposed to be simple. Needless time, trouble and money will be expended to fix an apparent scrivener’s error like this. Two: “If it’s free, it’s for me.” Bert personally owns a life insurance policy and had been using its cash value as a rainy day fund. As part of his estate plan,

MIND YOUR MOUSE CLICKS LIFE he intended to swap the life insurance into his irrevocable grantor trust in exchange for low-basis stock held in the trust. The swap would remove the life insurance from Bert’s estate without exposure to the pesky estate tax three-year rule, and the stock would receive a stepped-up basis at death — creating tax savings on both sides of the swap. Bert recently had a stroke and is incapacitated. But he planned ahead. Two years ago, he downloaded a free durable power of attorney form from a nonprofit organization that focuses on assisting the elderly. The POA specifically includes the power to change ownership of his life insurance. Because it is durable, his attorney-in-fact (the power holder) could have completed the swap. Unfortunately, Bert entered his name in the blank space designated for the attorney-in-fact. As a result, the insurance company cannot honor the form, and the swap may not take place. Three: “Failure to click.” I see this one several times a year. Marta created a will leaving her entire probate estate to her husband. It took her only 20 minutes, and the cost was a mere $79. But Marta forgot to click on the blank space for her executor. Naming an executor is kind of a big deal because the executor is the personal representative responsible for handling Marta’s final affairs and distributing her probate assets. In Marta’s case, the website address is the default space holder printed in her will. I have yet to see a probate court approve a website as an executor. Her heirs are now stuck with hoping the court will fix things. Hope is not a plan. Four: “The default setting.” Angie, a single parent, has a 6-year-old boy, Lucas. Her will includes a standard trust for minors. It provides income and principal to Lucas until he reaches age 21, at which time the remaining trust assets will be distributed to him. Angie recently met with her life insurance advisor and applied for a $1 million, convertible 20-year term life insurance policy. It will be payable to the trust. Lucas, who has autism, is an individual with special needs who may need lifetime support that could include government benefits programs. Angie’s documents, which are like some generic

online forms, do not include any “special needs” provisions, so Lucas may be at risk of losing (or never qualifying for) valuable support. Five: “Set it and (don’t) forget it.” Cyrus and Trisha created their wills and trusts when the estate tax exclusion amount was $2 million. They learned how a credit shelter (bypass) trust could reduce estate taxes by allowing each of them to use their estate tax exclusion amount. This would allow them to “double dip” on estate tax savings. At the time, they correctly clicked the option to fund the bypass trust up to the federal estate tax-free amount and then pass the rest to the marital trust. They properly executed the documents and then stored the documents in a safe place. Fast forward to 2019 when the federal estate tax exclusion amount is $11.4 million per person, $22.8 million for a married couple. A recent examination of Cyrus’s probate estate revealed that he has $4 million in separate assets and a $2 million life insurance policy payable to his children from a previous marriage. At death, under current tax laws, all of his separate assets would pass into the bypass trust, and the life insurance would pay to his children. In other words, all of it would bypass Trisha — in essence, disinheriting her. This is not what Cyrus intended. This mistake would likely force Trisha to lawyer up and make a trip to probate court in order to try to fix things. Lesson: Don’t expect a DIY drafting program or website to update documents or schedule checkup meetings. Cyrus and Trisha are on their own. These examples are not intended to dissuade the use of online drafting services. DIY estate planning is not going away, nor should it. But clients must understand that words have meaning and mouse clicks matter. These drafting mistakes and missteps could be avoided if clients involve their own attorneys in the process. Please be careful in cyberspace! David Szeremet, JD, CLU, ChFC, is second vice president, advanced planning, at Ohio National Financial Services. David may be contacted at david.szeremet@ innfeedback.com.

September 2019 » InsuranceNewsNet Magazine

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New York Annuity Rules Take Effect

New regulations mandating a best-interest standard in annuity sales went into effect in New York on Aug. 1. The regulations take the state’s oversight of annuities sales a step further than New York’s previous suitability standard. The law requires that financial services providers consider the interests of the consumer above everything else when making the annuity recommendation. In addition, the regulations place disclosure and training requirements on broker-dealers and insurers that sell annuities, and forbids annuity sellers from calling themselves advisors unless they are licensed as such. Several states, including Nevada and New Jersey, have proposed some form of fiduciary rules to pertain to all investment advisors and broker-dealers in their state.

HOW INTEREST RATE CUT HITS RETIREES

REGULATORS DISCUSS ‘PRUDENCE’ IN ANNUITY SALES

State insurance regulators aim to tentatively finalize a standard for annuity sales by the National Association of Insurance Commissioners’ Fall Meeting in December. Members of the group debated whether to add “prudence” to the model law. The difficulty is finding the proper landing spot between the current suitability standard and a full fiduciary standard. One question the commissions are trying to answer is: Should the care obligation of a producer include “prudence”? More conservative regulators are opposed to adding the word. The Securities and Exchange Commission omitted “prudence” from its Regulation Best Interest, Iowa Insurance Commissioner Doug Ommen noted. DID YOU

KNOW

When the Federal Reserve cut interest rates this summer, many retirees said, “Ouch!” When rates go down, generally so do yields on things such as fixed annuities. Here is how the rate cut could affect annuities. Rates on fixed annuities will likely fall, although interest rates are already at historic lows and the Fed’s interest rate cut might not feel like much of a difference. Although fixed annuities provide protection from fluctuations in interest rates, those rates would be lower if consumer lock them in now. But indexed annuities might reflect that rate reduction eventually, said Jeff Levin of BluePrint Wealth Alliance. But that impact could take more than a year to be felt.

Oof, my annuities...

United Technologies is the only Fortune 100 U.S. company that defaults new hires into an investment option that includes a lifetime income approach. Source: MarketWatch

InsuranceNewsNet Magazine » September 2019

I think New York state is essentially getting closer to calling for a fiduciary (standard). — Richard Roth, a founder and partner at The Roth Law Firm

ANNUITIES AFFECT RETIREE SPENDING

Four out of 10 older Americans spend more money than they make, and owning an annuity affects that spending pattern, according to the Employee Benefit Research Institute.

EBRI research found the availability of a pension or annuity affected seniors’ spending patterns. Only 34% of households with pensions or annuities spent more than their income while 46% of households without those items spent more than their income in 2015. For single and retired individuals, the average spending was $5,000 lower than income, but the median spending outstripped median income by $3,000. Retired married couples spent only 80% of their income in 2015, and those households where one of the spouses was still working spent only 45% of income.

INSURANCE INVESTMENTS RETIREMENT

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1. Subject to the claims paying ability of the issuing life insurance company. Please keep in mind that the primary reason to purchase a life insurance product is the death benefit. Product features and availability may vary by state. Life insurance products contain fees, such as mortality and expense charges (which may increase over time), and may contain restrictions, such as surrender charges. One could lose money in these products. Guarantees are based on the claims paying ability of the issuing insurance company. These materials are for informational and educational purposes only and are not designed, or intended, to be applicable to any personâ&#x20AC;&#x2122;s individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. Securian Financial Group, and its affiliates, have a financial interest in the sale of their products.

Insurance products are issued by Minnesota Life Insurance Company in all states except New York. In New York, products are issued by Securian Life Insurance Company, a New York authorized insurer. Minnesota Life is not an authorized New York insurer and does not do insurance business in New York. Both companies are headquartered in St. Paul, MN. Product availability and features may vary by state. Each insurer is solely responsible for the financial obligations under the policies or contracts it issues. Securian Financial is the marketing name for Securian Financial Group, Inc., and its affiliates. Minnesota Life Insurance Company and Securian Life Insurance Company are affiliates of Securian Financial Group, Inc. Policy form numbers: ICC18-20153, 18-20153 and any state variations. For financial professional use only. Not for use with the public. This material may not be reproduced in any way where it would be accessible to the general public.

ANNUITY

Annuities: Strategy Results of a recent study show advisors and consumers have different opinions of guaranteed income products.

By Susan Rupe

f you want to convince someone of the need for an annuity, position it as part of a strategy instead of merely presenting it as a product. That was one takeaway for advisors after the fifth annual Guaranteed Lifetime Income Survey showed a gap between what consumers think of annuities and what advisors are telling them about retirement income solutions. The survey was conducted by Greenwald & Associates and CANNEX. The big difference between the 2019 survey and those of prior years was that 2019 marked the first year in which the researchers studied advisors in addition to consumers. Prior surveys focused on consumers only. The study showed strong consumer interest in guaranteed lifetime income, with more than two-thirds saying they saw a high value in having such income on top of Social Security. Despite the value consumers place on having retirement income they can’t outlive, some of them still balk when the word “annuity” is mentioned. The study found 35% of consumers would be less interested in a product offering guaranteed income if it were labeled as an annuity than they would if offered an unnamed product that offered the same benefit. So what can advisors do to keep annuities from being the “A Word?” Communication is the key to breaking down confusion over annuities, as is educating consumers on the product’s value proposition, said Tamiko Toland, head of annuity research at CANNEX. “I think one of the confusing aspects of these products is that they actually provide a set of different values based on what the client is looking for. Sometimes they’re sold more as a bond alternative. Sometimes they’re sold purely for income,” she said. “I think focusing on the 52

value proposition as opposed to the term ‘annuity’ is really the key because people like what annuities do. But they get scared off and told in the media or by peers that annuities are bad.” Study director Doug Kincaid of Greenwald & Associates recommended framing annuities as a strategy. “When we talk about guaranteed lifetime income as a concept, there is a lot of appreciation for that,” Kincaid said. “When we talk about it as a product — especially as an annuity — you start to see consumers’ interest in it chip away as people get more skittish about their interest in that.”

Product interest from the consumers we surveyed — 71% said that seemed to be a good strategy for them,” he said. “When you’re shown exactly what an annuity does and it gives you this guarantee throughout retirement, all of a sudden consumers are really on board with annuities and interested in what annuities can do for them.”

Perception Gap

The study showed a perception gap between advisors and clients when it comes to discussing lifetime income strategies. Advisors said they discuss income strategies with an average of 79% of their clients age 55 and older, but only 55% of

Top 10 Findings 1. Consumers value guaranteed income in addition to Social Security. 2. Best reason to buy guaranteed lifetime income? Consumers say: protection against running out of money. 3. “Annuity” is still a dirty word, but strategy framing helps. 4. Mixed messages from advisors and consumers on retirement income conversations. 5. Advisors and consumers agree fees and liquidity are top barriers, but consumers are surprisingly less affected by financial expert warnings than advisors think. 6. Consumers are more interested in annuities with guaranteed lifetime income than advisors realize. 7. Positive beliefs about guaranteed lifetime income products outweigh negatives for consumers, but negatives remain persistent. 8. Advisors have greater conviction in their beliefs about guaranteed lifetime income products — both positive and negative — than consumers do. 9. Guaranteed income gives owners peace of mind. 10. Most advisors expect the highest costs in retirement to come early, but consumers aren’t so sure. Kincaid said the researchers walked the consumers they surveyed through what he called “a floor plan” of figuring out their expenses in retirement, figuring out how much of those expenses Social Security will cover, and then buying a product to provide income to cover the gap and investing the rest of their money as they want and having the ability to use it for discretionary spending. “What we saw is a large amount of

InsuranceNewsNet Magazine » September 2019

those clients report having discussed income strategies with their advisor. Advisors also consistently underestimate client interest in guaranteed lifetime income products, the study showed, with advisors saying anywhere from 10% to 39% of their clients are interested in annuities with guaranteed income. But between 43% and 56% of clients said they are either highly interested in annuities or already own them.

ANNUITIES: STRATEGY VS. PRODUCT ANNUITY

Interest In Annuities With Guaranteed Income Highly Interested: Rated 6–7 out of 7. 50%

49%

20%

23%

$100K–249K

$250K–499K

That interest gap is especially pronounced among wealthier clients and clients who are several years from retirement. And although advisors think that interest in annuities with guaranteed lifetime income increases with client asset levels, the opposite appears to be true. Clients with assets between $100,000 and $499,000 had the highest interest in annuities. Half (50%) of clients with assets of $100,000 to $249,000 were interested in guaranteed lifetime income, closely followed by 49% of those with $250,000 to $499,000 in assets. “Advisors are envisioning that

Advisors: % of clients highly interested Consumers w/ advisors: % highly interested or already own 45%

29%

$500K–999K

43% 29%

$1M+

higher-asset clients are most interested in these products, where we see that it’s lower-asset clients who are reporting the most interest,” Kincaid said. “Obviously, the caveat to that is that if you have a lower asset level, you may be actually more reluctant to put some of that money into one of these products. But I think it downplays the fact that these people may feel they are closer to the edge of needing that guaranteed income to protect them, so their interest level is that much higher.” In addition to the perception gap, the survey showed that advisors and consumers are at odds in their opinions of why

consumers don’t own annuities. Advisors appear to far exaggerate the impact of financial expert warnings against annuities on client receptivity; 95% of advisors say consumers don’t own annuities because financial experts have warned against them, while only 50% of consumers said that’s the case. However, the survey also found that about half of consumers said they heard positive things about annuities from financial advisors while about 38% of consumers said advisors gave them negative information about annuities. “So it’s not that we’re seeing this overwhelming negative narrative about annuities,” Kincaid said. “In fact, we’re finding that if consumers have heard something about annuities, it’s more likely to be something positive.” Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback.com. Follow her on Twitter @INNsusan.

September 2019 » InsuranceNewsNet Magazine

HEALTH/BENEFITSWIRES

House OKs Dropping ‘Cadillac Tax’ In a rare show of bipartisanship, the

House of Representatives voted to repeal the “Cadillac Tax” — that provision in the Affordable Care Act aimed at keeping health care costs down by taxing overly generous health insurance plans. The Cadillac Tax went down in flames with a 419-6 vote, showing that Democrats and Republicans disliked that particular part of the ACA. Unions, employers and health insurance industry groups all opposed the tax and set up a broad coalition against it. But health economists liked the tax, saying it was a valuable tool to control health care spending. The Cadillac Tax had never actually gone into effect, because Congress repeatedly delayed it when it came close to taking effect. The House vote would fully repeal it, although it remains unclear whether the Senate will also bring the bill up for a vote.

AMERICANS HAVE COVERAGE, BUT CAN’T AFFORD IT

More Americans have health insurance since 2010 — nine out of 10 people now have coverage. Despite the fact that about 90% of the population has health insurance, either through private plans or government programs, another health problem looms. The bigger issue seems to be that even though more people have insurance, they are struggling to pay their deductibles and copays, according to the Commonwealth Fund. The fund issued a report estimating 44 million Americans were underinsured in 2018, compared with 29 million in 2010 when the ACA was passed. That’s about a 50% increase. But the greatest jump in underinsured is among people who have employer coverage. “When you have 90% of the American people covered and they are drowning in their health care bills, what they want to

DID YOU

KNOW

QUOTABLE We shouldn’t be the solution. — GoFundMe Chairman Rob Solomon on the number of requests to fund health care through online charity

long-term trend has been for employees to pay an increasingly higher percentage of total costs. However, in 2019, workers’ costs increased by 3.6% compared with a 4% increase for employers.

hear from politicians are plans that will address their health care costs, more that they want to hear plans that will cover the remaining 10%,” said Drew Altman, president of the Kaiser Family Foundation.

TRUMP SEEKS TO IMPORT DRUGS FROM CANADA

HEALTH CARE COSTS REACH $28K FOR FAMILY OF 4

In 2019, health care costs for a hypothetical family of four reached $28,386, an increase of 3.8% from 2018, according to Milliman research. Health care costs for the average American adult in 2019 hit $6,348. The research looked at families and individuals who receive coverage through employer-sponsored preferred provider organizations. Milliman looked at five components of health care costs, including inpatient and outpatient care, pharmacy, and professional and other services. The researchers also found a shift in the percentage of costs shouldered by employers versus those paid for by workers. Over the last 15 years, the

U.S. consumers could find it easier to obtain cheaper prescription drugs from Canada, as the Trump administration announced a proposal to make it legal to import cheaper drugs from north of the border. Under the plan, states, wholesalers and pharmacists would draft a proposal for safe importation of prescription drugs already available in the U.S. The groups would then submit the proposal to the Food and Drug Administration for approval. But groups in both the U.S. and Canada oppose the plan. Pharmaceutical Research and Manufacturers of America, the industry’s main trade group, warned that the administration’s proposal threatens consumer safety. Canadians aren’t too keen on the proposal either. The Canadian Medical Association and 14 other groups expressed their fear that allowing the U.S. to import drugs from Canada will lead to shortages in their country.

Pharmaceutical producer Mylan will merge with Pfizer’s newly spun-off generic pharmaceutical unit.

Source: Associated Press

InsuranceNewsNet Magazine » September 2019

Source: The Hill

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HEALTH/BENEFITS

Long-Term Care Claims: Marketing Vs. Reality A story of two LTCi policy owners who filed a claim when one of them needed care. By Tricia Pilone

ne of the most important aspects of any long-term care insurance policy or linked benefit rider is the claims payment methodology. From our perspective as a product wholesaler, the questions most often asked by agents are all about the product’s cost and overall level of benefits. We rarely get questions about the difference between indemnity versus reimbursement method products, which is ironic because this is where the differences show up when a claim is made. When it comes to indemnity versus reimbursement products, carriers sell either one type of product or the other, and they do not offer the option of switching from one model to another. There isn’t any difference in price between a product with a reimbursement model and one under the indemnity model. Carriers’ actuaries use many factors to price their products. Those of you who have been selling stand-alone LTCi for decades are probably aware that most, if not all, of those policies follow the reimbursement method of claims payment. This means that when the insured person qualifies for the policy’s benefits by meeting two out of six activities of daily living requirements, the insured’s family will now need to understand how to submit bills for reimbursement of qualifying medical care. This is not an easy thing to do, and the rules are not easy to understand. An average consumer, with an above-average level of education and competence, would be hard pressed to understand the complexity of the reimbursement claims process, and in almost all cases would 56

need an insurance professional to help them deal with the claims department. I make this statement with a high degree of confidence, having recently handled a claim for an orphan client who was referred to me by one of our LTCi carriers. Here is what happened to two insureds who called their LTCi carrier to ask for assistance.

Betty And Bob

Betty and Bob live in a retirement community. The facility is divided into a residential side, where residents require little to no assistance, and an assisted living facility, where residents need regular or full-time assistance. Betty and Bob live on the residential side and are strongly resisting moving into assisted care. Many years ago, Betty and Bob purchased LTCi coverage through the same company at different times. They each own their own policies, which is important, because the claims department will only speak with the agent or the owner. Although Bob is a mechanical engineer by training and is highly intelligent, he has no experience with insurance contracts and was not interested in dealing with the claims examiners. This made the ownership issue even more acute, as we needed to have the insurance company accept me as the agent of record and give me limited power of attorney to act on his behalf in order to get the claims process moving. When I first met this couple, Betty was 84 and Bob was 90. Both believed that Bob was at the point in his life where he needed a level of assistance that Betty could no longer provide. Betty thought she wanted to make a claim against Bob’s LTCi policy, but had no idea what benefits would be paid, or if Bob even qualified to receive payments. They did not want to move Bob to the assisted living facility; they just wanted professional help with Bob’s daily living needs.

InsuranceNewsNet Magazine » September 2019

Bob is mentally healthy, but is having difficulty with showering and other physical activities of daily living that Betty is becoming too old to help him with. Most LTCi claims start this way; a claim made very late in life with a medical situation that can initially be handled by a home health care assistant. Betty knew Bob’s LTCi policy could potentially ease the financial burden of care, but did not understand the contract and was reluctant to tackle the claims process herself. Because the agent who sold the policies had died, the carrier referred Betty to the nearest general agent for help. And so I took on the task of coordinating the benefits provided by Bob’s reimbursement model LTCi policy. I thought that one or two calls to the carrier’s claims unit would be sufficient, but I soon learned that it isn’t that simple. The process took more than two hours just to get the carrier to share the policy information with me. Add to that at least another six hours of calls and paperwork to get the claim approved. And that was only the beginning. Because Bob had not made a claim, or hired outside assistance prior to making a claim, we had to deal with the elimination period, in this case 20 days of service. This proved to be a problem because Bob had not received care from a qualifying nursing service until the claim was made. This meant that the 20-day waiting period would be satisfied only when Bob had actually received and paid out of pocket for 20 days of services. Because he needed only intermittent care, it took more than 90 days to qualify the 20-day elimination period. Betty and Bob were perplexed by this and never really understood why they could not begin receiving reimbursements once Bob qualified for benefits under the policy. The bigger and arguably more important issue was coordinating with a local

LONG-TERM CARE CLAIMS: MARKETING VS. REALITY HEALTH/BENEFITS health care provider that could begin providing care during the elimination period. Betty wanted the benefits to be coordinated so that the carrier was paying the provider directly and she would not have to deal with bills and reimbursements. And while the claims unit was extremely helpful and cooperative, the provider had some issues with coordination of payments that caused me to spend several more hours on the phone untangling the nuances of the contract language. It seems as though the process was designed to get people to walk away in defeat. After six months of meetings with the clients and calls to the carrier, Betty and Bob are finally receiving the benefits they paid for. And unfortunately, those benefits will be insufficient to cover all of the costs this couple will incur while Bob is alive, something every potential insured needs to wrestle with at the time of purchase.

Most Claims Begin And End At Home

An indemnity model policy or rider would have been far more beneficial for Betty and Bob. Most LTC claims start with an in-home caretaker, usually a family member (in this case Betty), then transition to an outside professional providing in-home services and then into an assisted living facility as the condition progresses over an average of six years. Most reimbursement model policies will not pay family members, and even if they do, they require the elimination period (the vast majority of which is 90 days) to be met out-of-pocket before the policy pays any benefits. According to the American Association for Longterm Care Insurance, “Most long-term care insurance claims begin and end at home.” Coincidentally, while this situation was playing out, another one occurred. One of our close friends, a life insurance agent, was in the process of losing his wife to cancer. He had a stand-alone long-term care policy issued by a major mutual company. For some reason, he waited until his wife was home from a long hospital stay to make a claim. The policy had a 60-day waiting period, and his wife died on the 59th day.

Two things stand out about this: First, he should not have waited to make a claim, something agents should know; and second, there is no recovery of costs. His LTCi policy expired worthless. This does not have to be the case, as many linked benefit products provide a full death benefit. The facts are changing due to improvements in home care and the resistance of most cognitively healthy insureds to being placed in a full-time care facility. And that dynamic is likely to continue to evolve toward more home-based care options as the health care system changes and medical solutions improve. A recent sales piece from an insurer that offers indemnity-based payments makes the point: A client, age 60, purchases an LTCi policy with a $5,000 monthly maximum benefit, a six-year benefit period, and a 5% compound interest inflation benefit. At the age of 80, the client needs care and initiates a claim. Service is provided by informal care for the first two years, home health care for two years after that, and then the client spends two years in assisted living, after which they die. Under these typical circumstances, the total amount of payments the reimbursement model policy would pay equals $262,583. The cash indemnity model policy pays $1,082,850. And, the cash indemnity model does not require the client to submit bills once they are qualified. So, virtually no interaction with the claims department. Which would you prefer? It’s entirely too easy to rely on carrier illustrations and sales material that showcase the cost of a policy without regard for the client’s ability to actually collect the benefits they pay for. Having any coverage at all is better than none. But coverage that you can actually manage and collect on when you are an octogenarian in need is another thing altogether. If you have an option, do your clients the ultimate favor and make sure they have indemnity based coverage. There are many new options and product types that will ultimately provide more value and less stress to policy owners and insureds. Take the time to investigate these products and emphasize the

Reimbursement Model Vs. Indemnity Model

A reimbursement plan pays for the actual cost of care while an indemnity plan pays the maximum daily or monthly benefit. Under the reimbursement model for long-term care insurance, the policy pays for the actual daily or monthly cost of care. For example, if the selected daily benefit is $100 and the actual cost of care received is $90, the policy will pay $90. Any excess daily benefit remains for future care needs. If the cost of care is $120 daily, the policyholder will receive $100 per day and must pay the excess amount. A potential advantage to the reimbursement model is that the benefits can last for a longer period of time if the actual cost of care is less than the daily benefit. Under the indemnity model for longterm care insurance, the policy pays the selected daily benefit as soon as the policyholder qualifies for benefits. The policyholder receives this amount regardless of the actual cost of care. For example, a policyholder may incur a lower cost of care during the early stages of home care due to more limited needs. Or a spouse could provide some care during the early stages of home care, resulting in lower care costs. A potential advantage to the indemnity model is that a policyholder could receive more money each month than they incur in care expenses.

benefits of limited interaction with the claims department. Your clients deserve the benefit of this knowledge. Tricia Pilone is the president of CPI Companies, a life insurance brokerage general agency specializing in the design and sale of insurance products for high-net-worth individuals and corporate clients. Tricia advises agents and clients on product suitability, implementation, and policy management. Tricia may be contacted at tricia.pilone@ innfeedback.com.

September 2019 » InsuranceNewsNet Magazine

NEWSWIRES

Impact Investing Not Just For Millennials

Millennials have a reputation for seeking out products, services and investments that “do good.” But according to a Morningstar study, millennials are not the only generation interested in socially responsible investing. Morningstar found that 72% of U.S. investors are interested in environmental, social and governance funds, or ESGs. Additionally, the study found that Generation X and millennials were statistically equivalent in their level of interest in SRI strategies. Morningstar’s research also busted another myth about impact investing — that more women than men are interested in it. As it turns out, women showed only an ever-so-slightly stronger preference for impact funds than their male counterparts did, meaning many more investors are interested in sustainable investments than previously thought.

WOMEN FEEL THE STING OF SOCIAL SECURITY CUTS

It’s coming — and fast. As soon as next year, Social Security’s expenses are expected to exceed its revenue, forcing the program to begin making cuts. The projected impact will result in only 75% of promised benefits being paid beginning in 2035. According to the Social Security Administration, the population most dependent on Social Security benefits is older, single women. In fact, nearly half (44%) of all unmarried and widowed women get 90% or more of their total income from Social Security, compared to only 21% of married women over age 65. Because women have a longer life span than men, they are more likely to outlive their savings and become more dependent on programs like Social Security. Experts say the best thing women can do as they approach retirement age is wait until full retirement age (66 or 67), if not longer, before beginning to receive benefits. Those who claim Social Security early could be missing out on as much as 30% of their retirement income.

QUOTABLE We are still in a very strong prosperity cycle. ... We have very good pro-growth policies, low taxes, deregulation, opening energy, trade reform. I think the incentives of our supply-side policies are working. — Larry Kudlow, director of the National Economic Council

The states with the lowest financial literacy rates included: 1. Alabama – 24% 2. Mississippi – 28% 3. Georgia – 28% 4. Texas – 29% 5. West Virginia – 29%

FINANCIAL LITERACY VARIES (WIDELY) BY STATE

Managing money isn’t as easy as investors thought. The FINRA Investor Education Foundation report found only 34% of people could answer four out of five questions about basic financial concepts — ouch! The FINRA report asked respondents about inflation, interest rates, mortgages and diversification to find out what areas investors knew well and which they struggled to understand. Respondents proved to understand mortgages and interest rates well but struggled to answer questions about bond prices and compound interest. The report noted startling gaps of knowledge and financial literacy from one state to the next. The top five states with the highest financial literacy were: 1. South Dakota – 43% 2. Utah – 43% 3. Montana – 42% 4. Minnesota – 41% 5. Nebraska -- 41%

DID YOU

INVESTORS UNSURE ABOUT 2019 MARKET

Investors are feeling wishy-washy about the stock market through the end of 2019, according to a Gallup poll. Gallup found that half of investors, 49%, were bullish on the stock market in the second quarter, saying they expected average stock prices to be higher by the end of 2019. At the same time, 23% were distinctly bearish, expecting prices to be lower at year’s end, while another 28% predicted they will be the same. The poll also found a split among investors on party lines: 78% of Republicans overwhelmingly expect stock prices to increase, while 33% of Democrats are slightly more likely to predict a decline than an increase (29%).

KNOW More than one in five (22%) Americans have less than $5,000 saved for retirement, and 15% haveSource: noLIMRA retirement savings at all. Source: Northwest Mutual

InsuranceNewsNet Magazine » September 2019

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Caution: Offer On Table May Not Be As Good As It Appears When a new firm makes an offer to recruit you, look beyond the financial incentive. • Ashley Folkes

“M

oney often costs too much,” said Ralph Waldo Emerson. For advisors looking to make a move, there could be any number of factors prompting the search for greener pastures. Do any of the following resonate? » You’ve outgrown your firm. » Your current firm continues to mandate cross referrals, more product sales or partnering with other lines of business. » They cut your payout grids or created minimum account levels. » T hey change (seemingly) just for change’s sake, and it is tough to understand the value of those changes to the client or the advisor. » Your current firm does not offer a full suite of products or services for you to truly take care of your clients. » You’re looking for entrepreneurial freedom to manage your practice with the expertise you’ve spent years developing. The decision to transition your business is not to be taken lightly. In the same way you holistically evaluate wealth management strategies for your clients, so should you consider a transition of your business. You will likely entertain several opportunities and quickly feel like an allstar athlete who just hit the free agency market. Pause: This is where you should be careful of the blinding effect of the money, deal structures and packages that will be put in front of you. I’ll start by stating the obvious: Firms are trying to grow. This growth includes 60

obtaining more accounts, households, assets, revenue and income. It means more product sales and grabbing a deeper wallet share of existing clients. This creates a competitive marketplace for good advisors in motion, and the market knows they don’t come cheap. My recommendation to advisors is to pause, take a breath and look beyond the upfront check that firms are offering because these bonuses come with a cost. Unfortunately, some firms will tell recruits whatever they want to hear. This is because they know once the recruit joins the new firm, they will be locked in to a forgivable promissory note and will be unlikely to put their clients through another move in the near future. Some call the deals negligent, some call them intentional misrepresentations but, unfortunately, they can be common in the recruitment process. Upfront recruiting checks are almost always delivered as forgivable loans (a debt to be paid off through growth and fee production for the firm). But there are additional costs associated with these loans that may not be immediately obvious to the advisor. Think of this as you would a balance sheet. Is it preferable to grow your cash flow through revenues or through liabilities? You would likely not counsel your clients to raise cash through borrowing unless absolutely warranted, so why would this be a sound approach for you? Here are some things to consider from a tax perspective. The interest on the loan is taxable income, causing you an additional tax burden. In the year you receive the up-front compensation, you will not only be pushed into a higher tax bracket; in some cases, it could quality you for the alternative minimum tax. And compared to earnings resulting from higher payouts received as monthly cash flow, this

InsuranceNewsNet Magazine » September 2019

compensation will incur these extra taxes, which effectively net you less money. Advisors will often look at the upfront bonus as a source of freedom, but I see it as an additional obligation. Upfront compensation is usually applied to a 5- to 10-year contract. Often, we all have the best of intentions to save and invest that compensation. But, as we all know, reality and competing priorities (both personal and professional) usually drive some portion to be used early in an advisor’s transition. On the professional side, an advisor could end up using that compensation to buy out an existing agreement or partnership, spend the funds on up-front marketing costs, or use the money to supplement for the loss of cash flow you experience while clients convert with you to a new firm. On the personal side, advisors could spend the compensation on family or household needs, or even go overboard in rewarding themselves. In the honeymoon period of being recruited and joining a new firm, the multitude of long-term circumstances which could change (either in your life or in the firm’s policies) are often overlooked. These can include: » Changes to payout levels. » Advances in capabilities by competitors. » Changes in leadership and ownership structures. » Need/desire to relocate. » New incentives and requirements for cross/upsell. » Desire to move from W2 employee to independent. All these factors could potentially place a significant advantage or disadvantage on the advisor and their clients because of their inability to move and react.

CAUTION: OFFER ON TABLE MAY NOT BE AS GOOD AS IT APPEARS

Some FINANCIAL Considerations

Upfront recruiting checks are almost always delivered as forgivable loans. But there are additional costs associated with these loans that may not be immediately obvious to the advisor. While you aren’t typically obligated to pay interest, the interest is taxable income and is an income source not withheld, causing an additional tax burden on the advisor. The year the up-front compensation is received will not only push you into a higher tax bracket; in some cases, it could qualify you for AMT, even after the tax policy changes enacted in 2017/2018. Compared to earnings resulting from higher payouts received as monthly cash flow, this compensation will incur these extra taxes, effectively netting less.

Upfront compensation is usually applied to a 5to 10-year contract. Often, we all have the best of intentions to save and invest that compensation. But some portion of it usually ends up being spent early in an advisor's transition. Buy out of an existing agreement/ partnership

Up-front marketing cost

Supplement for loss of cash flow while clients convert with you to a new firm Family and household priorities (taxes, paying down debts, college savings, etc.)

You go overboard in rewarding yourself

Remember, a lot can change in a firm, the industry or personally in 7-10 years. Think about technology and your business 10 years ago and how different they are today. Ultimately, an advisor’s clients should be top priority. We all seek to establish sound strategies for our clients. That said, market conditions are not predictable or within our control. Often, the types of compensation agreements discussed are tied to converting and maintaining a certain level of client assets under management. Under periods of market contraction, clients’ performance and an advisor’s own performance are under pressure. The type of agreement discussed here will compound the pressure at a time when the advisor is least able to influence it. Additionally, if these firms make changes to payout and compensation agreements, install incentives for cross selling and upselling, and raise deferred compensation amounts, they are further controlling the advisor’s ability to meet the conditions of the upfront compensation. Here is my position. If you are an advisor considering a move, I challenge you to think beyond basic factors. Instead, reflect on the attributes in a firm that will provide you and your clients with long-term happiness and success. I would perform due diligence and make sure the deal you are taking is understandable and obtainable, and that there aren’t any items they are trying to camouflage. The best way to do this may be to seek the advice of legal counsel with experience in the securities industry to help ensure you are doing everything you can to protect you and your clients’ best interests and understand what you are signing up for. Do a lot of soul-searching to find out what you really want in a new firm so that you can articulate your “why” to your clients. Ask yourself some questions: » Does the new firm and its management walk and live their values? » Do they have a history and culture that allows you to put your clients at the center of your universe? » Does the firm truly allow you to run your business your way? Will the firm value you as an advisor? » Do they have the infrastructure, products and services that fit your practice? » Can you see yourself there for the long term? By taking time to evaluate the landscape, to think about cash flow and balance sheet implications, and to never confuse deal shape with deal economics, you will end up with a peace of mind that, in many ways, is priceless. Ashley Folkes, CFP, CRPC, RICP, is a senior vice president of investments and complex manager at Moors & Cabot Investments. He has more than 20 years of experience in wealth management and has held several different leadership roles. He may be contacted at ashley.folkes@ innfeedback.com.

September 2019 » InsuranceNewsNet Magazine

INBALANCEWIRES

What Are You Doing? Nothing! Looking for a simple way to relax? Try niksen,

the Dutch concept for doing nothing. And when the Dutch say doing nothing, they mean doing absolutely nothing — no reading, no watching TV, no checking Instagram. “You’re taking the time to sit there and not do anything on purpose. You could be gazing out a window, but you’re not observing your thoughts or letting them go or doing anything like that. You’re just being,” Dutch journalist Olga Mecking, told NBC. The idea behind niksen is for people to take a step back from whatever they’re doing to just let everything be as it is without being an active participant in it. Ideally, practicing niksen and allowing your brain to wander “can enhance creativity,” its proponents say.

1 IN 10 OLDER ADULTS BINGE DRINKS

When we think of binge drinking, most of us envision a bunch of college students getting wasted in a fraternity house. But adults whose college days are far behind them can go on drinking binges as well. About one in 10 older adults engages in binge drinking, and this behavior puts them at risk for falls and other medical problems, according to research published in the Journal Of The American Geriatrics Society. The researchers defined binge drinking as consuming five or more drinks at once for men, and four or more for women. Older adults are more likely to have a chronic health condition such as high blood pressure or diabetes. Binge drinking can makes those conditions even more serious, doctors say. “If you drink regularly and you are taking blood thinners,

DID YOU

KNOW

then there’s going to be a risk of bleeding in your stomach,” said Dr. Ronan Factora, a geriatrician at the Cleveland Clinic. “Binge drinking can also make your sugars go up, which can create problems for people with diabetes.”

WOMEN MORE LIKELY TO EXPERIENCE DEMENTIA

Women experience Alzheimer’s disease and other forms of dementia at much higher rates than men, and researchers think they know why. Stress is to blame for these higher rates of dementia in women, say researchers at Johns Hopkins University. Women in their 60s and early 70s can produce up to three times as much of the stress hormone cortisol than men can. All that stress adds up and harms the part of the brain that affects memory, the researchers said. The World Health Organization’s

Climate change could expose more humans to mercury in seafood. Source: Newsweek

InsuranceNewsNet Magazine » September 2019

QUOTABLE You should be washing your hands with soap and water to the sound of ‘Happy Birthday’ sung twice, one time after the other. — Philip Tierno, New York University Langone Health

latest guidelines on preventing dementia recommended general lifestyle improvements like increased exercise, balanced diets made up mostly of plant-based foods and minimal alcohol consumption. Maybe stress reduction strategies could be another way to lower the risk of cognitive decline, allowing older adults to live fuller, more productive lives.

POWER NAPS CAN WORK

Call it a power nap or call it a short nap, those short, revitalizing rest periods can do wonders to help raise your energy levels, a sleep expert said. But there are some things you need to know about power naps. “Short naps or power naps definitely do work,” said Dr. Rafael Pelayo of the Stanford Center for Sleep Sciences and Medicine. He described the sweet spot for these power naps as 30 to 40 minutes. Short, scheduled naps can be effective in beating sleep deprivation, Pelayo said. But it takes about 90 minutes of sleep for our bodies to enter the rapid eye movement phase where we begin to dream. He said if you wake up from a brief nap remembering a dream you had, it’s a sign that you aren’t getting enough deep sleep at night.

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INBALANCE

Dinner Is Served: Impress Your Guests Without The Stress How to throw a simple dinner party that will impress everyone. By Bryce Sanders

ating out can be expensive. Eating at home is less costly, but you must put the time and effort into making it happen. Entertaining at home might involve having the relatives over for a holiday meal, getting the neighbors together or inviting your spin class friends. Wonder why people don’t do more of these dinners? Because most people think they are hard to pull off. But they can be easier than you think. You will be concerned with four aspects of the meal: inviting people, setting the stage, drinks beforehand and the meal itself. This article explains the basics, but you might find this book useful: Brunch Is Hell: How To Save The World By Throwing A Dinner Party by Rico Gagliano and Brendan Francis Newnam.

Inviting People

Your objective is to get people to commit and show up at the appointed time. 64

Assuming your dinner party has six guests total, you and your spouse or partner are probably inviting two other couples. Casual verbal invites like “We’re having some people over the Friday after next …” are problematic because people are busy. They forget things. An email extending an invitation is fine. Texts work, too. Written notes have staying power because they can be clipped to the refrigerator as a reminder. Specify the date, time and place. Ask for RSVPs, because you want confirmation people are coming. Include your address and contact information. When your guests confirm, ask if they have any dietary restrictions. Since they are your friends, you will likely know the answer already, but it’s best to

double-check. This can be an issue if a friend is bringing a date you’ve never met. Although people have calendar features on their smartphones, it’s best to send a reminder a day in advance. People forget stuff.

Setting The Stage

Your objective is to make your guests comfortable. Let’s assume the format you’re going with is drinks at 7 p.m., dinner at 8 p.m. You will need someplace to sit guests for drinks beforehand and a table with chairs for the meal itself. You have questions: Why not go directly the table and start eating? Because it feels too much like walking into a college classroom and starting to take notes. Why not sit on my sofa and eat the meal there? It’s awkward. People drop

Wonder why people don’t do more of these dinners? Because most people think they are hard to pull off. But they can be easier than you think.

InsuranceNewsNet Magazine » September 2019

DINNER IS SERVED: IMPRESS YOUR GUESTS WITHOUT THE STRESS INBALANCE food. There’s not enough elbow room. Here are some logistics. You will need the following: 1. Table and chairs. You no doubt own them. 2. Tablecloth or placemats. If you don’t own them, borrow. Placemats are easier than a tablecloth. If you use a tablecloth, go with a solid color. White is good. 3. Napkins. They should be large and a solid color. If you don’t have them already, a home furnishings store such as Crate and Barrel, Pottery Barn or Williams Sonoma should carry them. 4. Flatware. Knives, forks, spoons. You’ve likely got these. 5. Glassware. You’ll want water glasses and wine glasses. Go for two wine glasses per person. For an impressive dinner party, the glasses should be clear, without decoration. 6. Plates. The standard sizes, in ascending order, are bread, salad and dinner plates. You will probably use the salad plates for the first course, dinner plates for the second and the rewashed salad plates for dessert. Here’s one additional thought: Go for candlelight. It makes everyone look better.

Drinks Beforehand

Sound simple so far? Good. This next part is pretty easy, too. As the host, your objective now is to get your guests comfortable without running around refilling glasses and preparing complicated hors d’oeuvres. If you are stressed, your guests will be stressed. Stick to wine, beer and soft drinks. Offering cocktails and mixed drinks increases the work load exponentially. With six people sitting around in a group, mention your drink selections and ask your guests what they

would like. Deliver their first drink personally. Let them know they’re on their own for refills. Another strategy is to set the popular bottles on the table, sitting on coasters. You can often make sparkling water the non-alcoholic alternative, eliminating soda. What will you feed everyone that’s easy to prepare? Salsa and chips aren’t really dinner party food. Olives and nuts are easy. Open the containers and pour into separate dishes. A cheese board looks good and goes over well. Three cheeses with grapes, dried apricots and walnuts will look spectacular. You’ll need sliced French bread or crackers, too. Obviously, you will need cocktail napkins. Paper is fine. You’ll need glassware in addition to what is set up on the dining table. Small plates are good. You’ll want knives for the cheese tray. You’ll also want background music. Picking something soothing and instrumental sets an elegant tone. Music can become livelier as the evening draws to a close. Avoid vocals, since they compete with conversation at the table.

The Meal Itself

So far, so good. Everyone is having a good time over drinks. What have you decided to feed them? Your objective should be to prepare as much of the meal as possible beforehand. Here’s how you could make that happen. The first course might be sliced smoked salmon. It’s very elegant. It can be prepared ahead of time. You lay a few slices across each salad plate you are using for the first course. IKEA produces a mustard and dill sauce that’s excellent. Put a dollop on the side. Buy some thinly sliced brown

bread, cut into triangles and add them to the plate. Serve with a white wine. It’s difficult to go wrong with chardonnay. Clear the dishes away when people have finished the first course. Discreetly wash the plates in the kitchen. They’ll be used for dessert. Wash the cutlery, too. On to your main course. This is the one you’ve cooked. It’s served warm. It doesn’t get much easier than beef stew, done in a slow cooker. Not impressive enough? Use a recipe for beef bourguignon. Serve over mashed potatoes. It’s a one-pot dish, because the vegetables are all in there. At the other end of the spectrum is beef tenderloin. It’s the expensive cut associated with filet mignon. Many recipes will tell you to pat it dry, season with salt and pepper, brown in a large frying pan and roast in the oven. This means it’s easy to do. You’ll want to serve it with potatoes and vegetables. This means three or more items need to come out at the same time. These dishes call for red wine. Choose a cabernet sauvignon, pinot noir or merlot. Beef bourguignon ideally should be accompanied by a red Burgundy wine, a pinot noir. Refill water glasses constantly. You want your guests to get home safely. Time for dessert. You bought this from a fancy bakery. It’s a showstopper, like a chocolate tart or fruit tart. It has the wow factor. You serve coffee afterwards. Moving your guests back to the sofa for coffee is smart. It gets them on their feet and initiates the mobilization process. If they settle in over wine and coffee with good music, they might stay all night. That’s it! You’ve thrown your own dinner party. You’ve started a trend. You’re a leader, not a follower. Bryce Sanders is president of Perceptive Business Solutions. He provides high-net-worth client acquisition training for the financial services industry. He is the author of Captivating The Wealthy Investor. Bryce may be contacted at bryce. sanders@innfeedback.com.

September 2019 » InsuranceNewsNet Magazine

PHOTO: J. STEPHEN CONN

BUSINESS

ROM GREETINGS F

T M , d a r n Co “Five years ago, I started my own agency from scratch in a rural Montana town of 2,500 people.”

Even The Middle Of Nowhere Is Somewhere For A Business If you strive to meet your clients on their own terms, you can learn their needs and provide effective solutions, whatever the market niche may be.

By Vanessa Bucklin

t’s a well-known fact that you must build relationships in order to establish a solid client base. However, cultivating client relationships in a rural, agriculture-based community can present a notable challenge. I’ve discovered, though, that if you strive to meet your clients on their own terms, you can learn their needs and provide effective solutions on a professional and personal level, no matter the market niche. Five years ago, I started my own agency from scratch in a rural Montana 66

town of 2,500 people. Even though it was such a small market, there were already seven other insurance agencies in town. Plus, I didn’t have a background in insurance. But I knew it was what I wanted to do and what the community needed, so I bet on myself and got to work. I bought a rundown building and moved my kitchen table in as a desk. People told me that I couldn’t just start from scratch — I would have to buy a book of business and move in with an existing practice. Despite their doubt, I qualified for Million Dollar Round Table in the first year and have qualified every year after that. Now, I have a successful practice with four other licensed agents.

Pursue Your Clients On Their Terms

I credit the majority of my success to my active pursuit of authentic client relationships. One piece of advice for building

InsuranceNewsNet Magazine » September 2019

your client base: Know your audience, especially their pain points. When I first started, I thought other agents in my area had become complacent when it came to insurance. I decided to stir things up and be more aggressive. I traveled down dirt roads to meet with people, sat at the kitchen table with them and learned their goals and stresses. For example, many members of my community are asset rich and cash poor. When a parent dies, they might have to sell land that has been in their family for generations in order to pay the estate tax. Or when parents need long-term care, the family might have to sell the farm to generate the necessary funds. As an insurance agent, however, I can help proactively address these concerns and provide my clients with strategies they might not have realized were options. Advisors are often told to adapt and use technology, and I agree, it’s a

MIDDLE OF NOWHERE IS SOMEWHERE FOR A BUSINESS BUSINESS helpful tool. However, I also realize I live in a rural town where people appreciate doing things the old-school way, so I don’t cut corners. I get in my car, drive across the state on dirt roads and stop to meet my clients face to face. I send handwritten thank-you notes and birthday cards. Of course, I could send email, but I know my target audience. You have to cater your services to where you operate, and I know my clients recognize and appreciate that.

Build Authentic Trust

I’m a farmer’s daughter and my husband and I farm, so I know what’s important to my clients. Breaking into an agricultural community is unique, and the marketing is vastly different. You don’t just need to build relationships, you need to

Our Unique Advantage

Although this industry may be male-dominated, we as women and mothers have a huge advantage. Having three young children helps me establish such a unique relationship with clients. On occasion, my kids are with me when I stop in to visit a client, and the client encourages me to bring them in and let them sit down for the meeting. This is often because the client and I have established such a personal relationship that they’ve grown to know and love my family. This is such a strong advantage to building trust, and a great reminder that it’s a two-way street: I get to know my clients, but my clients get to know me and my family as well. There’s also nothing that can replicate those feelings of compassion and understanding

One piece of advice for building your client base: Know your audience, especially their pain points. build trust. As agents, we help our clients through some of life’s biggest decisions; clients won’t feel comfortable making those choices with just anyone. These are emotional decisions that require a foundation grounded in a trustworthy relationship. Building trust comes before any sale is ever made. I know that harvest time is stressful for many in my community, so I try to provide a happy touch point by hosting a picnic lunch for the harvest crew while they work. I don’t talk about life insurance because I know they can’t think about buying or switching insurance while focused on the harvest, but it’s an authentic step necessary to building the relationship. The families are grateful I recognize how important harvest time is to them. Being there for them in that positive time establishes the precedent that I can and will be there for them in dire times, too. It takes some coordinating, time and money, but I’ve found it’s a very effective way to establish trust with my clients.

you cultivate as a mother, and that’s something you can easily transfer to your clients. Even at their young ages, my children understand my job lets me bring comfort and reassurance to people. Insurance can have a bad reputation sometimes, but when it comes down to it, we get to be there for people at their most difficult times. During life’s toughest moments, we’re able to come with something positive and bring families some relief. I think we often forget how unique that is. Building relationships like that, to me, is the most rewarding part of the job. Vanessa Bucklin, CLU, MBA, is the owner of PCI Conrad, Conrad, Mont. She specializes in estate planning and asset protection, focusing on family farms and next-generation transitions. She is a fiveyear qualifying member of MDRT. Vanessa may be contacted at vanessa.bucklin@innfeedback.com.

September 2019 » InsuranceNewsNet Magazine

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INSIGHTS

The Million Dollar Round Table is the premier association of the world’s most successful life insurance and financial services professionals.

Life Insurance Is The Oxygen Of Financial Planning When you practice what you advise, you serve your clients with authenticity. By Alphonso Franco

imilar to the safety instructions you receive on an airplane, advisors must help themselves before they help others. Our own personal financial planning can strengthen our extensive knowledge of product solutions and lead to more informed recommendations for our clients. Practicing what you advise leads to authenticity, and guides you and your clients toward the individual legacies you want to leave for your families.

Insure Yourself

Life insurance is the oxygen of financial planning, and an advisor who recommends life insurance products to clients should be well-insured. Insuring yourself puts you in a better ethical position because you are able to speak to the products, the facts and the consequences from a personal point of view as well as improve your professional knowledge, skills and competence.

Annual Reviews

Clients often hesitate to purchase the full amount of suggested life insurance coverage, despite your initial analysis and recommendations. If you were to conduct an audit, you would also find most advisors do not have enough coverage on their own lives. We are experts on life insurance! If we don’t adhere to our own guidelines, imagine how clients can incorrectly perceive the proper amount of coverage despite our efforts. Hold yourself accountable, so you can be a good example for your clients as to why additional changes beyond an initial policy should be addressed each year through annual reviews. You need to conduct these annual 68

Advisors must help themselves before they help others... checkups to review the plan and make sure you stay on course. Perhaps you need to evaluate how you or your client leveraged any living benefits the past year or how they can adjust premiums if their family is expanding. Tell your clients that even if they deviate slightly, they’ll end up at a completely different destination than planned. These meetings are also important so you can determine whether their needs have changed since they purchased their initial policy. If some of your clients do not understand the importance of the annual reviews, reframe the reviews as an opportunity to tailor their plans even further. Communicate your authentic motivations for these touchpoints and serve as an example for best planning practices as you continue to evaluate your own coverage options each year. Our recommendations are based on the information clients give us, and we can’t tailor their plans if we are unaware of life or financial changes, no matter how small they may seem. Communicating this perspective often resonates with clients, resulting in scheduled appointments each year.

Personal Stories

If you practice what you advise, you will have several personal examples to share

InsuranceNewsNet Magazine » September 2019

when trying to communicate the importance of life insurance. Often, it’s easier for clients to relate to a narrative rather than to a dollar amount or product specifications. In my case, a family member, who was an athlete in great shape, died unexpectedly. Because of his age and good health, he said he would get around to purchasing life insurance after his previous policy lapsed. He kept putting it off, and I was deeply affected when he left his family without any insurance. Sometimes you do everything possible and the results don’t come through. Personal experiences about my own family’s life insurance needs often propel clients to understand the importance of a life insurance plan, and motivates me as an advisor to ensure I’m doing everything I can to protect my clients and their families.

Combine Your Passions And Career

My family’s core value of never giving up on your passions has stuck with me throughout the years and translates into my career as an advisor. My zeal for insuring the uninsured motivates my actions and helps me authentically present recommendations that I follow in my own life. Making one more phone call or scheduling one more appointment can create a ripple effect, impacting your client’s life and the lives of those around them, something that is far more rewarding than your earnings. Alphonso Franco is the creator and founder of the World Critical Illness Insurance Conference and author of the first manual on critical illness insurance, The Critical Vision System. Alphonso is a life and qualifying MDRT Member with 20 Top of the Table and 21 Court of the Table honors and serves as the President Emeritus of the Canadian MDRT Foundation. Alphonso may be contacted at alphonso. franco@innfeedback.com.

INSIGHTS

Founded in 1890, NAIFA is one of the nation’s oldest and largest associations representing the interests of insurance professionals from every congressional district in the United States.

Advisors Have Many Ways To Stay Current In the Industry Continuing education and professional association membership ensure that advisors stay on top of an ever-changing industry. By Mark Briscoe

ife insurance has a long history in the U.S., and has earned a reputation that is built on security, stability and trust. Yet, despite the conservative, dependable nature of the industry, it is far from static. Much has changed since the mid-1800s, when some of the big names that persist to this day — including Guardian Life, MassMutual, MetLife and New York Life — put down roots and dispersed agents to sell policies designed to ensure the financial well-being of “widows and orphans.” Today, change and modernization in the industry are of the essence. Spurred by new product lines and innovative uses for those products, as well as by the whirlwind of advancing technology, the industry is like a mythical shapeshifter, constantly adjusting to market forces and consumer needs. Add important ethical concerns, demographic changes and frequent legislative and regulatory shakeups to this picture, and the need for engaged, educated insurance professionals to guide consumers along their paths to financial security is apparent. Keeping up with this ever-present change is a key point in the job description of every advisor.

Continuing Education Requirements

Every state insurance commission recognizes the need for highly trained and educated insurance professionals and has set continuing education requirements as part of the agent-licensing process. Typically, states require 24 hours of CE credits every two years, with three of 70

the credits dealing with ethics. However, every state sets its own standards; so agents should confirm their CE requirements with the insurance departments in every state in which they do business Agents have many options when it comes to obtaining CE credits. Most states accept online classes (again, check with your state insurance departments), and numerous professional education companies specialize in providing coursework acceptable to each state and curriculum specifically designed to meet insurance licensing requirements. Many insurance companies or agencies offer CE programs, though some states limit the number of credits from these classes that agents may use. Aside from traditional classes, producers can sometimes satisfy part of their CE requirements in other ways. For example, some states reduce the number of necessary credit hours for agents who engage in insurance-related teaching, journalism or legislative activities.

The Role Of Association Membership

Often overlooked are professional membership associations, which may also provide the means for producers to accumulate CE credits. Some associations offer their members, and in some cases

InsuranceNewsNet Magazine » September 2019

non-members, online and classroom programs that qualify. “NAIFA Live is an innovative and popular program that allows participants in some states to attend state chapter meetings virtually over their internet connection and potentially obtain CE credit,” said NAIFA CEO Kevin Mayeux. “Because states set continuing education requirements and administer the licensing of agents, most of NAIFA’s CE offerings are run though our state chapters, but NAIFA Live is a multistate venture with our national office collaborating and providing production support.” Apart from professional-development programming, association membership itself can qualify advisors for CE credits. Legislators and regulators in Arkansas, Georgia, Louisiana, Nebraska, North Carolina, Ohio, Oklahoma, Texas, Utah and West Virginia, have passed measures allowing agents to count their association memberships, or self-study of materials offered by their professional associations, toward CE requirements. In New York, both houses of the state legislature have passed such a measure but, at publication deadline, the legislation still awaits the governor’s signature. The “Continuing Education Credit for Membership in a Professional Insurance Association Model Act” is legislative

MARKETPLACE language that NAIFA developed and uses in its political advocacy efforts with state legislators. The Model Act provides for up to four hours of CE credit per reporting period, which is typically two years, and requires agents to demonstrate “active participation” in their associations. Active participation can take many forms. Associations afford members access to quality training and professional development programming, facilitate networking with other accomplished professionals, and promote ethical conduct among members. Associations may also keep members abreast of industry news and innovations through magazines, newsletters, blogs, webinars, podcasts, state or regional meetings and national conferences. The states listed

... the need for engaged, educated insurance professionals to guide consumers along their paths to financial security is apparent. previously and others that are considering similar laws and regulations recognize that association membership demonstrates an agent’s commitment and dedication to professionalism and provides many of the same benefits as traditional CE courses. The combination of continuing education and professional association membership ensures that advisors stay on top of an ever-changing industry. Knowledgeable, professional agents are more likely to enjoy successful careers, serve the best interests of their clients and bolster the reputation of the life insurance industry. Mark Briscoe is senior director of strategic communications at NAIFA. Mark may be contacted at mark.briscoe@innfeedback.com.

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More than 850 financial services companies in more than 70 countries turn to LIMRA first to help them build their businesses and improve their performance.

INSIGHTS

Caregivers Need To Take Care Of Their Own Protection First Fewer caregivers own life and disability insurance compared with the general population. Why they need help protecting their families from risk. By James T. Scanlon

ver the past several decades, advances in medicine and better living conditions have helped more Americans live longer. According to a LIMRA analysis, a 65-year-old couple has a 50% chance of both members living past age 80. But older Americans increasingly need caregiver help — and often it falls on family members to provide that care. A recent LIMRA study finds 36% of adults (ages 18-64) say they have been or currently are unpaid family caregivers. That’s 77 million Americans. Among these, 43 million currently provide care to a family member.

Life Insurance

Despite the important and valuable service caregivers provide, only 41% of current caregivers own life insurance. When you consider the cost of hiring someone to replace a caregiver if they should die, it is worrisome that more caregivers don’t own life insurance. The benchmark rate of life insurance ownership in the U.S. for this age group equals 58%, which is 19 points above the mark for caregivers, according to the LIMRA/Life Happens 2018 Insurance Barometer. Yet, LIMRA’s study of unpaid family caregivers clearly shows these consumers understand how important it is to own life insurance. Seventy-eight percent say they should have life insurance. This is a 37-point gap from their actual ownership rate, which suggests more than 28 million caregivers want to acquire coverage. The top reasons current caregivers give for not purchasing life insurance are: 72

» Too expensive – 45% » Other financial priorities – 27% » Haven’t gotten around to it – 23% These are very similar to responses the general population gave. But we know that the majority of Americans overestimate the cost of life insurance. According to the 2019 Insurance Barometer Study, consumers, on average, believe the cost of life insurance is three times its actual cost. Life insurance marketers have an opportunity to help these consumers by educating them on the actual cost of coverage and the risks that care recipients face if their family caregivers don’t have adequate life coverage.

LIFE INSURANCE OWNERSHIP AMONG CURRENT UNPAID FAMILY CAREGIVERS

25 MILLION 5 MILLION 15 MILLION

Communications

The caregiver persona is a powerful association for many working-age adults. It characterizes a stage of life to which many will

InsuranceNewsNet Magazine » September 2019

Not enough life coverage Enough life coverage

DISABILITY INSURANCE OWNERSHIP AMONG CURRENT UNPAID FAMILY CAREGIVERS No DI coverage

Disability Insurance

Becoming disabled is another significant risk for caregivers, particularly if they are also wage earners. A disability is even more likely than a premature death, and it puts both the caregiver and care recipient at risk. Most consumers do not understand the risk of a disability. More than 25% of those who are 20 years old today will be out of work for a year or more due to a disability before they reach retirement age, according to the Social Security Administration. Only 17% of caregivers own disability insurance. This is five percentage points lower than the general population of working adults. The gap between attitudes and behavior regarding DI is even larger. The data in the chart to the right suggests a 62-point gap between caregivers who “should” own DI coverage and those who actually own it. In all, 68 million caregivers need DI coverage. This includes 63 million who do not own DI, and 5 million who do not own enough coverage.

No life coverage

36 MILLION

2 MILLION 5 MILLION

Not enough DI coverage Enough DI coverage

dedicate years. During this time period, the presence of care recipients creates a persuasive need for life, disability and longterm care coverages. While displaying sensitivity to the demands on caregivers, advisors and companies can focus on helping caregivers understand the value of life insurance and disability products and the protection they provide for their families’ financial well-being. James T. Scanlon directs a team of LIMRA researchers focused on insurance product and service marketing. He conducts projects with a focus on key consumer segments, including the middle market, affluent markets and small-business owners. He may be contacted at james. scanlon@innfeedback.com.

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Learn how it works and how to get FREE access at