October 2012

October 2012

Life Annuities Health

SPECIAL ELECTION COVERAGE

PAGE 20 ALSO INSIDE: Legendary Legacy Planning PAGE 30 Low Interest Rates Hurting VA Sales PAGE 42

+

JOHN C. MAXWELL The 15 Invaluable

LAWS OF GROWTH

Every Leader Must Know PAGE 12

My client wants certainty.

Looking for a way to provide your clients with a measure of certainty and give them flexibility, at the same time?

SecureLiving Index 7 and Index 10 Plus offer safety and security no matter the market with bailout cap rates as high as 3.10%.1

and y t i l i b i x e fl

SecureLiving Index Annuities with innovative bailout feature positively impacts your clients’ retirement plans flexibility by allowing them to: • Prepare for the unpredictable with flexibility for their

money in a low interest rate and renewal cap environment • Protect their options if faced with a lower than expected

cap rate renewal And, our promise that if the renewal cap rate falls below the bailout cap rate, they have access to their full contract value2.

SecureLiving® Index Annuities — Prepare for the unpredictable Contact your general agency or visit us at genworth.com/indexannuities Rates as of 4/30/2012 for SecureLiving Index 7.

Rates are lower in AK,MN,MO,OR,PA, and WA. 2 Without surrender charge or Market Value Adjustment 1

Issued by Genworth Life and Annuity Insurance Company, Richmond, VA SecureLiving® Index Annuities, Individual Single Premium Deferred Annuities with market value adjustment and optional indexed interest crediting, subject to policy form series GA3003-0711, GA3004-0711, GA300R-0511, et. al. In AK,MN,MO,OR,PA, and WA, policy form series ICC11GA3001, ICC11GA3002, and ICC11GA300R et. al. Features and benefits may vary by product, state and market and may not be available in all states. Genworth Life and Annuity Insurance Company is licensed in all states except New York.

All guarantees are based on the claims-paying ability of the Genworth Life & Annuity. Withdrawals may be taxable and a 10% federal penalty may apply to withdrawals taken before age 59½.

This is a brief product description. Consult the annuity contract for a detailed description of benefits, limitations, and restrictions.

Although the contract value may be affected by the performance of an index, the contract does not directly or indirectly participate in any stock or equity investment including but not limited to, any dividend payment attributable to any such stock or equity investment.

Genworth Life & Annuity is a Genworth Financial company. Genworth, Genworth Financial and the Genworth logo are registered service marks of Genworth Financial, Inc. 131468 05/07/12 FOR PRODUCER USE ONLY. NOT TO BE REPRODUCED OR SHOWN TO THE PUBLIC.

© 2012 Genworth Financial, Inc. All rights reserved.

Preparation

• Indexed UL University • One on one Coaching

• Sales and Presentation Training • Complete Resource library

Presentation

• Exclusive Software – most powerful IUL presentation ever created!

• Simple & Easy to understand visual tools for consumers • Dynamic Comparisons that simply blow away traditional retirement plans • News, Media, & Industry Statistics to stack credibility • Consumer Videos that make your job easier

Prospecting

• Ready-to-go TV Shows • Custom Website, designed to sell and generate leads • Field Tested Mailers that get results • Instant Social Media plugins make you an instant star • Complete Seminar Program

vIew oUr Free vIdeo

Take your IUL sales further with the only IUL Total Sales Solution on the market.

For additional information and a free vIdeo, go to www.IULSalesMachine.com

800.290.7226 ext. 161 brokersalliance.com | info@brokersalliance.com

OCTOBER 2012 » VOLUME 5, NUMBER 10

» read it

Scan this QR code with any QR code reader on your smart phone

IN THIS ISSUE

View and share the articles from this month’s issue

online

insurancenewsnetmagazine.com/October12

ANNUITY 40 G uggenheim Quietly Becoming a Major Annuity Player

By Linda Koco The quiet arrival of Guggenheim Partners into the retail fixed annuity business came somewhat unexpectedly to industry professionals, and now the company’s interest in Aviva USA has people talking.

42

INFRONT

42 L ow Interest Rates Hurt VA Sales, Spur Changes

20 E lection 2012

By Steven A. Morelli As the election approaches, the all-encompassing issues of tax cuts, tax hikes, health reform, insurance regulation, the fiscal cliff – all leave many questions that may not all be answered even after November 6th.

8 Praise and Fireworks at NAIFA

By Linda Koco At September’s NAIFA annual meeting, membership responded with cheers but also opposition as the association fights for relevancy in an uncertain future.

30 12 FEATURES

2

HEALTH

48 H ealth Reform: Top Earners, Top Taxes

By Kathryn Rolston A guide to the $1 Trillion dollars in 20 new and revised taxes associated with The Patient Protection and Affordable Care Act.

LIFE

50

30 Legacy Planning is Legend Planning

By Katie Libbe Despite a volatile economy, an Allianz Legacy Pulse study reveals that legacy wishes remain consistent: family values trump financial for boomers and elders.

12 T he 15 Invaluable Laws of Growth Every Leader Must Know An interview with John Maxwell Author of The 21 Irrefutable Laws of Leadership and a New York Times best-selling author of more than 60 books, John Maxwell discusses how personal growth must be mastered, and maintained, before effective, true leadership can develop.

By Linda Koco The low-interest-rate environment has propelled variable annuity carriers to make changes and revisions to maintain profitability.

34 Carriers and Castaways

InsuranceNewsNet Magazine » October 2012

By Robert W. MacDonald For the insurance industry and independent agents to have a successful future, they need to invest in each other.

FINANCIAL 50 P roducing a Client Empowerment Event

By Bruce Raymond Wright Build enduring client relationships by understanding their wants, needs and values, and then demonstrating what you know.

American Equity offers more than competitive products, superior service and valuable producer incentives; we’re focused on the future… We’re The One! Strong Company Financials Focused on Building Relationships Proud to be American Owned and Operated #3 All-Time Producer of Fixed Indexed Annuities* Consistent Management Team Working Together for Over 15 Years

re o m n r a to le at s U l l a C 1 7 3 1 7 4 6 888Today!

WE ANSWER THE PHONES!

888-647-1371 www.american-equity.com

*AnnuitySpecs.com

12 INN 10.12 FOR AGENT USE ONLY. NOT FOR USE IN SOLICITATION OR ADVERTISING TO THE PUBLIC. October 2012 » InsuranceNewsNet Magazine 3

· Cut ing Edge Content Validation · Highest Quality Sources · Patent Pending Fraud Engine

59% OF ALL LIFE INSURANCE PURCHASES START ONLINE

ALSO IN THIS ISSUE OCTOBER 2012 » VOLUME 5, NUMBER 10

BUSINESS 54 W hen Foul is Fair

By Dan Seidman Design a simple matrix that demonstrates your advantage over the competition. It works, and your competition will hate you for it.

54

INSIGHTS

56 M DRT: Early Exit Planning Key to Smooth Landing To Retirement

By Gregory B. Gagne An MDRT-member investment advisor outlines the steps to successfully transition both your business’ continuity and yourself into retirement.

58 L IMRA: Guiding Emotion in Marketing

By Scott R. Kallenbach Tap into a prospect’s emotions and positively influence your sales approach.

59% OF ALL LIFE INSURANCE PURCHASES START ONLINE

1

BUY

GET

LEAD FREE

UP TO 20 FREE LEADS

Visit NetQuote.com/oct15 Or cal 87 .415.5153

GET ACCESS TO:

· Ready to Quote Consumers · Cutting Edge Content Validation · Highest Quality Sources · Patent Pending Fraud Engine

Visit NetQuote.com/oct15 Or call 877.415.5153

56

60 T he Dangers of Monopolies in Financial Planning Designations

By Larry Barton Larry Barton, Ph.D., CAP, of The American College discusses a recent provocative statement by a Financial Planning Association executive, and why a “one size fits all” mentality is detrimental to the average American.

60

EVERY ISSUE 6 Editor’s Letter 18 NewsWires

28 LifeWires 38 AnnuityWires

46 HealthWires 59 Advertiser Index

INSURANCENEWSNET.COM, INC. 355 North 21st Street, Suite 211, Camp Hill, PA 17011 tel: 866-707-6786 fax: 866-381-8630 www.InsuranceNewsNet.com

PUBLISHER Paul Feldman EDITOR-IN-CHIEF Steven A. Morelli

ASSISTANT EDITOR Kathryn Rolston

CHIEF OPERATIONS OFFICER Jim Barton

CREATIVE DIRECTOR Jake Haas

PRODUCTION EDITOR Natasha Clague

SENIOR GRAPHIC DESIGNER Carlos Centeno

DIRECTOR OF MARKETING Anne Groff

AND SALES

MARKETING COORDINATOR TECHNOLOGY DIRECTOR REGIONAL ACCOUNT MANAGER (NORTHEAST) REGIONAL ACCOUNT MANAGER (CENTRAL) REGIONAL ACCOUNT MANAGER (SOUTHEAST)

Brenda Salyer Joaquin Tuazon Mark Waters Jesse Barden Brian Henderson

REGIONAL ACCOUNT MANAGER Ken Landis

Copyright 2012 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 355 North 21st Street, Suite 211, Camp Hill, PA 17011, Fax at 866-3818630, or call 866-707-6786. Reprints: Copyright permission can be obtained through InsuranceNewsNet at 866-707-6786, Ext. 115 or reprints@insurancenewsnet. com. Editorial Inquiries: You may e-mail editor@insurancenewsnet.com or call 866-707-6786 ext. 117. Advertising Inquiries: To access InsuranceNewsNet Magazine’s online media kit, go to www.insurancenewsnetmagazine.com, or call 866-707-6786, Ext. 115 for a sales representative. Postmaster: Send address changes to InsuranceNewsNet Magazine, 355 N. 21st Street, Suite 211, Camp Hill, PA 17011.

Please allow four weeks for completion of changes.

(WEST)

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 expressed 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 unauthenticity of, the information published herein.

There once was a successful Producer named Joe who loved selling life insurance and annuities.

After years of hard work Joe found that the only way to grow his business was to duplicate his efforts. He looked into starting his own agency but found that his personal production would drop almost instantly.

Joe realized that in order to start a successful agency he would have to hire, train, and pay recruiters and experienced sales support staff. He would have to provide his recruiters with a continuous flow of leads and his marketers with competitive products and client generation programs not to mention working through mountains of red tape.

Then one day Joe found a new program that eliminated the 800 pound gorilla.

Watch the video and discover Joe’s secret. Learn today how you too can multiply your successful practice at:

www. joetheproducer.com No registration required, enjoy the full video now!

Or scan this QR code to watch it now.

INN _ FP_ a2A _ 0912-0398 Allianz PreferredSM production is not included. Restrictions may apply, contact us for more details. New York production does not qualify. Registered Representative participationMagazine is subject October 2012 Âť InsuranceNewsNet 5 to Broker/Dealer approval.

WELCOME

LETTER FROM THE EDITOR

The Great Red, White and Blue Yonder

BY STEVEN A. MORELLI, EDITOR-IN-CHIEF The plane banked hard on takeoff as if to grant me a view of Chicago like a carpet of light, stoking a goofy grin on my face. I realized then that I love flying, which surprised me because even the mere thought of being hurled sealed in a metal tube into the sky used to send pins and needles to my toes.

I thought about the pilot. Just a regular guy up there pushing buttons and yanking on a stick. For all I knew he could be on his way to being a screaming headline about a pilot who drank 20 shots in the airport lounge before jumping into a jetliner destined to do a backflip with a twist and “Yippeekayaaaay!” all the way to the ground. Yes, I admit it was a darkly bizarre thought, but I have to say I surprised myself again because the image didn’t ripple chills across my scalp.

Somewhere along the way I learned faith. Not in the pilot in particular or Boeing or the guy who is supposed to remember to lock the cargo door, but I believed in all of them as a whole. Everything we do is an act of faith – merging into traffic, stepping into an elevator, sending our children to school.

I thought about the event I just left, back in Las Vegas where the National Association of Insurance and Financial Advisors conducted its annual meeting.

I learned quite a bit at the NAIFA conference and I know many of the members loved it, feeling rejuvenated by the experience.

But some members had points of contention about the direction of the national and questioned the value for their dues dollar. Me, I think a healthy NAIFA is vital for the survival of life insurance agents for many reasons, particularly because producers don’t have many people looking out for them in Washington, D.C. And you know what they say about not being at the table – you end up on the menu.

6 InsuranceNewsNet Magazine » October 2012

Questioning is important. Challenge strengthens. But it was easy to see that the barrage from a few long-timers beleaguered some officers and staff members. After all, they have a tough enough job fighting for their members, so it’s dispiriting to feel like you’re fighting with members.

It seems faith is the crux of this, too.

Some members probably lost the sense the central organization is truly looking out for them and needed to be reassured.

I’m sure many were.

These are uncertain times and in those periods people feel less control. Should I trust my pilot? Is my association keeping my livelihood alive? Is my president ensuring that the America I know and love will be there for my children and children’s children?

Republican or Democrat, Libertarian or Green, everybody has had that last thought – certainly at some time during the past 10 years. But America is still here, still standing for the ideals that make us shine against the darkness that imprisons people, ideas and dreams.

I thought about that on the plane as the sun set behind me and threw long shadows below. Is all the vitriol about politics rooted in anxiety? Is everybody just scared? I am old enough to have seen several elections that were supposed to mean life or death for our way of life, but we have somehow managed to hold onto the essence of America. I have faith that we’ll all keep us aloft.

I was once unable to sleep on planes.

Now I can, like a baby.

Steven A. Morelli Editor-in-Chief

An unmatched package of guarantees and flexibility, on one life or two*

For more information, contact your Choose OptiOnality American General representative, visit eStation.americangeneral.com or call our n Clients can reduce benefits and access cash value without losing guarantees National Sales Desk at 1-800-677-3311.

AG Secure Lifetime GUL nAGLifeSecure time guaranteSurvivor ed death benefiGUL t for security n Early cash value build-up n Competitive 24-month rol ing targets* Today’s clients are asking for more than guarantees…they want Optionality to adapt their insurance to life’s inevitable changes, without sacrificing security or value.

Offer them the next generation of guaranteed universal life insurance from American General Life Companies: ®

SM

Give your clients OptiOnality.

Get GUL quotes-on-the-go with our Rapid Rater on Mobile app for iPhone or Android. *AG Secure Survivor GUL and 24-month rol ing targets are not available in New York.

Policies issued by American General Life Insurance Company (American General Life), 2727-A Allen Parkway, Houston, TX 77019. AG Secure Lifetime GUL Policy Form Numbers 10460, ICC-10460; AG Secure Survivor GUL Policy Form Numbers 11239; ICC-11239. The United States Life Insurance Company in the City of New York (US Life), One World Financial Center, 200 Liberty St., New York, NY 10281.

AG Secure Lifetime GUL Policy Form Number 10460N. The underwriting risks, financial and contractual obligations and support functions associated with the products issued by American General Life and US Life For more information, contact your are thAn eand issuinunmatched g iflexibility, nsurer’s responsibility. Guaronpackage anteesone are subjelife ct to tofhe or claiguarantees mstwo* paying ability of the issuing insurance company. US Life is authorized to conduct insuraGeneral nce businessrepresentative, in the state of New visit York. Policies American or call our National 1-800-677-3311. and riders not available in all states. American General Life Companies, www.americangeneral.com, is the marketing name for a group of affiliatedeStation.americangeneral.com domest ic lifeSales insurers,Desk includiatng Amer ican Gener al Life and US Life. IMPORTANT: Prior to soliciting business, be certain that you are appropriately licensed and appointed with the insurer and that the product has been approved for sale by the insurer in that state. If uncertain, contact your American General Life Companies representGive ative for assiyour stance. clients OptiOnality. n n n n

Clients can reduce benefits and access cash value without losing guarantees Lifetime guaranteed death benefit for security Early cash value build-up Competitive 24-month rolling targets*

AGLC106053-INN ©2012. All rights reserved.

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC.

Get GUL quotes-on-the-go with our Rapid Rater on Mobile app for iPhone or Android. *AG Secure Survivor GUL and 24-month rolling targets are not available in New York.

Policies issued by American General Life Insurance Company (American General Life), 2727-A Allen Parkway, Houston, TX 77019. AG Secure Lifetime GUL Policy Form Numbers 10460, ICC-10460; AG Secure Survivor GUL Policy Form Numbers 11239; ICC-11239. The United States Life Insurance Company in the City of New York (US Life), One World Financial Center, 200 Liberty St., New York, NY 10281.

AG Secure Lifetime GUL Policy Form Number 10460N. The underwriting risks, financial and contractual obligations and support functions associated with the products issued by American General Life and US Life are the issuing insurer’s responsibility. Guarantees are subject to the claims paying ability of the issuing insurance company. US Life is authorized to conduct insurance business in the state of New York. Policies and riders not available in all states. American General Life Companies, www.americangeneral.com, is the marketing name for a group of affiliated domestic life insurers, including American General Life and US Life. IMPORTANT: Prior to soliciting business, be certain that you are appropriately licensed and appointed with the insurer and that the product has been approved for sale by the insurer in that state. If uncertain, contact your American General Life Companies representative for assistance.

AGLC106053-INN ©2012. All rights reserved.

FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC.

October 2012 » InsuranceNewsNet Magazine

7

INFRONT

TIMELY ISSUES THAT MATTER TO YOU

Praise and Fireworks at NAIFA M embers stood up and cheered NAIFA at the annual meeting, but opposed measures the leadership considered vital for the association.

By Linda Koco

T

his year’s annual meeting of National Association of Insurance and Financial Advisors (NAIFA) reverberated with praise and fireworks.

Members voiced strong support for NAIFA’s advocacy efforts regarding the national debt, taxation and health care reform – issues about which the 122-yearold advisor’s association has long spoken out – but they opposed and defeated some measures the association board had proposed to strengthen the association.

The seemingly incongruous responses are not unfamiliar in the insurance industry today. Many groups, organizations and companies have seen polarization among their troops as the entities try to stay on track and grow amid powerful forces – the prolonged low-interest rate environment, stock market volatility, tax uncertainty, increased regulation, product curtailments, customer hesitance, reduced revenues and related challenges.

It is always possible that the tensions could evolve into divisiveness that harms the industry infrastructure. But the opposite may also be the case, that open discussion of pros and cons may lead to solutions that revive organizations and fine-tune them to meet current and coming needs. The happenings at NAIFA 2012 bring the struggle and the potential to the surface.

Positive Strokes

In national matters, members gave hearty applause for the association’s plan to converge on Washington for a spring conference. That’s where they plan to make face-to-face visits with members of Congress in favor of preserving the tax benefits of life insurance products.

“We cannot underestimate the value of the face-to-face meeting,” declared President Robert A. Miller in remarks about that plan during the annual Town Hall meeting. “It is necessary and it works!”

8

That one comment alone produced hearty applause all around.

This was not casual support. On the very next day, Miller drew a standing ovation and rolling rounds of applause when he implored members to “do what we do best – meet with our legislators, serve our clients, and spread the word to NAIFA members far and wide … that our voices need to be heard thunderously on Capitol Hill.”

NAIFA CEO Susan Waters drew unquestioned support also when she summarized the future advocacy plans for the association. “The association will work to protect the taxpayer status of life insurance and annuities,” she vowed, to a healthy round of applause.

The association will work to “define a workable fiduciary duty,” she continued amid more clapping; to continue to “seek improvements to the Affordable Care Act” (still more clapping); and to work on issues such as recruiting, attracting younger and more diverse demographic, and promoting the value of life insurance to the public.” (That last drew clapping followed by a standing ovation when Waters reminded the audience of how, for more than 120 years, NAIFA members have used “the miracle of life insurance” to help clients fulfill their dreams.)

But Resistance Also

In organizational matters, however, the fire went in the other direction. Members voted down three proposals presented by their own board – proposals to change the by-laws in a way that the board said would strengthen the association.

Glimmers of the rejection were evident in the jam-packed Town Hall session. The audience clapped politely upon hearing the proposals, but once the microphones opened up, numerous members spoke vigorously against the proposals while just a few spoke in favor. The proposed by-laws changes sought to: Increase dues in 2013 by $15. It’s a “modest increase,” said NAIFA Treasurer Matthew Tassy, but without it, “NAIFA will face a fiscal deficit if there is no growth in membership.” But objections followed, including one from a member

InsuranceNewsNet Magazine » October 2012

who suggested that increasing membership is more important.

Give the board authority to set national dues. That would help the board to manage revenue and expenses to ensure a balanced budget, and it would provide flexibility to build up reserves to an appropriate level over time, Tassy said.

But some members rejected the notion of giving broad authority to the board, preferring instead to keep such decisions in the hands of the membership.

Change the candidate selection process in a way that results in a vetted slate of candidates for Trustee and Secretary. The vetting process would ensure qualified leaders while avoiding the politics and risk inherent in the contested election process, said Miller. The vetting approach will help the association focus on more important matters like legislation and regulation, added others. But opponents didn’t buy it. Why give up the right to choose the leaders and have input, members asked.

In his general session remarks the next day, Miller openly acknowledged the tensions in the federation. There is a level of distrust that is not healthy or productive, he said, noting states are vying with locals, and some locals can’t fill their officer positions. He agreed there is room for improvement, but advised against painting differences as “us versus them” class warfare. He issued an impassioned call for unity, noting that “the risk is serious.”

Still, by the end of the annual meeting, the members voted down those three proposals.

Not a Demise

No doubt, the defeat of the three proposals is discouraging to the leadership. But for anyone to interpret that as a sign of eminent demise would be a mistake.

As noted earlier, the members who attended that meeting gave resounding support to NAIFA’s advocacy, political action committee, speakers, and programs. And by the way, they also voted in favor of a board resolution. It calls for na-

Do MEDICAL tional/state association partnerships that will help improve cooperative activities and help build trust, as Miller put it. So, they endorsed growth initiatives.

In addition, the eminent demise view is at odds with comments made by many members during casual conversations.

These were words of satisfaction and pride, despite the association’s concerns about membership decline and finances.

A more likely interpretation of events is that the members who vocalized – and voted – “no” may want other solutions than those presented to them.

What could those other solutions be?

During a breakout session at the annual, Sarah Sledek, president and CEO of Limelight Generations, Minneapolis, offered some observations that might trigger a few ideas.

Associations need to be more focused on the future than the past, she said. They also need to be member-centric, for instance by promoting member voices, members pictures and member benefits that members see as having value.

People join because they believe it will help solve a problem, she added. And they renew “because you solved the problem or are in the process of doing that.”

Associations that are relevant and growing are needs-based, Sledek continued. So “cut the crap. Do the must-haves and not the nice-to-haves.”

People, she said, have many of the same needs. “So develop programs and services to respond to those needs, and get rid of the sacred cows if they don’t add value and meet a basic need.”

Looking at it in that light might help to focus on initiatives that enable members (and participants) to get what they value while avoiding or minimizing changes that “take away” (whether it is money, access, input or something else).

Agreed, that’s a pretty simplistic approach. Actual solutions are always more complex. But the ideas could at least be a starting point for thinking about preserving what is working and reinventing what is not. This applies not just to NAIFA but to organizations everywhere, and perhaps even to companies.

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning.

Linda can be reached at Linda.Koco@ innfeedback.com.

IMPAIRMENTS

for Life Insurance Make Your Head Spin?

Breast Cancer with Negative Receptors Regurgitation of the Tricuspid Valve

Lacunar Strokes

EBCT Score in the 95th Percentile

NT-proBNP of 400 Hypertrophic Cardiomyopathy

Sleep Apnea with Bi-Pap

Stress Imaging Study with Apical Defects

Bicuspid Aortic Valve Positive CDT Remitting Relapsing MS

Hepatitis C with Bridging Fibrosis Enlarged Aortic Root

Elevated GGT, SGOT and SGPT

Lowered Ejection Fraction

Episodes of DVT

You’ve heard the health impairments above from your clients and underwriters. Don’t know what they mean?

That’s okay, we do!

From impaired risk clients, to low-cost term, to jumbo sized cases, we have the experience to help you find the right company for your client.

Helpin Broker g s Sin

1981

ce

EUGENE COHEN INSURANCE AGENCY, INC.

Life - Disability - Long Term Care - Annuities

9933 N. Lawler Ave., Suite 140 Skokie, IL 60077

Call Today 800-333-4340

Please ask for an Impaired Risk Life Marketer

www.CohenAgency.com

NOTE: All conditions, scenarios, and medical impairments may not be considered insurable by the insurance companies.

Only the insurance company can accept or deny an application after»a formal underwriting process.

Informal inquiries October 2012 InsuranceNewsNet Magazine 9 and trial applications do not guarantee coverage or rate classes. FOR AGENT USE ONLY • NOT FOR CONSUMER DISTRIBUTION

ADVERTISEMENT

B

ring up retirement income to Baby Boomers and the already Retired and it’s not a pretty picture. According to the latest poll done for AARP (What the Economy Means to Voters 50+ – July 2012 – Hart Research/GS Strategy for AARP) when asked, “Looking ahead to the next five years or so, how do you feel about being able to achieve your economic and financial goals?” 60% of Baby Boomers and 53% of Retirees are worried/concerned versus hopeful /confident. 45% of Boomers and 31% of the already Retired are dissatisfied with their financial situation today. This thinking creates a huge potential market for advisors who can offer solutions. However, the receptiveness of this market and the fact that they are being bombarded from every direction with people who say they have all the answers makes it harder to cut through the clutter. Or, does it?

In the summer of 2011, AMS along with 3 top producers created a workshop focused entirely

Case Studies* Dave Williams & Retirement Income Puzzle Overview: First to run set of public workshops with the system. Three mailings for nine programs. Outcome: 1.35% average response rate to mailing, 207 total attendees, 60 total appointments, $1.9M closed premium, $2.24M pending plus $1M in pipeline.

Todd Manternach & Marty Willenborg Overview: October 2011 mailing of 10,000 pieces. Outcome: 89 attendees, 20 appointments set AT program, $93,400 in commissions from program, $20,000 pending, $50,000 from Clients & REFERRALS. Our top sales performers used this program more than any other in 2011.

on income in retirement. Based on the premise research done by the Wharton Financial Institutions Center1, they wanted to create a program which addressed the study’s findings: “…without a guaranteed income stream in retirement, middle class Americans will run out of money in retirement.” After testing the workshop, it was taken to the field and has consistently generated great response rates.

Successes from the Field* Vince Virga (NJ): With a 2.25% response rate, he filled within 72 hours and had to increase room capacity to accommodate the extra respondees.

Gary Wedge (MI): He had 206 attendees and had to add a 4th night for 36 more people on his waiting list!

10

The beauty of this program is that it works across three specific demographics: Middle America, Upper-middle class, and the High Net Worth segment. These target markets are easily reached with the postcard mailer, which along with being more cost-effective than other methods, has a proven track record. The mailings have been well tested with a multiple of mail houses and list vendors providing excellent results.

As you can see from our sampling of case studies, response rates over 2% have been attained and over 1% the norm.* The message in the invitation is action-provoking with the proof being in the immediate response rates after mail delivery.

The immediate response to this program is both satisfying and motivational. Per the producers’ own stories, many have had to increase space or add additional dates to accommodate the overflow of respondents. When was the last time your marketing created a wait list?

1 Wharton Financial Institution August 2012 14, 2007 - http://fic.wharton.upenn.edu/fic/policy%20page/whartonessay18.pdf InsuranceNewsNet MagazineCenter, » October * Your results may vary.

ADVERTISEMENT

Consistent results are also an inherent part of this program.

Over and over, the stories reveal the positive outcome, not only in the initial response, but in the actual program. The message is engaging and, presented in an hour’s time, it is just right

for keeping the attention of these busy people while easily fitting into any schedule. A typical response to an informational session may evoke images of empty seats and dosing participants, but this is an active presentation which creates strong audience

engagement and participation.

As an advisor, looking at this program would be a wise decision. Asset Marketing Systems and their team can provide the case studies, program and information needed to adequately explore this opportunity.

It’s difficult to argue with proven results...

Seminar marketing and direct mail continue to rank among the most effective ways to generate new prospects. That’s why Asset Marketing Systems has a variety of successful, field-tested marketing systems to meet your needs.

Would you like to generate consistent sales with a program proven to fill seats with prospects and drive your audience to take action? Asset Marketing Systems has developed a way to address the major concerns of most Americans thinking about their financial future. Once you learn the Retirement Income Puzzle program, clients will turn to you for help creating a reliable, sustainable income in retirement and happily refer their friends and family. Visit www.amspuzzle.com to get started with the Retirement Income Puzzle today. These results don’t lie.

Uncover how one agent closed $1.93M with only 3 mailings* - Free report shows how Senior financial advisor Dave Williams did three mailings for a total of nine programs from September through November 2011 with an average response rate of 1.35%. The program drew solid crowds filled with middle-American prospects ready to take action. $1.93M premium closed • $2.24M pending (in transfer) • $1.00M estimated in pipeline Filled with engaging and relevant information, the Retirement Income Puzzle resonates with: Middle-America • Upper Middle and High-Net-Worth Prospects • Pre-retirees and Retirees

Download the Retirement Income Puzzle Report

You can download free sample presentation slides and an outline of the system at

www.amspuzzle.com

October 2012 » InsuranceNewsNet Magazine

11

GROW OR WITHER

JOHN MAXWELL’S

12 InsuranceNewsNet Magazine » October 2012

15

INVALUABLE LAWS OF GROWTH EVERY LEADER MUST KNOW

GROW OR WITHER

N

ot only did John Maxwell write the book on leadership, but he’s also rewritten the book many times and in many forms to examine different aspects of leadership. You might know him for The 5 Levels of Leadership or The 21 Irrefutable Laws of Leadership or The 360° Leader or any number of others.

Even if you have not read one of his 23 million books in 47 languages or heard him in one of his many events worldwide, you have likely been influenced by someone who learned from John’s lessons.

As John focused on how people can become better leaders, he realized that personal growth has to happen before effective, true leadership develops. This revelation led to his newest book, out this month, The 15 Invaluable Laws of Growth.

In this interview with InsuranceNewsNet Publisher Paul Feldman, John discusses the importance of personal “growth planning” and why many leaders miss this invaluable leadership lesson. It’s a lifelong pursuit that leads not only to effective leadership but a fulfilling life.

FELDMAN: In The 15 Invaluable Laws of Growth, one of my greatest takeaways came from the first page. That was about having a plan for your personal growth and I realized that I didn’t have a plan myself. I have plans for everything else, my business, my family, my retirement.

Do you think that is typical of business owners, that they have many plans in their lives but don’t have an intentional plan for personal growth?

MAXWELL: Yes. I’ll also say that I had the same reaction you did. When I was asked by a mentor, Curt Kampmeier, in the early 1970s about a plan for growth, I didn’t have one. I never even thought about having a plan. I went to all my friends and asked them if they had a plan.

Nobody had a plan.

What I tell people is nothing is going to happen until you become intentional.

Nothing gets better automatically. The only thing that’s automatic after we’re born is if we hang around long enough, we get to die. We don’t have to work on

FEATURE

The 15 Invaluable Laws of Growth 1. The Law of Intentionality – Growth Doesn’t Just Happen. To reach your potential and become the person you were created to be, you must go out of your way to seize growth opportunities.

2.

The Law of Awareness – You Must Know Yourself to Grow Yourself. Seek what you were put on this earth to do, then pursue it with all your effort.

3.

The Law of The Mirror – You Must See Value in Yourself to Add Value to Yourself. Self-esteem is the single most significant key to a person’s behavior.

4. The Law of Reflection – Learning to Pause Allows Growth to Catch Up with You. Investigate, Incubate, Illustrate.

5.

T he Law of Consistency – Motivation Gets You Going, Discipline Keeps You Going. Small disciplines repeated with consistency every day lead to great achievements over time.

6.

he Law of Environment – Growth Thrives in Conductive Surroundings. Do all T you can to grow yourself and create the right environment for others to grow.

7.

The Law of Design – To Maximize Growth, Develop Strategies. Predictably achieve goals with a system of specific, orderly, repeatable principles and practices.

8.

he Law of Pain – Good Management of Bad Experiences Leads to Great T Growth. Facing difficulties is inevitable. Learning from them is optional.

9.

T he Law of The Ladder – Character Growth Determines the Height of Your Personal Growth. Focus on being better on the inside than on the outside.

Character matters.

10.

he Law of The Rubber Band – Growth Stops When You Lose the Tension T Between Where You Are and Where You Could Be. Like rubber bands, we are most useful when we are stretched.

11.

he Law of Tradeoffs – You Have to Give Up to Go Up. Learn to see tradeoffs T as opportunities for growth.

12.

he Law of Curiosity – Growth is Stimulated by T Asking Why? Explore, ask questions, evaluate what you find. Repeat.

13.

he Law of Modeling – It’s hard to Improve T When You Have No One But Yourself to Follow.

Choose your role models and mentors carefully; their values will become the basis for yours.

14.

he Law of Expansion – Growth Always Increases T Your Capacity. Stop doing the expected and start doing the unexpected.

15.

The Law of Contribution – Growing Yourself Enable You to Grow Others. Be inspired. Be inspiring.

it. We don’t have to hire anybody to help us. We don’t need to consult. We just die.

Paul Harvey [the late radio personality] said, “You can tell you’re on the road to success – it’s uphill all the way.”

FELDMAN: Is the key to all success as simple as one word, “growth”?

MAXWELL: Without question. I’ve been intentionally growing since the early 1970s and I owe more to that than anything else because that has allowed me

to expand my world, expand my thinking and not run out of gas.

If you’re goal-oriented, you’ll hit a goal and get satisfied. But if you’re growth-oriented – Well, I’ve never met anybody who said, “I’ve grown to my maximum potential.” I’ve never met anybody like that. You never run out of growth. You may run out of goals. You may hit your dream or your goal and say, “What now?” and plateau, but you’ll never run out of growth.

So I became intentional on it and have October 2012 » InsuranceNewsNet Magazine 13

FEATURE

GROW OR WITHER

continued to be intentional to this day and will until my dying day. That’s what I’ll do.

FELDMAN: What are the “Invaluable Laws of Growth”?

MAXWELL: These laws will work 100 years from now. They would have worked 100 years ago. The laws work because they’re not bound to culture. I take every law through this grid. Is it culture-bound?

Is it gender-bound? Is it time-bound? And I have to answer to all those.

Just like the law of gravity works everywhere, the laws of growth just work.

You’ve got to work them, but they work if you do.

I’m passionate about it because as I’ve looked at my 40 years of being on a personal intentional growth plan, every one of these laws has had a place in my life.

Every one of these laws has really helped me. So I thought to myself: why not take personal growth, reduce the principles to laws, spell them out easily and simply, and then let people grab hold of them, and gravitate to them and apply them to their lives?

I feel the very same about this book as I did about The Laws of Teamwork and The Laws of Leadership. I’ve worked them and they’ve worked in me.

If a person asked, “What are the two most important questions I need to answer to be successful in life?” First I would ask what are you doing to grow yourself and how are you getting better?

No. 2 is, what are you doing to grow others? One has to do with personal development, the other with people development. But if you can do those two things well, grow yourself, grow others, you’re going to be very successful.

FELDMAN: Do you think that designing your life is more important than designing your career?

MAXWELL: Absolutely. Look at all the different career changes people have.

I read recently that the average person now has seven career changes. If you understand what your purpose in life is, then you can go to different jobs and be fulfilled. But if you don’t know what your purpose is and you haven’t developed a plan for growth, 14

“I’ve never met anyone who said, ‘I’ve grown to my maximum potential.’

You never run out of growth.” no matter what job you’re in you’re going to run out of gas and you’re not going to be fulfilled.

I always tell people to find their purpose in life. Figure this out and then have at it. Go after those different careers.

I don’t know how many I’ve had – probably six or eight myself. But it doesn’t matter. If you’re always growing, you’re always learning. If you’re always learning, you’re getting better and more valuable all the time. So wherever you are, whatever you’re working on is just going to get better.

FELDMAN: How has “intentional” personal growth affected your own life?

MAXWELL: I would say that it really hit me on the 10th anniversary of The 21 Irrefutable Laws of Leadership, when my publisher asked me to do a revised edition. So I said sure and thought I’d go in and tweak it, take 10 or 15 percent of the book and change it.

I started reading the book and I got very depressed – very depressed. In fact, I thought this is not near as good as I thought it was when I wrote it.

I was in a funk for two or three days and then it hit me. The reason that I was so depressed is in the 10 years, I had grown but the words on those pages didn’t change.

So here I am 10 years after I wrote The 21 Irrefutable Laws of Leadership, it’s already been a major bestseller, and I’m discouraged with it because I’ve grown, but the book hasn’t. That’s a classic example of what personal growth will do to a person’s life.

If you can look back five years ago in your life and be extremely content and fulfilled, there’s something wrong.

Not because five years ago was bad, but in those five years you should have grown. So when you look back it should seem a little bit mundane and simple to you and probably a little too basic. Growing people continually make themselves more valuable to themselves and to others.

InsuranceNewsNet Magazine » October 2012

Nothing is worse than having a leader who quit learning 20 years ago, but they’re still leading. They’re leading out of the past and it doesn’t work. That’s why I’m so passionate about it. In fact, although I’m known for leadership, I would say my greatest passion is personal growth. When I wrote my first leadership book, Developing the Leader within You, in the early ’90s, I thought, “There. I’ve written my leadership book.

That’s done.”

I didn’t realize as I kept learning more about leadership that I’d keep growing and write more books. I probably have at least five or six more leadership books I want to write. I mean the more you know about the subject, the more you know you realize you don’t know about the subject.

When you’re growing, the well that you’ve put your bucket down to draw water out of is almost inexhaustible.

Nothing is worse than having a well that doesn’t have any water in it, and it happens all the time to people. They run out of water. They just flatten out and they lose their purpose, and they get very bored with life and they die before it’s official. I see it happen all the time.

FELDMAN: You say that growth has to happen by intention. What do you mean by that?

MAXWELL: If you start walking without a plan, you’re going somewhere but you’re not going where you wanted. People say, “I’m moving.” Of course you’re moving. That isn’t the issue. The question is: where are you moving to?

That’s why intentional growth is essential. When you take intentional growth and couple it with your strengths, the things you do well. Then you’ve got some wonderful things happening in your life.

The return is in your strengths, not in your weaknesses.

FELDMAN: You say that working on your strengths is much more effective then working on weakness, how

GOOD TO GREAT – HOW ADVISORS CAN MAKE THE LEAP

September 2012 Issue 5 ...Volu me 1

Stop trying to force a product that simply doesn’t fit your client’s need for tax-free wealth transfer and strong tax-deferred growth. does your annuity have these features?

• 12% premium bonus • 4% monthly point-to-point cap • 8.5% annual point-to-point cap • Rider that pays nursing home and home health care benefits • Income tax-free death benefit • 9% commission • money Back Guarantee – RoP • $150k in premium gets you a $750 bonus Learn how this annuity-like, single premium life product can solve many of your clients’ needs in this low interest rate environment.

Call 877-844-0900 for more information, plus ask how to become a member of the safe money Places™ agent network and about our Quarterly Commission Bonus Program!

FEATURE

Playing it Sa fe

Remodeling Sense Can Lots of Cen Save You ts!

New lands capin as curb appe g also will add value , as well al, this improveme to your home. Expe rts say climates, wher nt pays back best in temp e you can show off your erate

By Steve Dinn ... en Click here to Read

Personal Fin

ance

How the Hea lth Care Law Impact You Will r Taxe

s The intent of this articl e is to the Affordable Care Act will explain how pocketboo impact your k in 2013 ...

By Thompson Myers and Associates, Click here PC to Read

Safety Pins

Reflecting on a half cen economic tury of growth

10 Money Questions You Need To As k Yourself ond

- by Raym

J. OHlson

CLU, CR

Before you C determine what you shou money, eithe r ld do with your of a financial figuring it out by your self or with professional the help some hard , you need questions. to ask and answer The questions financial need will help you understan sold the wron s really are so you don’ d what your t choose or g solutions professional and help both get find the right you and any solutions.

Today, almo st definition (aboueveryone who meet s the pove rty chosen poorl t half the 1962 share ) has y on education and paren

By Dr. Mich ting. ael Hicks Click here to Read

Safe Retire

ment

When you hea what do you r the word annuity , think

of?

The first annu ities were Empire as issued by the a reward to legionnaires Roman service. Two for their millennium being used later annu ities are still to provide a dependab

By Dr. Jack le income.

Marrion Click here to Read

Safe for Lif e

Striking a Safe Bala nce in You Fitness Life r

Most succ essful athle tes, business and fitness enthu people, outcome orien siasts possess a balance of ted and proce ss oriented

By Dan Hubb drive. ard M.Ed. Click here to Read

Call now to sign up for our free, informative Safe Money News™ Newsletter.

Raymond J. ohlson, ClU, CRC is President and CEO of The Ohlson Group, Inc. and President of Safe Money Places International, LLC. 877.844.0900 | www.ohlsongroup.com | info@ohlsongroup.com

... a different experience

October 2012 » InsuranceNewsNet Magazine

15

FEATURE

GROW OR WITHER

do you determine what your greatest strengths are?

MAXWELL: There are four things to know. One, what are you good at? If you can’t sing that’s not a strength, so don’t try it. If you’re not technical, don’t be a technician. What are you good at?

The second thing is to take a strength finders test. Marcus Buckingham did a great job with a book that helps people discover what their strengths are.

Third: Ask your friends. Ask people around you. Ask people you work with, “What do I do well? What do you think I do well?”

Fourth: Then ask yourself what you’re intuitive in, because we’re intuitive in the area of our strengths. We’re not intuitive in the area of our weaknesses. People will say, “I’m not an intuitive person.” Yeah, you are. Everybody is, but you’re intuitive in the area of your strengths.

So if it’s leadership, I’m very intuitive.

My goodness, you just put me in a leadership situation and I can feel my way through it. If it’s technology, I’m told I have no intuition at all. I know nothing and I can’t figure it out. So we’re intuitive in the area of our strengths.

So, when people ask, “What are my strengths?” I say, “What are you intuitive in? What do you do well by gut and just your intuition? That will be what your strength is.”

FELDMAN: Are there a number of strengths that people typically have?

MAXWELL: People have two, maybe four at maximum. People don’t have a lot of strengths. I’m not talking about what you’re average in but what you’re really good at. When you find it, that’s where you need to do your growth plan.

You need to apply everything you do in personal growth toward strengths, because that’s where you’ll compound everything. If you play your growth plan to your weaknesses, all you’ll be is distracted and deluded. So you’ve got to really find your strengths and stay there.

FELDMAN: So, you advocate focusing on strengths and not weakness for maximum growth. Do most people focus on the wrong thing?

16

“If you can look back five years and be extremely content and fulfilled, there’s something wrong.”

MAXWELL: Yes, it happens all the time because it’s our culture. When you’re a child and you’re failing, what do they have you do as a kid? They have you work on your weaknesses. When you go to school, what do they do? They have you work on your weaknesses.

If you got an A in math and a C in English, what do they do? They say, “Go work on your English.” I say don’t work on your English. Thank God you got a C. You probably deserved a D. Don’t take yourself too seriously. You’re not good in everything. You can’t be good in everything.

In areas of skill, we can usually only increase two numbers, maybe three, but no more. So if I’m a two, really below average, that means if I work hard on it I may get up to a four, which is still below average. People don’t pay for average. That’s not going to help anybody.

But if you’re a six in something, my goodness, you could become an eight if you decided. Now if you get in the top 20 percent, doggone, people will stand in line for you. You can help people, do business, and make some money. It all works. But you’ve got to grow and focus on your strengths because that’s where your return is going to be.

Now, when I say don’t work on your weaknesses, I’m talking about giftedness, ability and skill set. But, by all means, when it comes to choices, work on your weaknesses. In other words, if you’re lazy, that’s a choice. That’s not a skill. Then you’ve got to work on your laziness and get some discipline or else you’ll never be successful. In

InsuranceNewsNet Magazine » October 2012

areas of choice, work on your weaknesses.

In areas of skill, work on your strengths.

FELDMAN: What are some other areas of choice people should work on?

MAXWELL: Attitude is a choice. That’s why you’ve seen people who have had a bad attitude and one day they just turned around. Everybody looked at them and said, “Man, what happened? They used to have a terrible attitude and all of a sudden they’ve changed.”

Well, it’s because it’s a choice. In areas of choice, two things happen that in areas of skill don’t. In areas of choice, your growth is much greater than in areas of skill.

If I’ve got a lousy attitude, I’m a zero.

If I really work at it and make a choice to change, that can go up to a 10. I mean you can go from zero to 10 in choice areas. In skill areas, you can only go up a couple numbers because we’re not wired for things that we can’t do well. Secondly, in matters of choice you can also grow faster than in matters of skill.

When people take off like a rocket in their growth it’s in areas of choice, not in areas of skill. Skill takes longer. So you can grow faster and grow higher in choice than you can in skill.

Always grow.

NEXT MONTH: John Maxwell talks about the choices he had to make to become a success and how to empower leadership from everyone on your team.

Groundbreaking Material

FEATURE TITLE

FEATURE

The MOST IMPORTANT and INNOVATIVE MARKETING AND SELLING SYSTEMS EVER CREATED Enable Advisor to Average $16 Million in Annuities Every Year — Featuring POWER PLAYER supreme Tami Simpson — “Tami’s story is not unique, it is my story, and it may be your story too. This is a tough business and we are operating in tough times. By tapping into her own creativity, support by the Wealth Financial Group marketing team, and learning from other Power Players, Tami’s business grew over 500% in just three years. Please download this important FREE REPORT. Change is happening quickly and this isn’t the time to wait!”

—Steve Lewit, CEO of Wealth Financial Group “ In following the systems designed, created and tested by other Power Players, I not only produced $16 million in annuities, but I also found peace of mind, confidence and joy in what I do every day.

our market. The Power Players at Wealth Financial Group have figured out how to meet and stay ahead of today’s complex marketplace.

I went from being a registered nurse to a pastor to a financial advisor, and nothing was harder than not knowing where my next piece of business was coming from. Even writing $3 million a year in the beginning, I was not enjoying myself and felt I was at the mercy of the market, the competition, and my clients. Every morning I would wake up wondering if my next marketing activity would produce and if my next sales call would close.

It didn’t take long before I lost my confidence and my energy. I needed help to reclaim my confidence and my life!

These Players are all in the trenches, and so is Steve Lewit, even though he owns a marketing organization.

Like me, they want to share their story in detail with you. That is the bottom line reason for the Power Player’s Conference.

The brutal fact is that 99% of all marketing and sales systems fail badly. The reasons vary from unrealistic production promises, to vanilla marketing, to unpredictable and inefficient mentoring models. The list goes on. In reality, the majority of systems suffer from a fundamental lack of documentation, training, coaching and personalization.

Unfortunately, most systems don’t evolve with the business changes in the industry and the psychology of the people in

“By following the lead of other Power Players and conferring with Wealth Financial Group’s marketing and selling team, I grew my business over 500% in just 3 years.”

Just ask yourself this important question: “IS STATUS QUO AN OPTION FOR ME?” Can you keep doing what you’re doing? Will it get you – Tami Simpson where you want to go? Will it help you reach your potential? Will you find it gratifying—will it increase the quality of your life? If you answer “NO” to any of these, I hope to see you at the Power Players Conference so that I, and the other Power Players, can teach you what we have learned on the journey.

This is a MUST DOWNLOAD Special Report!

• Learn cutting edge marketing and selling techniques guaranteed to perform • Incrementally increase your business without spending a fortune • Achieve predictable results that give you peace of mind NOVEMBER

8 – 9,

2012

•

THE

AN COSMOPOLIT

of

LAS

VEGAS

Instantly download the FREE Power Players Conference Report by visiting www.PowerPlayersConference.com or call our 24-hour hotline 1.888.333.7771 today!

October 2012 » InsuranceNewsNet Magazine

17

[NEWSWIRES]

Study Shows Insurance Fraud Growing bitly.com/FraudStudy

Allianz to Pay $10 Million to Settle Sales Complaints Allianz agreed to pay $10 million to settle complaints of unsuitable annuity sales between 2001 and 2008, according to state insurance departments.

The money will be distributed among 43 participating states, says the Insurance Division in Iowa, which was the managing lead state in the settlement. The other lead states were Minnesota, Missouri and Florida.

In the settlement document, Allianz says it will review old and new complaints involving fixed annuities purchased in those years, offer a retroactive policy cancellation and full refund for justified complaints, change the format of its policy annual reports, maintain training and monitoring of agents, require conformity with some monitoring provisions of the National Association of Insurance Commissioner Replacement Model regulation, and submit reports to the lead states to confirm compliance.

In settling the complaints, Allianz states it does not admit or concede any actual or potential violation, fault, wrongdoing or liability in connection with the review.

LONG-TERM DISABILITY CLAIMS STILL GOING UP

The Council for Disability Awareness (CDA) has confirmed that in 2011, the number of long-term disability insurance claims continued to increase year over year, while the number of wage earners protected by private disability income insurance declined for the third consecutive year.

In total, CDA says, the council’s member companies paid more than $9.3 billion in long term disability insurance claims during the year, up 2 percent from 2010.

Of the 155,000 new disability claimants approved by CDA member companies during 2011, more than half (57 percent) were women. The age group with the largest increase in new approved claims over the past four years was the over-60 age group.

According to CDA, the 17 member companies that provided the data represent three-fourths of the individual and group commercial dis18

ability insurance market. Barry Lundquist, president of the CDA, says the aging workforce and “painfully-slow” jobs recovery are clearly having an impact on claims.

AIG CONTINUES PLAN TO REPAY BAILOUT LOAN

American International Group continues to sell assets to help pay down the bailout loans it made from the U.S. government during the financial crisis.

The new initiative is to sell part of AIA Group, an Asian issuer, according to an AP report, which says the sale could be for up to $2 billion of AIA shares. The proceeds will be used for general corporate purposes, including possible stock buybacks, AP says.

SMALL BUSINESS CONUNDRUM

Advisors might want to prepare for some mixed messages from their small business clients in the weeks ahead.

On the plus side, 44 percent of small businesses say they are in an improved financial position compared to a year ago, according to a second quarter survey from Capital One Financial.

InsuranceNewsNet Magazine » October 2012

That’s two points above the previous quarter, and higher than those who say that their position is about the same (40 percent). Even so, small businesses rated the national business outlook at six out of 10 points, or 0.4 points lower than first quarter, the McLean, Va., firm says.

CALIFORNIA GETS FRAUD INVESTIGATION MONEY

The California State Legislature has passed Assembly Bill 2138, a bill that raises the current annual assessment of 10 cents per insured paid by health and disability insurers to up to 20 cents.

That would give local district attorneys more funds to investigate and prosecute health and disability insurance fraud in the state, says the California Department of Insurance.

Health and disability insurance fraud is increasing in sophistication, complexity, and volume, the department says. For instance, from 2007 to 2010, the department received more than 6,000 health and disability-suspected fraudulent claims.

Only a fraction was referred to local district attorneys, which resulted in 221 arrests and 184 convictions with an annual average of $223 million in chargeable fraud.

GRANDPARENT CHALLENGE

2.7

MILLION

Northwestern Mutual has been digging into some U.S. Census data, which show 2.7 million grandparents in the U.S. were respon-

QUOTABLE Just offering a wellness program and expecting a majority of employees to participate – the ‘if you build it, they will come’ scenario – is prone to failure. Communication that clearly delineates the benefits of participation to employees is the first step to long-term engagement in wellness programs.

— Steve Bygott, assistant vice president of marketing analysis and programs at Colonial Life and Accident

[NEWSWIRES] sible for the basic needs of grandchildren younger than 18 living with them in 2010.

That’s up 13 percent from 2000 (2.4 million). Meanwhile, the average cost of raising a child from birth to age 18 is more than $225,000, the insurer says, citing U.S. Department of Agriculture data.

“That’s a significant expense grandparents may not have even anticipated, let alone planned for,” comments Senior Vice President David Simbro. But, he adds, “the good news is that it’s never too late for anyone – young or mature – to revisit their financial plans.” This might be a good point for advisors to raise with older clients.

REGULATION CREEP

“An average of 72 major U.S. federal regulations per year have been promulgated since 2009, compared to an average of 45 per year between 2001 to 2008, and 36 between 1993 to 2000.” Surprisingly, the source of that statement wasn’t an insurance professional, though it sounds like something an insurance person would point out in discussing the mountain of new regulations the industry is facing.

No, this time the source was a report from NERA Economic Consulting on behalf of the Manufacturers Alliance for Productivity and Innovation, Arlington, Va. So, it appears that the insurance industry is not alone in its concerns about regulation creep.

The study contained a daunting warning apropos to just about any business.

It said that regulations may reduce the gross domestic product by $240 billion to $630 billion this year, and cut the average household purchasing power by between $1,800 and $5,000.

It’s a worry.

FEE-CUTTING FRENZY

Well, maybe it’s not a frenzy, but the cuts are pretty widespread. Advisor Group, a large independent broker-dealer network, says it is eliminating or significantly reducing mutual fund fees charged to clients of its financial advisors.

“Mutual fund fees associated with exchanges, systematic transactions, ac-

Kids Require a Big Adjustment When marrieds start having children, parents tend not to adjust their life insurance accordingly, says a MetLife employee benefits trends study.

For instance, while 72 percent of married workers without minor children have some amount of life insurance, the study found that only 3 percent more – or 75 percent in all – of married couples with youngsters have some coverage.

This is despite the fact that many employers provide life insurance as a workplace benefit, say researchers for the New York City carrier. What’s more, workers with or without minor children have, in general, only about three times their annual household income covered by life insurance, the researchers say. This amount may be inadequate with the addition of children, they caution, since the number and age of dependents should be considered when determining amount of coverage needed. count inactivity and low balances have been eliminated within brokerage accounts and advisory platforms,” says the New York firm, which is a business of American International Group, Inc. (AIG). “Other fees involving mutual fund-only IRAs have also been reduced.”

So have the minimum mutual fund purchase size, the required holding period, and early redemption charges.

The reductions reflect the firm’s philosophy of enabling advisors “to conduct business on their own terms,” according to the firm’s president and CEO, Larry Roth. Whatever the reason, the change will likely help form a nice welcome mat for when Advisor Group picks up advisors from the Woodbury Financial Services broker-dealer. That will likely happen later this year when Advisor Group’s parent, SunAmerica Financial Group, an AIG company, finalizes its previously announced agreement to purchase Woodbury from The Hartford. By the way, Advisor Group already owns three B-Ds – FSC Securities Corporation, Royal Alliance Associates and SagePoint Financial, Inc. DID YOU

KNOW

?

SOME COMMUNICATIONS JUST DON’T WORK

That is what the Oregon Insurance Department found out. Insurance Commissioner Louis Savage says that the department has stopped sending out its quarterly online agent newsletter, the Regulator, effective following the summer issue. The reason? “Our Web statistics show that few producers read the newsletter,” he said frankly in announcing the decision to fold.

The department is not giving up on communicating with producers, however. As Savage puts it, “We are brainstorming better ways to reach you with updates.” Meanwhile, the department still offers e-mail notices and its website.

Here’s a point to ponder: The Summer issue of the Regulator is eight pages in pdf format, and it’s filled with a variety of articles, data boxes, hyperlinks, contact information and other items.

It’s hard to fathom why only a few read it. Time constraints? Information overload? Irrelevant information? Other?

THE MORTALITY PROTECTION GAP IN THE U.S. – the resources needed versus those available to maintain dependents’ living standards after death of the primary breadwinner – has increased 10 percent since 2001 to $20 trillion, but life insurance coverage per U.S. family has declined 24 percent on average in the same period. Source: Swiss Re October 2012 » InsuranceNewsNet Magazine

19

Behind the headlines, vital issues for insurance are in the balance

BY STEVEN A. MORELLI

20 InsuranceNewsNet Magazine Âť October 2012

ELECTION 2012

P

olitics are often seen as a state of war, especially these days, with many Americans calling this year’s election a fight for the future.

That is also true within and for the insurance industry where some say the consequences of this election will lead to a battle in a far longer war – a 100-year campaign, if you will.

That struggle started in 1913, when life insurance proponents fought for the tax treatment that the public and producers take for granted today. Today, insurance advocates once again call the industry to fight for the tax status, as the mammoth maw of government seeks more revenue. That is just one of the reasons for producers to pay attention. In fact, although this year’s election touches on many areas, some really sensitive ones, it is also setting the stage for industry-rattling events to come next year and the years ahead.

At a glance, those issues are: Taxes – Not only the tax treatment of insurance, but also the effect of income taxes in general and estate taxes in particular.

Health Care Reform – As the taxes and regulations roll out.

Regulation – Many wary eyes are watching the unfolding universal fiduciary standard.

TAXES

The three thin threads – that’s how the Association for Advance Life Underwriting (AALU) describes the tax status essential to life insurance. They are the tax-free inside buildup; the tax-free death benefit; and the ability to remove life insurance from a taxable estate.

Some readers might say that AALU and others ring this alarm bell each year, so why is this or next year any different?

That’s because somewhere out there is a speeding bus with “Tax Expenditures” written on it – and someone is going to get thrown under it.

Tax expenditures are things and activities that are not taxed, so they are considered government “investments.” The tax deduction for mortgage interest would

FEATURE

Republican presidential candidate Mitt Romney is calling for tax reform, cutting all rates 20 percent. His vice presidential candidate, Rep. Paul Ryan, voted for HR 6169, which also calls for reform next year.

be an example of that, projected to cost $134.7 billion next year, according to the Joint Committee on Taxation, a bipartisan, bicameral congressional panel.

Both parties have been calling to remove deductions and reverse tax-exempt status (aka “loopholes”), and both parties once in the Oval Office have eyed insurance as revenue. At the top of the insurance section in the tax expenditures list is the “exclusion of investment income on life insurance and annuity contracts” with a $3 billion price tag. Granted, it is a drop in the trillion-dollar annual deficit but the “lost” tax on inside buildup is larger than many legislators would have guessed.

That was what Robert Miller found out when he visited legislators as the 20122013 president of the National Association of Insurance and Financial Advisors (NAIFA).

“I even sat down with a congressman who is probably one of the brighter ones and I would call him fairly middle-of-theroad and slightly conservative on economic issues,” Miller said. “But when we started talking about insurance as a tax expenditure, he just said, ‘well, that’s just not a big number.’ And when we clued him in, he said, ‘Wow, it is.’ He was a little surprised.”

Miller and the NAIFA staff people with him were able to help the congressman understand the value of life insurance and annuities in light of the tax expenditure. They were able to explain that the industry accounts for 20 percent of long-term savings in the United States and pays out $1.5 billion a day in benefits.

The problem is when legislators see that big, juicy number without understanding the trade-off if the inside buildup, or any

other aspect of insurance, is taxed.

But why is the tax status especially threatened now? First, the resounding march of the increasing debt is drumming up anxiety about the long-term impact on the nation. Simultaneously, both parties are talking about retaining or even increasing tax cuts, deepening the desperation for revenue.

Even if the plan is to broaden the tax base by cutting the tax rate to encourage taxable economic growth while reducing government spending substantially, those will take some years to do. In the meantime the federal government will need more money.

Republicans vow to hold the line on tax rate increases and are calling for lower rates in a reform plan. The Republican-controlled House of Representatives approved HR 6169, the Pathway to Job Creation through a Simpler, Fairer Tax Code Act of 2012. The bill would, among other things, cut the top tax rate to 25 percent and broaden the tax base, partly by reducing tax loopholes. Republican presidential candidate Mitt Romney also calls for a 25 percent top rate. His vice presidential candidate, Rep. Paul Ryan, voted for HR 6169.

The Senate has not passed a companion bill, so the tax rate and other aspects of the tax code would not immediately change. But the legislation does ask for a tax reform plan in the House by April 30, 2013. This is one reason some feel the crosshairs are on insurance in particular next year.

Miller put it in stark terms in a speech during NAIFA’s annual meeting in September: “This threat is serious. …We are one signature from extinction.”

October 2012 » InsuranceNewsNet Magazine 21

FEATURE

ELECTION 2012

ESTATE TAX

Another tax that profoundly affects insurance is the estate tax, which is once again scheduled to change. At the end of the year, the exemption is supposed to drop from $5.12 million for individuals ($10.24 million for surviving spouse) to $1 million, and the top tax rate is to rise from 35 percent to 55 percent, where they were before the Bush-era tax cuts.

The life insurance industry is often conflicted about this. Many producers oppose the tax on its face, that it is unfair and an undue burden on families. In fact, besides raising revenue, one of the purposes of the estate tax was to break the cycle of dynastic wealth early in the 20th century. When the modern estate tax was established in 1916, it was progressive with the exemption starting at $50,000 at 1 percent tax rate and rising to $5 million at 10 percent. Back then, when the average house cost $6,000, you had to be the child of a fancy-pants oligarch to feel the estate tax’s worst sting.

Next year, if Congress doesn’t act, the top rate will hit estates over $3 million.

Three million bucks is nothing to sneeze at, but many would argue that it hardly makes a dynasty.

The tax makes good business for life insurance. Wealthier families (or not-sowealthy, depending on the exemption) are prime candidates for life insurance to soothe the tax bite.

But the estate tax also brings people through the door for other services and products associated with estate planning, which many advanced producers are saying is not happening as frequently.

Miller, along with being a NAIFA officer, is also a partner at Miller-Pomerantz and Associates in New York City and typically deals with wealthy, Wall Street clients.

“Some of our largest sales have been based upon people needing liquidity in their estates,” he said. “It’s very common for me to have clients worth $30 million or $40 million between their real estate and portfolio holdings. And they’re procrastinating because they don’t have an accurate prediction about what’s going to happen. It really has hurt sales tremendously.”

President Barack Obama’s proposed 2013 budget would reduce the exemption and raise the rate, turning the clock back to 2009, when the exemption was 22

Mitt Romney and congressional Republicans have vowed to repeal Obamacare. If Romney becomes president, Republicans get another leg on the stool to take ACA down. Winning the Senate would give them the third leg.

$3.5 million and the top rate was 45 percent. It would also set the gift tax at the 2009 level, a $1 million lifetime exemption and a 45 percent rate. Romney has vowed to repeal the estate tax, but preserve the gift tax rate at 35 percent.

The differences represent a typical starting point between the parties on the estate tax. But, these days any negotiations have been non-starters in Congress. In 2010, the estate tax lapsed completely because of a failure to communicate. The federal government lost $15 to $30 billion depending on the exemption and rate. And many people got another reason to hate Yankees owner George Steinbrenner, who was lucky enough to die in that year.

Edward E. Graves, associate professor of insurance at The American College, doesn’t expect an agreement by year’s end, leading to the far more severe pre2001 estate tax rate and exemption. “Unless we get cooperation in Congress, they won’t be able to get any middle ground, and it doesn’t look like they’re going to do that because they don’t want to compromise on anything anymore,” he said.

“That will be good for insurance because many people who dropped their coverage will want to reacquire it.”

But on the flip side, if the estate tax is abolished, is the heavy thud of many people dropping policies. “It could have some fairly negative ramifications if they do away completely with the federal estate tax,” Graves said. “There’s a heck of a lot of coverage where that’s the only reason it’s in place.”

InsuranceNewsNet Magazine » October 2012

TAXMAGEDDON

Graves’ prediction of continued congressional paralysis will be damaging for other reasons at year’s end. Many have reported with dread that the Mayan calendar runs out this year, leading to prognostications of the end times. But maybe the Mayans foresaw Taxmaggedon.

If Congress does not come up with a deal, Americans will be slammed by the biggest tax increase in history when the Bush tax and payroll tax cuts expire, combining for a $92 billion tax hike.

Now, imagine those horsemen of the Taxocalypse racing across the desert of our economy right for The Fiscal Cliff and now you have the full effect of every economist’s nightmare.

The chief feature of the cliff is the sequestration, a fancy name for the automatic spending cuts that Congress put into the Budget Control Act of 2011 in exchange for raising the debt ceiling. It cuts about $100 billion a year, $1 trillion over 10 years. Half of that comes from defense spending.

Both parties are as firm in their corners on this fight as they have been for the past few years. Republicans want to shift those cuts toward social programs and away from defense and Democrats want greater tax rates on the wealthy.

So, this knot manages to tie up not just the spending cuts but also the Bush tax cuts, virtually ensuring inaction on both.

Perhaps the only bright spot would be that the tax increase would about match the spending cuts, so in a sense it would be neutral. But for many people, that is

Foresters non-med product choices

SELL ANYWHERE

FEATURE

Foresters non-med product choices For final expense planning needs, a nonmed plan up to $35,000 with three levels of coverage offered.

Applying is simple, we depend on answers to questions in the application TM and on the outcome of the underwriting review, based on underwriting requirements and guidelines.

Foresters offers you a variety of non-med products, including UL, Term and Whole Life with coverage up to $250,000.

For You

• Easy-to-qualify-for producer awards – As little as $78k in annual premiums may qualify you for Foresters Destination 2013 in Switzerland.1 • Annualization • Daily commission processing • Point of sale processing • Financially strong

For Your Clients • A variety of non-med products to cover their shortand long-term needs • Backed by a financially-strong provider • Foresters unique package of complimentary member benefits2 includes:

For You

Competitive scholarships Orphan benefits Terminal illness loans3 Everyday Money

• Easy-to-qual Legal Link ify-for producer awards – As little as $78k Start advantages in selling annualForesters premiumsandmayenjoy qualthe ify you for Foresters Get contracted through one of our National Marketing DestinatioPartners n 2013 in today!

Switzerland.1 866 466 7166 (press 1) or USsales@foresters.com

• Annualization

1

Subject to eligibility.

2

Foresters members include Foresters insureds. Foresters member benefits are noncontractual, subject to benefit specific eligibility requirements, limitations and restrictions and may be changed or canceled without notice.

3

Not available as a member benefit in the states of Illinois or New York or on Accidental Death Products.

• Daily commission processing

Foresters™ is the trade name and a trademark of The Independent Order of Foresters, a fraternal benefit society, 789 Don Mills Road, Toronto, Canada M3C 1T9

• Point of sale processing

FOR PRODUCER USE ONLY

October 2012 » InsuranceNewsNet Magazine

408179 US (02/12)

ForestersTM offers you a variety of non-med products, including UL, Term and Whole Life with coverage up to $250,000.

23

FEATURE

ELECTION 2012

President Barack Obama’s proposed 2013 budget would reduce the estate tax exemption and raise the rate, turning the clock back to 2009, when the exemption was $3.5 million and the top rate was 45 percent.

merely gallows humor because they believe the economy would be a smoky ruin if the tax cuts entirely expire and the full sequestration occurs.

But for Kevin M. Lynch, assistant professor of insurance at The American College, the fiscal cliff is one of many points of anxiety. Even worse in his view is that Obama is likely to push for higher taxes for many Americans, not just the ultra-wealthy, he said.

“It’s understood that taxes after Jan. 1st are going to have a dramatic impact on all Americans, not just the theoretical $250,000 and above,” Lynch said. “The fact is that taxes are going up – taxes in general and Obamacare.”

Beyond Taxmaggedon, Lynch said the future under Obama ensures higher taxes and less spending money for Americans. (Obama’s 2013 budget projects taxes to rise from the current 15 percent of the economy to 20 percent by 2022.)

“You take your average family of four and their income, where they spend X percent on protection products and Y percent on savings for retirements, they’re going to have less discretionary, less disposable income to do that,” Lynch explained. “When you step back and look at the broad economic impact of who gets elected and what happens after Jan. 20th, it’s very difficult for people who do not have money to be able to afford to buy products and services that they might want to have.”

HEALTH CARE REFORM IMPACT

Lynch cited the Patient Protection and Affordable Care Act (ACA) as one of the leading drags on the economy.

24

“Much of the concern you’re hearing today has to do with the impact of health care on employers and the mandate,” Lynch said. “On the consumer level, individuals are going to be told that they have to buy insurance. If they don’t, they start out with a penalty. It’s relatively innocuous to begin with, but after two to three years it gets as high as 3 percent of your income.”

ACA has about $1 trillion in taxes to pay for the program and its goal to get everybody covered by health insurance.

Lynch said those taxes will in themselves be a strain for consumers, even apart from consequences presented by other taxes. ACA proponents say reform will ultimately improve the economy by making health insurance more affordable and extending consistent, higher-quality health care to all Americans.

ACA also has the individual mandate in place after the Supreme Court challenge. That decision came as a relief to insurance companies, which demanded the mandate in exchange for universal coverage without accounting for pre-existing conditions. Otherwise, carriers said, they would have been left caring for the sickest part of the population with the healthy not paying premiums until they became ill and bought insurance with no questions asked.

Lynch sees reform’s impact on employers as a “job-killer.”

“As Obamacare is implemented, new requirements are going to be placed upon you to provide different coverages,” Lynch said. “If you don’t do that, then you’re going to be penalized.”

InsuranceNewsNet Magazine » October 2012

The penalty might push up to a third of employers to opt for the penalty and dump their insurance coverage, Lynch said. ACA supporters have agreed with that estimate, because the fines were too low, making it a better deal to take the penalty rather than buy coverage.

Romney and congressional Republicans have vowed to repeal Obamacare.

The House has passed repeal measures a couple of times that have no traction in the Democratic Senate. And of course repeal would face certain veto with Obama. If Romney were president, Republicans get another leg on the stool to take ACA down. What if the GOP also got the third leg of the Senate in this election?

Graves, of American College, said ACA would be the obvious first target: “I think you will see a very expedited effort to repeal the law.”

What would happen after repeal?

“We’re going to have all kinds of chaos because people will not know what to do next,” Graves said. “And everybody will be gnashing their teeth about the amount of resources they committed toward transition.”

Health insurance companies that have spent years planning for reform would have to restructure, but they wouldn’t know what to prepare for. On the other hand, although some health insurance producers have figured out how to do business in an insurance exchange marketplace, many who are uncertain about their role might welcome any alternative.

REGULATION

The elephant, and donkey, in the room is regulation. Neither candidate has said much about regulation directly but its presence is undeniable.

The wake of the economic collapse still has not settled. Even the terms of the Dodd-Frank Wall Street Reform and Consumer Protection Act have not been decided. Graves said as it stands, DoddFrank does little to prevent another financial collapse.

“Whether they (Democrats) are going to put any teeth in Dodd-Frank, I don’t know,” Graves said. “But if Republicans get in they will probably just say ‘dispense with it’ and maybe repeal DoddFrank, although there’s really no reason to repeal it because it’s got no teeth.”

ELECTION 2012

FEATURE

THE ISSUES Barack OBAMA Taxes

Keep the Bush tax cuts for those making under $250,000 a year, but end the Bush tax cuts for those earning more. For families earning more than that, he would raise the top two rates to 36 percent and 39.6 percent, up from the current 33 percent and 35 percent.

Cut spending on tax “expenditures,”* particularly tax breaks for corporations. Obama has not detailed where he would cut loopholes for wealthier individuals and families, but has said tax breaks for income above $250,000 would be capped at 28 percent. Over the long term federal spending would drop from 24 percent to 23 percent of the economy by 2022.

Estate taxes would return to their 2009 levels, with a $3.5 million exclusion and a 45 percent top rate.

Cut the corporate tax rate to 28 percent from 35 percent. Tax breaks would be eliminated for companies that outsource jobs overseas, as well as oil and gas companies, hedge fund managers and owners of corporate jets. A corporation’s foreign profits would be subject to an unspecified minimum tax rate. Businesses would get a 20-percent income tax credit to move operations into the United States.

Health Insurance

Mitt ROMNEY Keep the Bush tax cuts and reduce all tax rates another 20 percent, reducing the current top tax rate on income to 28 percent, down from today’s 35 percent.

Cut spending (including tax “expenditures”* and the size of the federal government workforce)—a “cut, cap and balance” approach.

Repeal estate tax but keep gift tax rate with top bracket at 35 percent.

Repeal Patient Protection and Affordable Care Act, which includes $1 trillion in taxes Eliminate the Alternative Minimum Tax. Eliminate taxes on capital gains and dividends for individuals making less than $200,000. Rate above $200,000 would remain at 15 percent for individuals.

Corporate tax rates: Romney favors cutting the top corporate tax rate to 25 percent from 35 percent, as well as a territorial system for U.S. corporate profits earned overseas.

Keep ACA and allow its implementation to continue, as per the Supreme Court decision.

Repeal ACA and replace it with patient-centered reforms that control cost through the health care system.

That includes support of:

On a limited basis, bar insurers from denying coverage due to preexisting conditions when a person has had coverage for a specified period.

• The ACA mandate that everyone should buy health insurance by 2014 or pay a tax penalty.

Allow tax deductions for people who buy insurance on their own.

• ACA’s plan to prohibit carriers from denying coverage to people who have pre-existing conditions

Social Security

No changes. Retain 2 percentage point payroll tax cut.

Allow individuals and small businesses to join together to buy insurance.

Raise the retirement age over time.

Create personal retirement investment accounts for younger workers.

Index Social Security benefits to prices (not wages, as now).

Consider other tweaks for today’s younger workers.

Medicare

Does not cut benefits. ACA reforms cut Medicare spending by more than $700 billion over 10 years chiefly by reducing payments to health providers and insurance companies.

A third of the Medicare spending cuts come from Medicare Advantage by cutting the reimbursement rate paid to MA insurance carriers and require carriers to abide by 85 percent medical loss ratio by 2014.

Continue ACA provisions allowing seniors in the “doughnut hole” for prescription drug coverage to receive a 50 percent discount on Medicare Part D covered drugs, and phase in more brand/generic drug savings through 2020.

Legislation/ Regulation

Continue implementing the Dodd-Frank Act of 2012 and also ACA.

No changes for current seniors or those nearing retirement.

All insurance plans must offer coverage at least comparable to what Medicare currently provide.

Retain Medicare Advantage.

Medicare is reformed as a premium support system, existing spending is repackaged as a fixed-amount benefit to each senior.

Allow seniors to choose between private and traditional Medicare plans.

Reduce federal government involvement in the U.S. economy via laws and regulations. Repeal ACA.

*Tax expenditures are exemptions such as for mortgage interest. The federal government considers the exemptions expenditures because of the lost revenue.

SOURCES: U.S. Office of Management and Budget, Tax Policy Center, Mitt Romney campaign, Reuters, USA Today, CNN

October 2012 » InsuranceNewsNet Magazine

25

FEATURE

ELECTION 2012

Supreme Court upholds Obama’s Affordable Care Act on June 28, ensuring that ACA will be a battle cry for both sides in the campaign.

Letting Dodd-Frank go would be fine

by Lynch. “I’m not so sure that we need more regulation,” he said. “I’ve always been one who believes there’re plenty of rules on the books. Why don’t we have the intestinal fortitude to enforce them?”

Many regulations and regulators affect financial and insurance advisors – too many to cover here – but a main issue on the table is the universal fiduciary standard. Some legislators and regulators, particularly Securities and Exchange Commission Chairwoman Mary L. Schapiro, are pushing for a standard of care that would cover as many companies, wholesalers and advisors as possible in financial services, even including insurance.

SEC concluded in a study, conducted as a Dodd-Frank requirement, that the fiduciary standard should be a minimal requirement in financial services.

Schapiro has also long said she wants to bring insurance into the SEC fold.

Although the push for the universal standard seems to have eased, the pressure is actually growing to adopt it as the United States harmonizes with global financial standards. Internationally, the insurance commission-based model is becoming more rare in the growing fee-based world. That fact was acknowledged by the Million Dollar Round Table in 2010 when it allowed fee-based income for eligibility in its effort to build worldwide membership.

Lynch functioned under the fiduciary standard as a financial advisor for 26

20 years and said it would place severe limits on insurance producers.

“The fiduciary concept, simply putting your client first, owing them the absolute utmost in trust and faith, is obviously not a problem and I have no issue with that,” Lynch said, adding his issue is the implementation of the standard. “I want everybody to be on a level playing field, but I want there to be common sense. If I work for a company and it has X, Y and Z as its products, but I don’t have available A, B and C, I don’t want to be criticized because I did the best for my client, but yet I didn’t offer them something to which I had no access. ” The fiduciary standard requires the advisor to lay out the array of options for consumers to consider, rather than making a recommendation on the best option for the client, which is commonly done under the suitability standard of insurance. Lynch said he would prefer to hear advisors’ expertise and recommendations, “because if I already knew what was best for me, why would I need you?”

Miller of NAIFA said not only would the push to fee-only planners limit insurance distribution, but it would shut many Americans out of any kind of financial advice.

“I think the regulators can never be reminded too much that if the universal fiduciary standard is pushed onto all of us, that would reduce the number of people who receive intelligent, professional financial advice, particularly in the marketplace that most of our NAIFA members deal with,” Miller said, adding

InsuranceNewsNet Magazine » October 2012

that his members’ clients typically can’t afford fees for advice.

“These are not people saying ‘I have $200,000 floating around from my bonus.’ These are people who might have $5,000 or $10,000 and they want to look at getting an IRA. But if the cost of doing business by meeting the fiduciary standards becomes too high and advisors have to start charging fees and their liability insurance quadruples, it just may not be worthwhile to get involved with those clients. So you can disenfranchise a lot of people across the country.”

AT THE END OF THE DAY

Obviously, the election has a significant impact on insurance in the coming years as politicians work out budgets and regulations. But sometimes the effects are not the predictable ones from particular parties. That’s when the old hobgoblin Unintended Consequences rears its goofy head and confounds intentions.

As many commentators try for simplistic answers and reach for stereotypes, details get in the way. But one thing is simple – clients need help and work needs to be done.

“We as financial service providers and professionals need to focus on one thing – we need to focus on our clients,” Lynch said. “We don’t control the economy. We don’t control the government.

The only thing we can do is take the rules as they exist, find the best solutions and help our clients. Every day that you spend worrying about who’s going to be elected, what the rules are going to be and how bad or good it’s going to be, simply takes you away from your job. That doesn’t mean I abandon my responsibility to vote and influence the votes of others if I can. But whatever happens, we react to it, respond to it and move forward to help our clients to the best of our abilities. I hope that’s what we all would do.”

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

“I made $5 million selling IULs the hard way.

I want to make it easier for you.”

(Here’s 5 Sales Secrets FREE for starters!)

- Merle Gilley, the only CEO of an IMO that’s sold $5 million of Indexed Universal Life target premium I got into IULs when I saw annuities cooling and IULs getting hot.

I read books written by actuaries, went to conferences to learn every possible way to reduce every penny of expense and squeeze out every dime of extra growth from the IUL. I ran thousands of

illustrations, built and modified spreadsheets (one 71 times!) so the math would absolutely prove what I said were true. Then everything came together. I started moving millions into IULs and never looked back. I gave these battle-tested sales secrets to my agents, and they started becoming million-dollar earners. Like Greg Gall, who every year bags at least one sale with target premium of a quarter of $1 million, and Steve Burton, who does $1-2 million a year by seeing 25 new prospects a week!

Other newer agents are knocking down $250k after the first year!

Then I loaded all these sales FREE download. secrets and techniques into the crown jewel of Triquest, the One-on-One Calculator.

It gives you my complete sales process with just the brush of your finger— from illustrating when they run out of money if they don’t do something different, to showing the solution (a lifetime of tax advantaged income), to finding money when they say there isn’t any (by using funds not matched by an employer, allocating discretionary income, restructuring debt, and more!)

We must be doing something right, because in the last year we went from 20th to No. 2 as ranked by one of America’s largest insurance companies. And now we’re closing in on No. 1.

Available only to Triquest Agents

Come join us at our IUL Boot Camp in November, and learn my other 15 sales secrets including…the right way to optimize an IUL illustration, our power closes, and how to find $10,000+ in ordinary peoples’ budget from the 2 big sources you are missing! Plus, all my other sales secrets that you can apply in any selling situation—whether it’s moving $1,000 a month premium over the kitchen table—or transferring $100,000 into IULs as a better and more predictable accumulation vehicle.

It’ll be 1 ½ days of intensive training, but I promise you’ll leave with the confidence that comes from knowing your stuff inside out—the stuff that made our Million-Dollar earners Million-Dollar earners.

Learn to be a Million-Dollar earner in IULs from Million-Dollar earners.

Triquest IUL Boot Camp at Norfolk VA, November 7-8 FREE download. Sales Secret of 5 Million Dollar Man at iulbootcamp.com ororcall IUL-Bootcamp.com call(951) (866)595-8322 876-9437

October 2012 » InsuranceNewsNet Magazine

27

[LIFEWIRES]

ING study shows striking disconnects toward life insurance bitly.com/LifeStudy

Life Sales Continue Their Uptick

INDEXED UNIVERSAL LIFE UP

37% 9%

WHOLE The increase in individual life sales is modest LIFE UP and a little squiggly but the trend-line has a 2Q 2011 Source: LIMRA definite upward incline. For instance, in second quarter 2012, new annualized premiums grew by 4 percent over the same period last year, reports LIMRA. And in the first half, they grew by 3 percent over first half 2011.

The squiggly part is that policy count in second quarter was flat. This was after five consecutive quarters of growth. LIMRA says. Then again, that may not be too bad. After all, when looking at policy count for the first half, it was up 3 percent over first half last year.

When viewing results by product line, indexed universal life was the big winner. Second quarter premiums in this product line galloped ahead 37 percent over second quarter last year, according to Ashley Durham, senior research analyst-product research for LIMRA. Whole life took second place, with premiums up 9 percent in both the second quarter and also the first-half. What’s more, whole life policy count was up too, by 3 percent in second quarter and 5 percent in the first half. Worth noting: Market share for whole life, as measured by premium, was 33 percent in second quarter, the highest WL share since 1998, according to LIMRA. The news was less eye-catching in other product lines. For instance, total universal life new annualized premiums grew by a modest 6 percent in second quarter, and 3 percent in the first half. And universal life with lifetime guarantees saw premiums drop by 8 percent in second quarter.

Pulling up the rear were two other product lines. Variable universal life premiums fell 6 percent in the second quarter and 7 percent in the first six months over the same year-earlier periods. And term premiums dipped 3 percent in second quarter and 1 percent for the first half.

DO SINGLE PEOPLE NEED LIFE INSURANCE?

WellPoint decided to go to some American adults to find out whether they think singles need life insurance. In an online poll of 2,500 Americans ages 18 and up, the Indianapolis insurer found that a surprising percentage – 25 percent – think the answer is “no.”

Men were significantly more likely than women to agree that single people don’t need life insurance (29 percent versus 22 percent), the researchers say, and younger Americans (18-34 year olds and 35-54 year olds) were significantly more likely than DID YOU

KNOW

?

28

older Americans (ages 55 and up) to agree with that statement.

Another survey – from Genworth – sheds some light on the magnitude of the coverage problem that singles face if they have no life insurance. According to the Richmond, Va. insurer, 69 percent of single parents with children living in the household are uninsured. That’s the highest percentage of uninsured people in the survey, the company says.

Is there a solution to the “uninsured singles” problem? Well, yes and maybe. It could be marriage—or some other life-changing event. Consider these percentages from yet

52 PERCENT OF PEOPLE WHO PURCHASED LIFE INSURANCE ON THEIR OWN say they were motivated to purchase it in order to provide for loved ones, but only 6 percent were motivated to purchase a life policy to fund an inheritance for heirs or charities/nonprofit organizations. Source: Northwestern Mutual Life Insurance Company

InsuranceNewsNet Magazine » October 2012

another survey, this time from Northwestern Mutual. In a poll of nearly 2,100 American adults ages 18 and up, the Milwaukee insurer found that those who had purchased life insurance were most often prompted to do so as a result of marriage (32 percent), retirement planning (25 percent) or the birth of a child (22 percent).

So, do these percentages mean that advisors who talk about life insurance with singles are wasting their time? Could be.

But the results might also serve as a signal for advisors to consider developing a “singles strategy” that targets the unattached in unique ways.

AG 38 GUIDELINE REVISIONS MOVING FORWARD AT LAST

A joint working group of National Association of Insurance Commissioners has agreed on revisions to Actuarial Guideline 38. That moves along the ongoing and highly technical regulatory inquiry concerning the document, which frames out statutory reserves that life insurers must hold to support universal life policies with no-lapse guarantees. The heart of much of the discussion has been the proposed “bifurcated approach” for applying AG 38 to universal life insurance contracts with a secondary guarantee and to term universal life products. The discussions have been daunting in their technicalities but filled with important implications that could affect pricing, product availability and more.

The Joint Working Group of NAIC’s Life Insurance and Annuities (A) Committee and NAIC’s Financial Condition (E) Committee did the fine tuning, with much comment from the industry. The document now heads to each committee for an okay and then on to NAIC executive and plenary for final approval.

QUOTABLE A new family member, an inheritance, a promotion: All can mean that the (life insurance) policy bought years ago is no longer the best fit.

— Michael Ferik, senior vice president-individual life, The Guardian Life Insurance Company of America, NY

During Medicare Annual Election Period The Sentinel Plan® Hospital Advantage Plus

TM

• Uniquely Designed to help cover gaps in Original Medicare and Medicare Advantage • Pays Cash Benefits to Your Client for Covered Expenses for more informaTion, pLeaSe CaLL

866-235-1892 or viSiT www.SSLCo.Com

THREE LEvELS OF BENEFITS THAT INCLuDE COvERAgE FOR ExPENSES RELATED TO: • Hospital Stays • Emergency Room Visits • Surgeries • Primary Care Physician Office Visits • Ambulance Benefits • Annual Wellness Visits •and More

2121 South State Street Salt Lake City, UT 84115 (888) 510-0668

www.SSLCo.Com UnderwriTTen by SenTineL SeCUriTy Life inSUranCe Company, SaLT Lake CiTy, October 2012 » InsuranceNewsNet Magazine UT. oCTober 1, 2012 avaiLabiLiTy; noT avaiLabLe in aLL STaTeS

CHOICE • PROTECTION • PEACE OF MIND

Boost Your Sales!

29

LIFE

Legacy Planning is Legend Planning An Allianz study shows that successful legacy planning looks beyond finances.

By Katie Libbe

A

lot can happen in seven years, especially when it comes to the economy. Conditions can change, opinions can shift and as a result, behavior can be affected for both the short and long term. As such, seven years can seem like an eternity.

Take for example the economic crisis of 2008. In a span of only 17 months from October 2007 to February 2009, the stock market (as measured by the S&P 500) lost 51 percent of its value.

This resulted in a number of negative events, including the threat of total collapse from large financial institutions, the bailout of banks by national governments and declines in consumer wealth.

For people in retirement and those nearing retirement, the economic crises of the past five years have caused many to scale back their expectations or even delay retirement to rebuild their lost savings. As a result, it’s logical to assume that elders (age 72+) and boomers (age 47-66) would feel differently today about the topics of legacy transfer and inheritance than they did in 2005.

Would boomers be anticipating money 30

from inheritances to help them recover from debt or make ends meet? Would elders have the funds available to give to their heirs after weathering significant losses? Simply put – would legacy planning in 2012 be all about the money?

Initial Insight into Legacy Planning

In 2005, Allianz Life Insurance Company of North America conducted the American Legacies Study, a landmark study of more than 2,000 boomers and elders that captured their attitudes and opinions on a variety of legacy transfer topics. At the time, researchers expected roughly $25 trillion in wealth to be handed down by elders, $7.2 trillion of which would go directly to the boomers, constituting the largest intergenerational wealth transfer in history.

From the different ways in which generations define legacy, the 2005 survey revealed exactly how American families were working to pass on their legacy to their heirs. Several key themes emerged from the research, including insight into the types of conversations that both boomers and those in their parents’ generation were having about legacy and inheritance, and also their opinions about the top qualities that both generations look for in a legacy adviser.

Perhaps most notably, the study

InsuranceNewsNet Magazine » October 2012

revealed a truth that legacy was not all about the money, with respondents saying that values, not valuables, were the most important part of legacy transfer.

The study found that both boomers and those in the elder generation were uncomfortable discussing the one-dimensional topic of leaving an “inheritance” but both embraced the idea of leaving a “legacy,” because it captures all facets of an individual’s life – including their family traditions and history, life stories, values and wishes.

Despite Economic Turmoil, Legacy Wishes Remain Consistent

Fast forward seven years to early 2012.

Surely these opinions would have changed over time, especially given the volatile economy we’ve experienced since 2008. With boomers’ poor saving habits combined with an over-reliance on credit and propensity for high debt, logic suggests that many boomers would be more interested in the money they had coming from their parents.

Along those lines, it’s reasonable to assume that many elders would also have been affected negatively by the recession and have more concern about the financial aspects of legacy transfer than they did previously.

But the 2012 Allianz Life American

LEGACY PLANNING IS LEGEND PLANNING Legacies Pulse Study – a reprise of the original American Legacies study – found that baby boomers and their parents remain focused on the emotional elements of legacy transfer rather than purely financial aspects of inheritance.

Eighty-six percent of boomers and 74 percent of elders agree that family stories are the most important aspect of their legacy, ahead of personal possessions (64 percent for boomers, 58 percent for elders) and the expectation of inheritance for financial well-being (9 percent for boomers, 14 percent for elders). Despite the tumultuous years since the first study, this outcome echoed the findings in 2005, with 77 percent of both boomers and elders citing the importance of family values and life lessons as the most important part of legacy.

Furthermore, in 2012 boomers and elders still agree that inheritance is not “owed.” Only 4 percent of boomers said they felt they were owed an inheritance – the same percentage as in 2005. In addition, the number of elders who feel they

LIFE

Family Stories Valued Highly in Legacy Planning 86%

Boomers1

Family Stories

74%

Elders2

Personal Possessions

64%

Boomers1

58%

Elders2

9%

Boomers1

Financial Inheritance

14%

Elders2

Age 47-66

1

Age 72+

2

Source: American Legacies Pulse Study (January 2012) commissioned by Allianz Life Insurance Company of North America

owe their children an inheritance actually went down, from 22 percent in 2005 to 14 percent today.

Although they agree on what part of legacy transfer is most valuable, boomers and their parents are not as in-sync

Knowing What to Know About Retirement Assets Uncertainty. It may be the most common feeling clients have today about their Retirement.

This uncertainty may be keeping people from realistically assessing their current financial situation. “How much money will I need for the rest of my life? When should I retire, or will I ever be able to?” These are big and often overwhelming questions. They need you and you know it, but getting the conversation started can be another story.

on actually doing the work of legacy planning. The 2012 study revealed that elders are generally prepared when it comes to legacy planning and have also initiated conversations with their children on the topic. Three-quarters of

FREEPORT

CLIENnTt DRoEwnload Insta

We Can Help Get the Gears Turning

The conversation with you is more important today than ever before and we have a tool to help you get the discussion moving. “Securing The Vault” is a high quality, informative and thoughtprovoking customizable communication. Once it’s in their hands, it gives you a way to open up the conversation and gives the client solid information that could help ease their retirement worries.

These 7 Things may make a big difference in your business and their life... take action today!

To request this exclusive report, visit:

SecureTheVault.com 557184_262202

October 2012 » InsuranceNewsNet Magazine

31

LIFE

LEGACY PLANNING IS LEGEND PLANNING have a holistic conversation that touches on multiple topics, particularly the values and family stories that both boomers and elders indicate are most important. You can be an asset to your clients by helping them explore legacy issues through four main areas:

& 2005

74%

89%

2012

91%

67%

[ 1] Values and life lessons – Address client wishes regarding family traditions and stories, as well as charitable contributions.

Age 47-66 Age 72+

1

Boomers1

Elders2

Boomers1

Elders2

2

Source: American Legacies Pulse Study (May 2005 & January 2012) commissioned by Allianz Life Insurance Company of North America

elders have obtained professional assistance, such as a lawyer, financial professional, accountant or estate planner in planning their inheritance and 79 percent have had some type of in-depth discussion with their children about legacy planning.

Boomers are lagging behind in preparation. Less than half of boomers have obtained professional legacy planning assistance and nearly 50 percent never initiated a conversation with their own children about inheritance issues.

A significant change in opinion from 2005 that boomers and their parents share are the characteristics they look for in a financial professional. Seven years ago, both boomers and elders cited “honest & trustworthy” as their most desired characteristic (74 and 67 percent), followed closely by “explains things in an easy-to-understand way” (66 and 56 percent) and “good listener” (58 and 46 percent). In 2012, “honest and trustworthy” is still the top characteristic, but has taken on increased importance with 89 percent of boomers and 91 percent of elders deeming it as a key requirement.

The other major shift can be seen in the financial acumen required of financial professionals. In 2005, 51 percent of boomers and 43 percent of elders cited the importance of their financial professional’s ability to “help minimize taxes” and less than half of both groups 32

(42 percent of boomers and 35 percent of elders) required that their financial professional be able to “help maximize the long-term value” of the inheritance.

Today, those skills are more highly valued with 75 percent of boomers and 70 percent of elders requiring skill to “help minimize taxes” and more than half of both groups (60 percent of boomers and 55 percent of elders) desiring that their financial professional can “help maximize the long-term value” of the inheritance.

Next Steps for Financial Professionals

Considering that so much has changed since 2005 from an economic standpoint, it’s remarkable that people remain so focused on ensuring transfer of family values and stories rather than finances. Although turmoil in the markets has boomers and elders more focused on working with trustworthy financial professionals that can help them get the most out of any money that gets passed along, the real story remains connected to financial professionals who understand that legacy is about more than just money.

The bottom line is that many people are in need of assistance with legacy planning and are looking to trusted financial professionals to help them prepare for the future. Because there is more to legacy planning than finances, it’s important to

InsuranceNewsNet Magazine » October 2012

[ 2] Instructions and wishes to be fulfilled – Discuss health care instructions, control of property if incapacitated and health insurance and nursing home costs. [ 3] Personal possessions of emotional value – Focus on distribution of personal belongings, including pictures, journals, family history and household items. [ 4] Financial assets or real estate – Important topics include items of financial value, residence and other real estate, and any financial assets and liabilities.

The more specific you are in these discussions, the more effective you will be in helping your clients create a sound legacy strategy. To get the most value out of this process, encourage open and honest family dialogue and remember to include attorneys, CPAs, or other professionals in your suggestions. There are a number of tools available from carriers and industry sources to assist you in starting this conversation with clients.

Although legacy planning has many facets, it really comes down to understanding your clients’ values and how those values inform their legacy wishes.

With better insight into what truly matters to both boomers and elders, you can help them prepare for a smoother transition.

Katie Libbe is vice president of Consumer Marketing and Solutions for Allianz Life Insurance Co. of North America. Katie is responsible for leading retirement income strategy and consumer education efforts for Allianz Life. Katie can be reached at Katie.Libbe@innfeedback.com.

1-800-769-1847 | www.RitterPartD.com Agent Use Only. Not for Consumer Distribution. *“Good Standing” shall include maintaining a valid license, state appointment, annual training andOctober testing, and with other requirements 2012complying » InsuranceNewsNet Magazine for 33 marketing and receipt of compensation, as may be modified by SilverScript or CMS from time to time.

Get John Maxwell’s newest book, The 15 Invaluable Laws of Growth, at www.johnmaxwell.com.

Plus, check our exclusive interview on page 12.

LIFE

Carriers and Castaways Companies and agents must rescue each other for the good of the industry.

By Robert W. MacDonald

S

ometimes it seems as though insurance agents have become the real-life embodiment of Chuck Noland, the FedEx employee portrayed by Tom Hanks in the movie Castaway. He survived a plane crash, only to be stranded on a desolate island for four years and forced to fend for himself.

After more than a century of flourishing symbiotic relationships between insurance companies and agents, the companies, either out of expedience, incompetency or arrogance, have left agents marooned and fending for themselves. There even seems to be an attitude of ambivalence toward the very survival of the agent distribution system.

34

Think about it: Companies no longer provide any type of financial support for the agent, especially for those new to the business. “Agent training” has become an oxymoron. What companies define as “training” is limited to “sales seminars,” where some home office person (who probably has never sold a policy) will plod ponderously through a PowerPoint presentation extolling all the detailed technical features of the latest product.

It is like teaching someone to sell a television by explaining all the electronics, rather than the beauty and entertainment value of the picture it produces.

Companies no longer make the investment or take the time to teach the agent the most important aspects of the job: finding the prospect, identifying a need, recommending the proper solution and motivating the prospect to act.

If that is not enough, when it comes

InsuranceNewsNet Magazine » October 2012

to even a whiff of a consumer complaint or regulatory question, the agent is presumed guilty and must prove his or her innocence. It seems that rather than working with the agent to resolve the issue, the companies become a protagonist in the complaint against the agent.

Once an application has been submitted and before the policy is issued, the underwriting process has become more akin to a minefield the agent has to circumnavigate to prove that they have not done anything wrong. (Certainly, there have been abuses and inappropriate sales made by agents, but much of that blame can be laid at the clay feet of companies that failed to invest in proper training and supervision of the agent.)

And it gets even worse. Companies seem to view the agent as superfluous to the sales process and are intent on abandoning the agent distribution

LIFE

Most life insurance companies see policies.

CARRIERS AND CASTAWAYS

system – especially independent agents – by striking distribution deals with banks, investment firms and broker/ dealers. The objective for the companies seems to be to “rent” a distribution system, rather than growing, developing and controlling their own system. The assumption made by the companies is that this approach is less expensive and it shields the companies from accountability for the actions of those selling the products. In addition, more and more, companies are attempting to distribute products via the Internet that totally circumvents the agent.

There is another subtle phenomena being employed by the companies that is detrimental to the agent and ultimately the consumer. There was a time, not too long ago, when companies recognized that in order to grow they needed to earn the business, respect and loyalty of the independent agent distribution system. However, as competition among companies and options for independent agents have diminished, a number of companies now unabashedly exhibit an arrogant attitude suggesting they are entitled to the business written by the independent agent.

If it is large enough and the competition is relatively anemic, the company can be tempted to implement an entitlement strategy by demanding – under threat of withholding product – to be the primary company of the agent. This approach might seem to be an effective use of corporate leverage against the distribution system and may bring short-term results.

However, the hypocrisy inherent in this tactic is that a company that demands the support, respect and fidelity of the distribution system is the least likely to offer the same in return.

In reality this is a self-destructive act of folly, because it plants the seeds of contempt and loss of respect for the company and that will ultimately work against its success.

The reality is that the life insurance industry is presented with its most significant opportunity for success – the need for a safe, secure income that cannot be outlived. The best products to take advantage of this opportunity are most effectively delivered face-to-face by a welltrained agent to the consumer.

So what is to be done?

It’s quite simple: If the insurance industry and the independent agents want to have a successful future, they both have to invest in it – and in each other. Given that it is impractical for the industry to go back to the captive agent system, this investment should take the form of a partnership between the company and various marketing organizations in an effort to attract and retain new agents.

By offering education, training, and appropriate supervision, the agent will not only have product knowledge, but knowledge of how to properly present and sell the product.

A company will ultimately succeed when it adopts a philosophy that it is not entitled to the loyalty and business of the agent, but must earn both. This means the insurance companies will have to assume more of the direct responsibility for training and supervising agents and pay more to marketing companies on the condition that these funds are used for true agent education and supervision.

To protect their own future, when dealing with castaway agents marketing companies will have to do more than recruit agents and let them fend for themselves. These actions should not be viewed as an increase in costs - for either the insurance company or the marking organization - but rather as a lifeline to the future that may be uncertain unless the investment is made to assure it.

Robert W. MacDonald, is the retired chairman and CEO of Allianz Life of North America and was president of ITT Life, founder of LifeUSA. You can contact him at Robert.MacDonald@ innfeedback.com.

36 InsuranceNewsNet Magazine » October 2012

We see people in need of a plan that helps them live well now and receive care later.

Introducing the new Aviva Accelerated Access Rider – providing support when your clients need it most.

Offer this new rider with an indexed universal life policy, and you’ll provide clients the ability to help pay for unexpected care expenses on top of fulfilling their life insurance needs. Pair it with our Wellness for Life® rider and they’ll also be rewarded for healthy living now. Learn more about how you can offer your clients the care they deserve; www.avivausa.com/launch.

We are building insurance around you. ®

Aviva Accelerated Access Rider (form number ICC12-2CABRH12 or 2CABRH12) allows clients to accelerate a portion of their life insurance death benefit in the event they are diagnosed with a chronic illness that meets certain eligibility requirements. This Rider as well as the Wellness for Life Rider [2WFLAJ07-2] are both issued by Aviva Life and Annuity Company, West Des Moines, IA. Availability varies by state.

October 2012 » InsuranceNewsNet Magazine

37

[ANNUITYWIRES] Former Annuity Agent Sentenced to Jail A former California annuity agent who had pled guilty to a single felony count of grand theft is now facing 180 days in County Jail, five years of supervised probation, participation in theft counseling, and a restitution order amounting to $204,800.

Between July 2001 and August 2004, according to the California Department of Insurance, Alvin Leroy Black, now 75, “had sold his 80-year-old victim seven annuity policies with a deposit amount totaling $1,535,000 without fully disclosing the terms of the annuities and without her full understanding of what she was purchasing.” Black also changed ownership and beneficiary forms and moved money into a non-profit corporation he had founded without the client’s knowledge or consent, and ultimately cashed three policies for $224,700, which triggered over $26,900 in surrender charges as well as income tax liabilities, the department says.

The sentencing followed by a few weeks the release of a poll that documents widespread concern about investment fraud and financial exploitation of the elderly. Released by the Investor Protection Trust and the Investor Protection Institute, Washington, D.C., the poll found that 78 percent of the 700+ surveyed experts think older Americans are “very vulnerable” to investment fraud/financial exploitation. The experts included state securities regulators, financial planners, health care professionals and others. Among the most common abuses they named was “financial scams perpetrated by strangers” (47 percent).

The experts also told researchers that “current efforts for maintaining the legitimacy, value, and authenticity of credentials held by financial advisors and planners” are “not very effective” (36 percent) or “not effective at all” (26 percent).

What does work? The survey pointed to financial education, counseling, or personal finance management programs tailored to seniors.

ANNUITY OWNERS HAVE THE CONFIDENCE EDGE

Annuity owners have more confidence in their ability to live comfortably throughout retirement than non-owners, according to an Insured Retirement Institute study.

Surprisingly, this is the case not only for baby boomers (born between 1946 and 1964) but also for Generation X (1965 to 1978). For example, 53.4 percent of boomer annuity owners and 49.4 percent of Gen-X owners said they are extremely or very confident as compared to 31 percent of boomer and 31.2 percent of Gen-X non-owners.

The Washington, D.C. trade group found that the owner groups are also more likely DID YOU

KNOW

?

38

to engage in retirement planning activities.

For instance, 73.7 percent of boomer annuity owners say they consulted a financial advisor and 69.6 percent calculated their retirement savings needs compared to 34.8 percent and 44.3 percent of non-owners, respectively. For Gen-Xers, 62.3 percent of owners consulted an advisor and 60.4 calculated their retirement savings needs compared to 29.7 percent and 34 percent of non-owners, respectively.

ANNUITY ACTIVITIES ON THE CFP RADAR

Among 19 disciplinary actions the Certified Financial Planner Board of Standards, Inc. announced recently, two involved admoni-

ASKING PRICES ON FOR-SALE HOMES INCREASED 2.3 PERCENT IN AUGUST 2012 , versus August last year (or rose 3.8 percent if foreclosures

are excluded), making for the largest year-over-year gains since the recession. Source: Trulia, San Francisco

InsuranceNewsNet Magazine » October 2012

Brought to you by:

tions for annuity-related activities of individuals using the CFP mark. In one case, the board admonished an individual for signing a client’s initials on an annuity replacement notice on two occasions. In the other, the board admonished an agent for selling fixed indexed annuities outside of the individual’s firm and for allowing two employees the individual supervised to sell fixed indexed annuities outside the firm.

THE ANNUITY-MEDICAID CONNECTION

Annuity advisors don’t often get involved in helping consumers qualify for Medicaid long-term care benefits, but if that ever happens, it might help to know how annuity ownership can affect the outcome.

According to a new report from the Government Accountability Office (GAO), all states require documentation of annuity ownership from people who are applying to receive Medicaid long-term care benefits. This helps states determine whether an

annuity should be considered a transfer of assets for less than fair market value under the Deficit Reduction Act of 2005. Among other things, the 2005 Act governs current standards for Medicaid eligibility.

The GAO researchers say they also found that 45 of 49 state long-term care application forms require “disclosure of any interest the applicant or spouse has in an annuity,” and 27 contain “statements regarding the state becoming a remainder beneficiary of such annuities.”

Reminder: Those who transfer assets for less than fair market value during a specified time period – the “look-back” period – before applying for Medicaid may be ineligible for Medicaid long-term care coverage for a period of time, GAO says.

Go to AnnuityNews.com for exclusive sales ideas and more!

North American Annuities 2012 Market Trends and Technology Considerations, summarizes past market conditions as well as predictions for the annuity market through 2014. bitly.com/AnnuityGrowth

@Annuity_ News

hing Nothing Here.Scary Here.

Nothing Scary Here.

A Bountiful Index Annuity 12.00% * Bonus Paid Over 3 Years

• 7.00% Income Rider (Annual rider fee only .50%) Roll-Up for 20 Years!

• Full Account Value at Death - No Annuitization Required

9.00% • 10.00%Index Withdrawal Available after Year 1 nnuity A Bountiful Annuity Commission Ages 0-75

12.00%

fee only .50• %) 7.00% Income Rider (Annual rider fee only .50%) Roll-Up for 20 Years!

Call Fairlane Financial for your sales kit today 1.800.327.1460

* Bonus Paid Over 3 Years

nnuitization• Full Required Account Value at Death - No Annuitization Required

9.00%

r Year 1 Commission Ages 0-75

• 10.00% Withdrawal Available after Year 1 Withdrawals before age 59 1/2 may result in a 10% IRS penalty tax. Withdrawal s do not participate in index growth. Surrender of the contract may be subject to surrender charge and market value adjustment. Product and rider not available in all states. Contract may vary by state. MarketTwelve Bonus Index fixed index annuity is issued on contract form Series ET-MPP-2000(02-05) with Riders ET-AVBR(06-09) and ET-IMVA(07-09).

Call Financial your sales kit today 327 .

460 Group Certificates issues on FormFairlane Series1 ET-MPP-2000C(01-07) with Ridfor ers ET-AVBRC(06-09) and ET-IMVAC(07-09).

Income ri1.800.327.1460 der provisions and availability may vary by state. Rider issued on Form Series ICC11-ETurrender Withdrawals charge age 59 1/2 may result inand 10% IRS market tax. Life Withdrawals do not value participateWest in index of the contract subject Product to surrender IBR-B(1111)before or ET-IBR(06-08).

Contract isasued bybypenalty EquiTrust Insurance Company, Desgrowth.

Moiadjustment. nes,Surrender IA. ForEProducer Usemay OnlybeAC12-ET-M121094 charge and market value adjustment. Product 2-05) and with rider not availableRiders in all states. Contract may Evary T-AVBR(06-09) state. MarketTwelve Bonus Index fixed index annuity and is issued on contract T-IMVA(07-09). form Series ET-MPP-2000(02-05) with Riders ET-AVBR(06-09) and ET-IMVA(07-09).

M-2509

ay vary Group Certificates by issues state. on Form Series ET-MPP-2000C(01-07) Rider with issued Riders ET-AVBRC(06-09)on and ET-IMVAC(07-09).

Form Income rider Series provisions and availability ICC1 may vary1-E by state. Rider T-issued on Form Series ICC11-ET94 IBR-B(11-11) or ET-IBR(06-08). Contract issued by EquiTrust Life Insurance Company, West Des Moines, IA. For Producer Use Only AC12-ET-M12-1094

M-2509 M-2509 October 2012 » InsuranceNewsNet Magazine 39

ANNUITY

Peter Lawson-Johnston Sr., who established Guggenheim Partners, is from the same family that built the Solomon R. Guggenheim Museum in New York City.

Guggenheim Quietly Becoming a Major Annuity Player I f the private firm grabs Aviva, it would become the largest company in the indexed annuity world.

By Linda Koco

T

he arrival of Guggenheim Partners into the retail fixed annuity business was so quiet that even long-time industry professionals rarely spoke of it. But for the past few months, it has become a “topic.”

The trigger was a report in the British Telegraph that a Guggenheim Partners business – Guggenheim Life and Annuity – is a potential buyer for Aviva USA. That drew some “yikes!” from the advisor community. After all, Aviva is the No. 2 ranked leader in indexed annuity sales in the country, based on first-half figures from AnnuitySpecs.com. And Guggenheim Partners, based in Chicago and New York, is a global financial services brand whose family name in business stretches back to 1881. A deal between the two brands could make a splash in the U.S. fixed annuity marketplace.

As of this writing, Aviva USA has not confirmed that it is cutting a deal with Guggenheim. “As a matter of policy, we do not have any comment on the current media speculation,” an Aviva spokesman told InsuranceNewsNet. However, the “yikes” people were already off and running. There has been an eye-rubbing quality to their discussion ever since. “Where is Guggenheim coming from?” “Where are they going?” and, of course, “Huh?” Some of the Aviva/Guggenheim musing took a pause a few days later when a Canadian insurer – Industrial Alliance Insurance and Financial Services – came out with its own Guggenheim-related news.

40

The Quebec-based carrier said it had concluded an agreement to sell, “by way of indemnity reinsurance and assumption reinsurance, all its U.S. fixed annuities and accumulation riders to Security Benefit Life Insurance Company and EquiTrust Life Insurance Company, two affiliates of Guggenheim Partners.” The price: $800 million (U.S.) in contract liabilities and related assets.

What happened

and Annuity agrees to reinsure the life and annuity business of Standard Life of Indiana under a reorganization agreement arranged by the Indiana Insurance department. The deal follows a two-year period when Standard had been in rehabilitation. Previously, the Guggenheim carrier had been “predominantly a reinsurer of fixed annuities,” according to the department’s announcement of the agreement.

That news launched another round of “what’s-going-on-with-Guggenheim?”

Then the annuity wonks began putting two-and-two together, to see if they could assess the firm’s annuity and life insurance aspirations. Here’s a brief summary from the public record:

[ Oct. 7, 2011] Guggenheim Partners and “certain of its controlled affiliates” agrees to acquire EquiTrust Life from FBL Financial Group, an Iowa company that sells fixed and indexed annuities and life insurance. EquiTrust focuses on indexed annuities, though not exclusively.

[ Sept. 15, 2009] Guggenheim Life and Annuity Co. becomes the new name of Indianapolis-based Wellmark Community Insurance, according to insurance department records from Oregon. The Guggenheim insurer is backed by Guggenheim Partners, a privately-held financial services firm with headquarters in Chicago and New York.

[ Aug. 16, 2012] Industrial Alliance Insurance and Financial Services of Quebec announces it has agreed to sell, via reinsurance, its U.S. fixed annuities and accumulation riders to Guggenheim’s Security Benefit and EquiTrust companies.

That deal indicates company is pressing forward into the annuity/life marketplace. That should probably come as no surprise, since Guggenheim Partners CEO Mark Walter said in 2011 that Guggenheim has an “ongoing commitment to grow our presence in the annuity and life insurance arena.”

[ Feb. 16, 2010] Guggenheim Partners and a group of investors (including certain shareholders of Guggenheim Partners) announce that they have reached an agreement to acquire Security Benefit Corporation, a Kansas insurer that writes fixed and indexed annuities and life insurance among other products. The two firms had begun working together in June 2009 when Guggenheim became the investment advisor for Security Benefit’s general account. [ Dec. 29, 2010] Guggenheim Life

InsuranceNewsNet Magazine » October 2012

A leaf in the breeze

But Walter’s message appears to have blown right past the industry headlights, like a leaf swept away by a fall breeze seen by few. Perhaps some of that is simply oversight, but it may also have to do with the way that privately held companies tend to do deals in the insurance business. Consider these characteristics.

GUGGENHEIM QUIETLY BECOMING A MAJOR ANNUITY PLAYER These companies tend to move very quietly. They don’t hide their buys, of course. They even announce them after the fact, as Guggenheim dutifully does.

But these companies tend to be subtle about their initiatives – they reinsure a book of business here, buy a company there, no particular rah-rah, no glitzy image-building effort. Just process.

They can, and do, partner up with other investors. The other interests could be affiliates, other private firms or individual investors. For example, in 2010, Guggenheim said that “Guggenheim Partners, LLC and a group of investors (including … )” were buying Security Benefit. Sometimes, lengthy long buyer descriptions like that don’t get much attention. Maybe the market-watchers just glaze over all those words as they get lost in the weeds of who-is-who.

They play things very close to the vest. They are privately held companies, after all. The deals may involve investors/

individuals personally known to them or perhaps families (does the Guggenheim Family ring a bell?), instead of unknowns (like investors in publicly traded companies). The personal nature of the alliances seems to help them keep deals under wraps until they are ready to announce.

That’s not 100 percent insulation, but even outsiders with a good nose have a hard time sniffing out these deals.

They often continue using the names of the companies they buy. Hence, Security Benefit and EquiTrust are still in use even though they are now Guggenheim companies. Keeping the original name can bring beaucoup benefits to the new owner, especially if the name of an acquired company is well known and regarded, but one thing it does not do is signal that a new owner is at the helm. So some onlookers may not even learn of the change of hands until months later.

They don’t broadcast their master plan. By comparison, publicly traded corporations – which operate under complex

ANNUITY

public disclosure requirements – often trumpet their master plan, and they use it to generate buzz, guide sales campaigns and measure results. In the privately held world, you have to hunt for the plan in the tea leaves – by asking questions, watching for key words, analyzing moves, etc.

So, if a privately held company decides to bulk up on annuity business, it may take the market a while to figure out that this is indeed the plan.

The quiet ways of privately held firms is their competitive advantage in the insurance world. It gives them an element of surprise, enabling them to build roots and alliances in their target arenas before the broad market catches on. The challenge for everyone else is to keep the old ear to the ground, seeking heads-up clues on the privately-helds that will make it unnecessary to shout “yikes.”

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning.

Linda can be reached at Linda.Koco@ innfeedback.com.

Get your complimentary copy of this incredible sales tool today.

Perhaps the greatest client sales guide ever created, this brochure is now available to all life producers. If you sell IUL (or plan to), this is the one brochure that takes clients through an educational and easy to follow journey into Indexed Universal Life.

Visit this website to instantly download your copy today:

www.IULBuyerGuide.com

October 2012 » InsuranceNewsNet Magazine

41

ANNUITY

Low Interest Rates Hurt VA Sales, Spur Changes R ecord low interest rates prompt cuts to VA features, as well as fee increases and product revisions.

By Linda Koco

V

ariable annuity insurers haven’t been sitting back twiddling their thumbs this last quarter, even though sales have slumped.

More than half of the nearly 40 carriers in the Morningstar variable annuity database filed for 168 changes in their products in second quarter, according to John McCarthy, product manager-annuity solutions for the Chicago researcher.

That’s well above the 59 filings made in first quarter 2012 and slightly above 42

the 162 recorded in the second quarter of last year, he says.

The changes read like a story-board of how carriers are responding to the tough economy. For example, 57 of the second quarter changes involved closure of existing contracts, and 23 involved closure of existing benefits. There were 11 product revisions, too, and also seven fee changes.

Carriers were taking active steps to maintain profitability during the prolonged low-interest rate environment, McCarthy explains.

With interest rates at record lows, it has been difficult for carriers to continue supporting living benefit guarantees designed for a higher interest rate environment. Hence the cuts to certain products

InsuranceNewsNet Magazine » October 2012

and features, the fee increases and the product revisions.

New Contracts, Too

But the Morningstar report shows something else too. Thirty-seven of the second quarter filings involved new contracts, and 33 involved new benefit features. So the carriers aren’t abandoning the market. Many are debuting new contracts designed for today’s environment.

Even here, however, strains of the tough economy have filtered through.

For instance, “a number of carriers tweaked the guaranteed lifetime withdrawal benefit (GLWB) features in their products,” McCarthy says.

By tweaking, McCarthy means the carriers cut back on certain provisions.

ARTICLE TITLE

ANNUITY

SMA ADVISOR OF THE YEAR.

IT COULD BE YOU.

BUILDING CHAMPIONS BUILDING YOU FIG welcomes SMA’s 2011 “Advisor of the Year”, Jim Brogan and Foundation7. Foundation7 offers an in-depth and well-rounded mentorship that utilitizes a 7-layer marketing strategy that will transform your business. Brogan will guide you through implementing radio, community education, client relations, alliances, social media & web, media relations, and community outreach into your practice. With his experience and expertise, this mentorship is sure to have a lasting impact on your personal and professional life.

FINANCIAL INDEPENDENCE GROUP, INC info@figmarketing.com

800.527.1155

www.figmarketing.com

October 2012 » InsuranceNewsNet Magazine

43

ANNUITY

LOW INTEREST RATES HURT VA SALES, SPUR CHANGES

Low-Cost Variable Annuity Carriers

Some reduced the guaranteed lifetime withdrawal percentage that their products offer, a process that began at many variable annuity carriers following the start of the Great Recession in 2008.

The new withdrawal percentages now range between 5 and 7 percent, McCarthy says. That’s down from a high of 10 percent in 2007-2008.

Some carriers have been increasing the fees they charge for the GLWB roll-up feature, as well. (This feature determines the percentage increases the carrier will make to the annuity base value, which is used in computing the guaranteed withdrawal amount). The average in fees for this feature has been rising for the last three or four quarters, McCarthy says.

2Q 2012

The “I-share” Surprise

Damper on Sales

Changes like this have put a damper on sales growth. In the first half, new sales reached $73.5 billion, about 48 percent of 2011’s full-year new sales total, Morningstar says. (“New sales” refers to gross dollars going into the products.)

That means there is a strong possibility that variable annuity sales will end the year flat or slightly down – unless there is a significant uptick in the second half, McCarthy predicts.

In second quarter 2012, new sales did trend up 5.5 percent over first quarter, he allows. They rose to $37.7 billion from $35.8 billion. But compared to the new sales total of $39.4 billion in second quarter 2011, this year’s second quarter was down by 4.6 percent.

Second quarter 2011 was the highest quarter the industry has seen in three years, McCarthy says.

There are a number of reasons for the projected flat-lining in sales, but McCarthy’s overall view is that carriers really want to limit exposure to risk by managing growth in their variable annuity sales.

Managing growth includes adjusting features and percentages in the products that serve as incentives. “Some, like MetLife, have stated publicly that they want to control variable annuity growth so as to manage the risk of their overall insurance portfolio,” McCarthy says.

The resistance of advisors and consumers to some of the product restrictions play a role, too. For instance, the newer withdrawal rate guarantees of 5

Morningstar doesn’t track commissions, but if haircuts are in the air, the company often hears rumblings about it. “I heard some rumbling a couple of years ago, but nothing recently,” he says.

Companies typically use commission cuts to limit sales, he points out. So companies that want to rein in on sales might turn to that at some point.

Source: Morningstar list of insurance companies currently offering I-share (low-cost) variable annuities in the United States, as of second quarter 2012

percent or 5.5 percent may sound fairly modest to some people, so they may not be interested.

Actually, McCarthy says, in today’s low-interest rate environment, “Rates like that are pretty attractive.”

With all the changes that variable annuity carriers have already made in their products to ensure profitability, there don’t seem to be many more levers the carriers can pull in order to meet profitability objectives, McCarthy says.

In the fixed indexed annuity business, some carriers have been reducing commissions for just this reason. But McCarthy says he has not heard of that happening in the variable annuity market.

44 InsuranceNewsNet Magazine » October 2012

Surprisingly, despite the trend to introduce more limitations on product features and provisions, some variable annuity carriers are looking for new revenue opportunities.

This is evident in the rise of the so-called “I-share” variable annuities. Morningstar reports that, at the end of the first half 2012, there were 55 I-share contracts in its database of more than 500 available variable annuities. That’s up from 34 I-share contracts one year ago.

The number of companies now offering I-share contracts is 22, Morningstar says.

I-share variable annuities are extremely low-cost products, with total fees ranging from 30 to 80 basis points and surrender charge period that run about eight years. “They are like tax-deferred shells with cutting edge investment strategies,” McCarthy says. (They have nothing to do with iShares, the family of exchange-traded funds managed by BlackRock.)

Companies that have capacity for more variable annuity sales could be using these products to spur sales from fee-based registered investment advisors, he adds.

Still, it’s a niche market right now, and only 3 percent of variable annuity sales go into I-share products. So, even if they double the carriers’ sales volume through I-share contracts, “it won’t affect industry sales in a big way or dramatically affect the risk exposure of the companies that sell them,” adds McCarthy.

The product development here could be an activity for the carriers to pursue, while “the wait continues for interest rates to rise,” he says.

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning.

Linda can be reached at Linda.Koco@ innfeedback.com.

Financial Strength + A Company You Can Trust

= Great American Life Great American Life has everything you need to help build your business.

We are proud to provide our partners with:

★ A comprehensive portfolio that includes competitive fixed and fixed-indexed annuities

★ Income solutions, including our unique 10% income rider and 8% income rider with an enhanced death benefit

★ An American company with a heritage dating back to 1872 ★ Strong ratings. We are rated “A+; Outlook Stable” by Standard &

Great American Insurance Group Tower, headquarters of Great American Life, overlooks Great American Ball Park, home of the Cincinnati Reds.

Poor’s and we’ve been rated A or higher by A.M. Best for more than 30 consecutive years.

Learn more at www.GAFRISingleSource.com or contact your managing partner.

S&P rating–effective October 31, 2011. “A+” is fifth highest of 21 categories. A.M. Best rating–effective March 29, 2012. “A (Excellent)” is third highest out of 16 categories.

Products issued by Great American Life Insurance Company, a subsidiary of Great American Financial Resources , Inc. (Cincinnati, Ohio). For distribution partner use only. Not for use in sales solicitation. COM12295 ®

October 2012 » InsuranceNewsNet Magazine

45

[HEALTHWIRES]

Survey: Employers Expect Health Premium Increases of 8% bitly.com/PremiumsUp

$750 Billion Health Dollars Wasted Each Year

y ssar ece unnvices ser

in de effic of cliver ient are y

e ess istrativ excm n i ad sts co

rice dp ate infl

About 30 cents of every medical dollar is lost through unneeded care, unnecessary paperpr work, fraud and other factors, resulting in a faileven ure tion waste of $750 billion a year, according to the s Institute of Medicine.

The 18-month study identified six major ud fra areas of waste: unnecessary services ($210 billion); inefficient delivery of care ($130 billion); excess administrative costs ($190 billion); inflated prices ($105 billion); prevention failures ($55 billion) and fraud ($75 billion).

According to the report, health care costs have increased at a greater rate than the economy as a whole for 31 of the past 40 years. Most payment systems emphasize volume over quality and value by reimbursing providers for individual procedures and tests rather than paying a flat rate or reimbursing based on patients’ outcomes.

The report stresses that health economists, researchers, professional societies, and insurance providers must work together on ways to measure quality performance and design new payment models and incentives that reward highvalue care. s

HEAVY BURDEN

The burden of obesity on the U.S. health-care system and taxpayers is at crisis levels, and it’s one that will only increase in coming decades. Medical care required to treat obesity makes up 5 to 10 percent of total U.S. healthcare costs, half of which is paid for by Medicare and Medicaid.

The cost of obesity and its association with multiple chronic diseases, complications from medical and surgical care, increased levels of disability, work absenteeism, and premature death exceeds $215 billion a year in the United States. New York, Texas, DID YOU

KNOW

?

Pennsylvania and California each spend more than $4 billion annually treating obesity-related health problems.

“Keeping obesity rates level could yield a savings of nearly $550 billion in medical expenditures over the next two decades,” said Eric Finkelstein, a health economist with the Duke University Global Health Institute, and author of “National Medial Expenditures Attributable to Overweight and Obesity.”

STUDY: HEALTH INSURANCE COST HIKES SLOWING

The Kaiser Family Foundation survey of more than 2,000 small and large

LOWER-WAGE WORKERS PAID MORE FOR COVERAGE even though the overall premium cost less, on average, than coverage provided to higher-wage workers – $14,694 in total annual premiums for lower-wage workers, compared to $16,427 for higher-wage workers.

Source: Kaiser Family Foundation/Health Research & Educational Trust (HRET) survey

46 InsuranceNewsNet Magazine » October 2012

employers nationwide found that health costs, while rising, are going up at much slower pace than average.

Health insurance premiums grew by a relatively modest rate this year, according to the report. The average annual premium for employer-sponsored family coverage this year is $15,745, up 4 percent from last year.

The rate of increase exceeded the growth in worker wages (1.7 percent) and inflation (2.3 percent) between 2011 and 2012, but is now one of the lowest annual growth rates for health insurance premiums since 1999.

At high-wage companies, where at least 35 percent of workers earn $55,000 or more a year, in 2012 workers paid just under $4,000 each for family coverage while their employers are kicking in another $12,459.

But at low-wage firms, where at least 35 percent of workers earn $24,000 or less per year, employees contribute about $5,000 each for family coverage while employers are contributing an average of $9,716. Workers at lowwage firms also are more likely to face higher deductibles when seeking care.

“This year’s survey suggests that working families at the low end of the wage scale face significant out-of-pocket costs for coverage,” said Gary Claxton, a Kaiser researcher. “Firms with many lower-wage workers ask employees to pay more out-of-pocket than firms with many higher-wage workers even though the coverage itself tends to be less comprehensive.”

QUOTABLE In terms of employee insurance costs, this year’s 4 percent increase qualifies as a good year, but it still takes a growing bite out of middle-class workers’ wages, which have been flat or falling in real terms.

— Drew Altman, Ph.D. Kaiser President and CEO

nationalUnderwri InternationtaerslUnderwriters Got a rainmaker?

ife • MediDisabcilalty • LiCont fe • Medicnalgency • Contingency Yes. We cover that.

g • 800.345.8816www.pi•u.orpig •u@pi80 .34u5.8o1rg6 • piu@piu.org When business depends on a Key Person, a death or disability could mean financial ruin. High-Limit coverage is necessary.

For more than 30 years, we have been creating insurance products for hard-to-place cases. We will, when others won’t.

Petersen International Underwriters

Disability • Life • Medical • Contingency www.piu.org • 800.345.8816 • piu@piu.org October 2012 » InsuranceNewsNet Magazine

47

HEALTH

Health Reform: Top Earners, Top Taxes billion, will be borne by the nation’s top 2 percent of earners. About 2.5 million households fall into this category of those making more than $200,000 per year, or married couples with a combined income of $250,000. For those in this bracket, an additional 3.8 percent tax on investment income is added to the current capital gains rate, set to rise from 15 percent to 20 percent in 2013

unless Congress acts, for a total 23.8 percent tax.

Some of these new taxes went into effect when the health reform bill was passed in March 2010, such as the 10 percent tax on salon tanning and the sale of prescription drugs. Most taxes will be phased in beginning in 2013 through 2023.

High-income households will be paying more into Medicare. The Medicare

ACA TAXES DESCRIPTION IMPACT 2014-2023

TAX COLLECTED 2013-2023

T he top 2 percent are the top payers for health reform taxes

By Kathryn Rolston

T

he Patient Protection and Affordable Care Act, aka Obamacare, has an associated cost of approximately $1 trillion, covered by 20 new and increased taxes.

The largest tax amount, about $318

PERSONAL Individual Mandate

Imposed on individuals with AGI at or below 138% of poverty level who do not purchase a health insurance policy, or who do not have coverage through an employer; for incomes between 100-400% of FPL, a tax credit of about $5,000 may be taken on tax returns; exemptions are allowed for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty level, members of Indian tribes, and hardship cases as determined by HHS.

Beginning in 2014, the tax is 1% of AGI, or $95. The tax escalates to 2.5% of AGI by 2023. Purchasing health insurance through a state exchange will cost families between 2% and 9.5% of AGI.

Other Personal Taxes

Individuals and Families

Itemized medical deduction increases from 7.5% to 10% of AGI Flexible Spending Account (FSA) Cap: In 2013 deposits will be capped at $2,500.

Health Savings Account (HSA): Penalties for withdrawals for non-medical reason increases from 10% to 20%.

Medicine Cabinet Tax: In effect since 2010, use of pre-tax dollars from HSAs, FSAs or health reimbursement accounts is not allowed for the purchase of OTC drugs.

$18.7 Billion

0.9 percent Medicare tax applied to wages; 3.8 percent tax on investment income in addition to current 15% tax

$318 Billion

Top Earners

Individuals who earn more than $200,000/yr, or married couples with a combined income of $250,000/yr

$55 Billion

$24 Billion $4.5 Billion $4 Billion

BUSINESS Employer Mandate

Employers with fewer than 25 employees, avg wage of $50,000

Certain small employers receive tax credit to offset cost providing they contribute 50% of cost of employee health insurance

Employers with fewer than 50 employees

Exempt from penalties imposed on larger employers

Employers with 50-100 employees, if health coverage not provided and 1 employee qualifies for tax credit

Access to SHOP exchanges, $2000 per F/T employee, $3000 if employee gets coverage through an exchange, coverage waiting period tax, $400-600 per employee.

Grandfathered plans are exempted from some health reform requirements. To retain this status, employers must not make significant changes to their plans.

Employers with 100-plus employees

No access to SHOP exchange before 2017

48 InsuranceNewsNet Magazine Âť October 2012

$106 Billion

business taxes combined

HEALTH REFORM: TOP EARNERS, TOP TAXES payroll tax is 2.9 percent on all wages and is funded by employees and employers, each paying 1.45 percent. Starting in 2013, high-income individuals will pay another 0.9 percentage point on earned income.

A single person earning $250,000 will pay an additional $450 a year into Medicare, according to Deloitte. At $1 million in income, an additional $7,200 tax will be imposed.

The itemized deduction limit for medical expenses will rise from 7.5 percent to 10 percent of adjusted gross income. Flexible Spending Account (FSA) deposits will be capped at $2,500. The penalty for Health Savings Account (HSA) withdrawals for non-medical reasons increases from 10 percent to 20 percent. Already in effect is the “Medicine Cabinet” Tax, which disallows us-

ing money from an HSA, FSA or health reimbursement account for over-thecounter medications. These changes will amount to about $53 billion in new tax revenues through 2023.

Effective 2018, ACA places a 40 percent tax on the dollar amount of “Cadillac” health-care plans, which have premiums of more than $10,200 per person or $27,500 per family, not including dental or vision coverage. Employers are responsible for paying the tax.

Business owners could be responsible for an estimated $106 billion in new taxes, which will be imposed if they fail to meet the mandate deadline of January 2014. The tax varies based on the number of full-time employees.

Large employers with more than 100 workers may face new requirements

ACA TAXES DESCRIPTION 2014-2023

HEALTH

related to their workers’ coverage and will not have access to Small Business Health Options Programs (SHOP) exchanges before 2017 (these exchanges save employers money by spreading insurers’ administrative costs across more employers and have associated business tax credits.) While larger firms are unlikely to experience significant changes in the types of coverage they provide, higher costs may be associated with increased enrollment to the health coverage they offer their workers.

Kathryn Rolston is the assistant editor at InsuranceNewsNet Magazine. She can be contacted at KRolston@ insurancenewsnet.com.

IMPACT

TAX COLLECTED 2013-2023

HEALTH CARE INDUSTRY $29 Billion

Medical Device Tax

As of 2013, imposed on all medical devices costing more than $100.

Pharmaceutical Companies

Already in place, a fixed tax is applied to the sale of prescription The amount increases from $2.5 billion in 2011 drugs. Large drug companies pay a portion of this tax based on their to $4.2 billion in 2018. aggregate revenue from brand-name drugs.

Insurer Tax

Based on premiums collected, firms with $50M in profits, phases in through 2018

High-Cost Health Insurance

Effective 2018, additional tax on the dollar amount of a healthcare 40% tax on dollar amount plan with premiums of more than $10,200 per person or $27,500 per family, not including dental or vision coverage.

Excise Tax on Hospitals

In effect, imposed on hospitals for failing to meet HHS rules regarding community health needs, financial assistance, and billing and collection

Health Plan Fee

Patient-centered outcome research

$3.8 Billion

Modify Section 833

Treatment of certain health organizations

$0.4 Billion

Health Provider Executive Compensation limits

Restricts high-level executive pay for health insurance providers should such providers not meet minimum acceptable coverage requirements.

Tanning Tax

10% tax on those using artificial tanning services

Medicare Part D

Elimination of employer deduction

Codify Economic Substance Doctrine

If a taxpayer both changed their economic position in a meaningful way and had substantial non-federal income tax purpose

Bio Fuel Credit

Cellulosic biofuel sales of the “black liquor” by-product no longer qualify

2.3% sales surtax

$8 billion in 2011, rising through 2018.

$50,000 per hospital

$500,000 limit

$34 Billion

$101 Billion $111 Billion

Negligible

$0.8 Billion

OTHER

Other Revenue Effects Sources: Congressional Business Office July 2012 report; Healthcare Costs: A Primer May 2012, Kaiser Family Foundation

$1.5 Billion $3.1 Billion Penalties of 20 to 40 percent

$5.3 Billion

GRA ND T OTA L

$15.5 Billion $222 Billion

$1.05 Trillion

October 2012 » InsuranceNewsNet Magazine

49

FINANCIAL

Producing a Client Empowerment Event The best way to build a client relationship is to deliver real value to their lives.

By Bruce Raymond Wright

W

hether our intention is to form stronger and more meaningful connections with existing clients, their advisors, our colleagues or influential people, it is better to attract them rather than pursue them. The surest way to connect with people is to either directly bring them what they value, or to act as a conduit to bring them what they want or need. It’s really all about what 50

they value and want. Until we understand this simple truth and deploy it in pragmatic, dynamic and attractive ways, we will be working harder rather than smarter.

Meaningful, enduring relationships are built upon our consistent demonstrations that we understand the wants, needs, values and voids that are relevant to our clients. When we expand our awareness, understanding and solutions to include the other advisors our clients respect, we exponentially ease and speed the effectiveness and success for all involved.

Many years ago I discovered that by

InsuranceNewsNet Magazine » October 2012

serving as a conduit for ageless, timeless wisdom for people, I became more relevant and valuable in their lives. Even though at the tender age of 23 (when I discovered this truth) I really didn’t have much, if any, wisdom of my own to provide. So I sought wisdom written by credible sources, the kind of wisdom that worked universally and had been proven over many decades or even thousands of years. Then I presented it to clients, prospects, centers of influence, etc.

As I began providing books, quotes, movie recommendations, etc., that elevated my clients’ awareness and led them

Service, Strength, truSt. thiS iS our heritage.

Sagicor Life Insurance Company (Sagicor) is a full-service life insurance company that helps clients make wise financial decisions today to ensure that they are protected tomorrow. We are licensed in 44 States plus the District of Columbia.

Sagicor is rated “A-” (Excellent) by A.M. Best Company and is a wholly-owned subsidiary of Sagicor Financial Corporation, one of the oldest insurance groups in the Americas. Founded in 1840, Sagicor Financial Corporation operates in 22 countries including the United States, Latin America and the Caribbean.

Sagicor is committed to offering customers world-class service with integrity and value.

To learn more about Sagicor, visit our website SagicorLifeUSA.com or call toll-free 1-888-724-4267, option 2.

LIFE INSURANCE | ANNUITIES

Sagicor Life Insurance Company is rated “A-” (Excellent) by AM Best Rating Company.

4449

FOR PRODUCER USE ONLY – NOT FOR PUBLIC DISTRIBUTION S1000912 October 2012 » InsuranceNewsNet Magazine 51

FINANCIAL

PRODUCING A CLIENT EMPOWERMENT EVENT

to discover better solutions, my perceived and actual value increased. Later I discovered that my new way of being was really a tangible, recognizable means for demonstrating that I truly did understand what was important to my clients, and I cared enough about them to think and act on their behalf outside of how I earned my compensation. I had actually developed into a person that brought clients value that nobody else would bring.

Lots of professionals claim to understand, protect and serve the best interests of their clients. However, very few can articulate those best interests, their wants, needs, voids and values with clarity sufficient for dynamic action and tangible measurable results.

Here is a real life example of how I do this. If you so choose, you can also apply this simple client empowerment recipe for mutual success. You will be able to pragmatically apply this principle, which for most people is nothing more than an abstract concept: The surest way to your own success lies in helping lots of other people get what they want, but are unable to get on their own or from their existing advisors or colleagues.

Yes, I took an old Zig Ziglar idea and expanded on it. Now here is a powerful way for you to pragmatically translate what is a great concept into measurable results, meaningful connections – and revenue, cash flow and mutual success!

It’s a classic example of a classy way to live win-win with clients, other advisors and the entire community.

Some Context

Everybody I know has been negatively touched by this economy. Either they were laid off, fired or downsized, or someone important to them has been. Retirees have children, grandchildren, nieces or

Check out Steve Matter’s must-read book at amzn.to/ GetNoticedGetHired

52 InsuranceNewsNet Magazine » October 2012

nephews that have been axed. Most if not all of our clients, their advisors, colleagues, our prospective clients and our circles of influence have been suffering during this economy and that means there is an important void that can be filled. The question is who is daring and caring enough to fill that void? I will explain how I am working to fill that void, even though I do not have expertise solving unemployment challenges.

Acting as a conduit for wisdom and details that I do not possess, I have secured access to a dynamic book entitled Get No-

The surest way to your own success lies in helping lots of other people get what they want, but are unable to get on their own ... ticed & Get Hired: Action Steps, Strategies and Resources to Become Empowered & Employed, by Steve Matter. This book is well written and contains a combination of effective solutions mixed with inspirational “why do it now” insights that actually help people move forward in productive ways. Whether people are seeking a new career path, a job or they want to begin their own enterprise, Steve’s book is a must-read.

Here is my recipe to help my clients and those they care about solve one of the biggest challenges in the history of their lives. [ Step 1: A List] I have created a cover letter that will be mailed out to my A List of clients along with a complimentary copy of Steve’s book, Get Noticed & Get Hired. I will send separate packages to Dr. Chase and to Mrs. Chase, for example, because I want each of them to individually know that I care about them on a personal basis. This means I’ve had to acquire one hundred and seventy two copies of the book, but this costs me far less than the cost and the time involved of taking each client to lunch to merely tell

them that I care about their happiness, success and the well-being of their family.

In the cover letter the recipients and their guests are invited to an author reception and book signing. At the reception, Steve Matter will deliver a Whole Brain presentation designed to empower each attendee to improve their future career.

He will share priceless, ageless wisdom which, when effectively applied, tends to improve not only ones’ income, but also enhances ones’ sense of significance, joy and fulfillment. [ Step 2: B List] This cover letter is similar to the A List letter except I tell them that I have reserved fifty complimentary copies of Get Noticed & Get Hired for my clients. To receive a complimentary copy of this wonderful book, I ask them to please email me a request or call my office and a copy will be mailed right away. Each recipient is invited to attend the complimentary author reception and book signing and bring as many guests as they‘d like. [ Step 3: C List] Everyone not on the A or B List receives an email or letter describing the book including a website address so they can acquire their copy at a discount. Each recipient is invited to attend the author reception and bring as many guests as they would like.

It’s a win-win scenario. It is a demonstration that I care enough about their success, peace of mind and well-being to actually do something meaningful for them at my expense. It is outside the box of what I receive compensation to do. It elevates all who choose to participate.

This isn’t the usual self serving, self centric behavior most people expect from most advisors, and is an example of uplifting and empowering others with no strings attached. It’s a demonstration of “client centeredness.”

Simple and elegant demonstrations that we care for others go much further than mere words, and forms a stronger and more meaningful connection.

Bruce Raymond Wright is CEO of The Wright Company and can be reached at Bruce.

Wright@innfeedback.com.

GO MOBILE!

InsuranceNewsNet Magazine is now available on the iPad Newsstand You can now download INN Magazine for free on your iPad from the App Store Newsstand.

Simply search for InsuranceNewsNet in the App Store or visit bitly.com/innmagazine for a direct link and you’ll be up and reading in minutes.

October 2012 Âť InsuranceNewsNet Magazine

53

BUSINESS

Fair!

When Foul is Fair Find your advantage over the competition and run with it!

By Dan Seidman

B

ack when I played college basketball, we were competing with a team one night that had a very dirty player. This guy would run down the floor, glance to see if the officials were looking his way, and if he could, elbow one of my teammates in the face.

Everyone in the league hated this guy.

So in the first half, when that opponent went in for a layup, our center just flattened the guy. Our center was huge, broad and big – like a football player.

And he leveled that dirty player like a truck running over a small deer.

The whistle blew, and as the dirty player lay dazed on the floor, our big 54

man leaned over and said, “I have four more fouls … and they’re all for you.”

So, sales pro, how strongly do you feel about defeating the competition?

What’s your attitude here? Perhaps you’re friendly face-to-face. But are you determined to take their money – before they get yours?

I’ve found that great, truly great athletes hate losing MORE than they enjoy winning (read that again).

Top sales professionals are the same.

Do you have similar feelings when you go head-to-head with another advisor, another firm?

Today, you’ll learn how to slam the competition.

Remember what you were taught growing up in sales? Never make negative comments about another firm. It’s a

InsuranceNewsNet Magazine » October 2012

turn-off. Buyers will resent people who do this (well, unless you’re running for president).

Here’s an exception – a sweet way to show your buyers that there are some serious flaws in what those other organizations are offering. You can do this respectfully and, as you’ll see, it comes down to using a potent question.

You might not like this. You might not try it. Doesn’t matter. A ton of people who read this will put it into play.

They’ll do it because it’s another strategy that will help them rise above the rest. And great sales pros seem willing to do things that mediocre reps won’t.

Start by creating a chart

This chart is a competitive matrix that compares you to your biggest competitor.

BUSINESS

WHEN FOUL IS FAIR I encountered a great example of this six years ago at the Motivation Show in Chicago. Big trade shows are great places to gather marketing ideas as exhibitors make massive investments in marketing.

At this show I met the marketing team for Creative Corporation. This company produces the ZEN mp3 player. Their competition? Apple iPod. iPod OWNS this market – with an astronomical 82 percentage share in 2005! How do you go toe-to-toe with this monster? Design a chart like the one on the right.

Prospective customers look at this and say, “What am I really buying? The big name, better-budgeted company, or a product that gives a lot more for my money? Maybe I should be buying the Zen.” You’re creating doubt in the buyer’s mind about going with the other organization.

Here’s why the other company will hate you for doing this: The trick is to line up a half-dozen benefits, using mostly those that the competing product or service doesn’t have. They’ll look at the list and say, “but they left off this feature or skipped that benefit…” Your response, “It’s my marketing piece, so I set the rules.”

Now that you’ve built the sales tool, in print and/or online, let’s go to work with it. Stick with me here and we’ll use this example, then get into how you build your own competitive matrix.

Create questions that clearly point out the gaps in the product or service offering. In our Zen example, the seller might ask these three gap questions.

Notice the responses (and keep in mind that this was before the iPhone).

Seller: “This is a crazy, great green color. How does it compare to the iPod green?”

Answer: “Uh, there is no green iPod.” Seller: “Oh, I’m looking at your business card. So what if your company wants a green to go with your logo?”

Seller: “A nice touch with these mp3 players is the radio tuner. You want some news, have a favorite radio program, this is nice to have. What about iPod’s tuner?”

Answer: “Uh, there is no tuner on the iPod.” Seller: “Oh, well you probably have a radio in your house, or you’ll turn it on when you get in your car.”

FEATURE/ BENEFIT

ZEN

iPOD

Colors

10

4

FM Tuner

Yes

No

Microphone

Yes

No

Battery Replace?

Yes

No

4-5 hrs

4 hrs

Charge Time

Seller: “One of the things I like is the ability to record things with the built-in mic on this Zen. It might be a conversation, your kid singing, notes to yourself or spouse. Think that’d be a nice thing to have sitting in the palm of your hand?”

Answer: “You can’t record stuff on the iPod.” Seller: “Well that’s too bad. Is that something you’d want to have?”

You get the picture. The idea is to sell into the gaps.

Sell hard into the gaps!

It is time to truly distinguish yourself from the competition. Keep the conversation right on the track that’s been established by your gap question. Begin to ask questions that focus on the gap.

These are questions related to value (remember in our business, buyers quantify investments in a big way), questions related to support and service (how quickly can your team provide help?), questions related to safety (distinguishing a product or service in terms of safety is huge as well).

You choose the path that makes the most sense, based on that specific buyer.

And you take them with you – all the way to the close. Help them realize that these gaps are bigger than they imagined and you are the smartest person to partner with, because those gaps don’t exist with your company, your offerings.

What are some of the gaps you can identify? It could be anything – location of your office, your age and experience, specific products, testimonials. Pull out everything you use to promote yourself,

everything you’ve read in InsuranceNewsNet Magazine over time and create that competitive matrix.

This concept, Selling into the Gap, is my absolute favorite consulting conversation. Recently I was presenting at a global training conference and a major service organization that has only one global competitor asked me “How can we distinguish our offerings when the companies are so much alike?” I taught this in about two minutes and two senior sales executives had the biggest grins on their faces.

Why mention this last conversation?

Because you create something that works this well and you’ll have a hard time hiding a grin when you use it.

You get it now, right? This is a potent strategy and the competition will hate you for doing it.

So get there first! If you’re an independent advisor or entrepreneur, you can easily put this chart into play for your sales work (don’t forget to place it prominently on your website as well). If you happen to be a corporate sales executive, it might be a bit more difficult, as you aren’t always allowed to create materials. I’d encourage you to draw one up and share it with your VP of sales or marketing and see if it’ll work as a flyer you can use.

Competitive matrix – get your team together, build one and use it today.

Dan Seidman is a sales trainer who travels globally, keynoting and consulting on the latest best practices in influence. Reach Dan at Dan. Seidman@innfeedback.com.

October 2012 » InsuranceNewsNet Magazine

55

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

MDRT INSIGHTS

Early Exit Planning Key to Smooth Landing to Retirement First, figure out what your practice is worth.

By Gregory B. Gagne

B

eginning to think about the steps to hand over a business can be a bit unsettling for some. Many have built businesses from the ground up and cannot imagine an exit strategy. But transitioning can be the best thing you can do for yourself and your business when approaching a career turning-point.

While many in the industry consider succession planning and begin thinking about it, it’s more uncommon to find an advisor who is taking the steps toward setting up a continuity plan.

Early strategic thinking can provide advisors with a secure retirement plan, as well as assurance that your clients are getting exceptional service even without your aid. Building a practice is not an easy task, and planning to hand it off to a successor will not be any easier. However, it will ensure your practice stays afloat after retirement.

Succession planning has become a vital topic for the Million Dollar Round Table. I spent the past year with some members studying the issue, as well as trying to give some deliverables for our members.

One of the first things an advisor must do before beginning to build a succession plan is to determine the practice’s value. We found the traditional way of doing business under the commission model is challenging to valuate, making it difficult to formulize a valuation. Advisors who use a model based on assets under management or some form of recurring revenue will find the valuation process less cumbersome. Putting a valuation on a practice can be done in a number of ways: F ree cash flow: Your salary, plus profit, minus what you would need 56

to pay someone else to do your job is what we call “free cash flow.” If you multiply this number four to six times, you have your practice valuation. ecurring and nonrecurring revR enues: Take gross revenues for one year and determine what is recurring (asset fees, renewals, etc.) and what is nonrecurring (new sales). The higher the recurring revenue, the higher the value of your business.

F ull business valuation: Hiring a valuation expert is another way to assess your business and its market value.

Identifying a prospective buyer is another task which should not be taken lightly and often requires a great deal of time. Finding someone you trust to take care of your clients is the most important factor in planning for a successful transition, according to a 2007 survey by LIMRA. One factor advisors must consider is whether they want to work with an outside buyer or recruit from within their practice. An inside buyer could either be a family member or a key employee or partner who has worked at your practice for quite some time. Looking to go with an outside buyer can sometimes be a more difficult process, as you need to find a suitable

InsuranceNewsNet Magazine » October 2012

candidate with similar core values.

Once you have worked out details with your successor, the next step is simply executing the plan you have put in place. A well-executed plan will make the transition easier for all parties involved – you, the new advisor and your clients. Allow your clients to be a part of the process. This can be accomplished by sending them a letter explaining what is happening and how the transition will take place. Another option is to schedule meetings with high-value clients so they can meet with you and your successor to discuss steps moving forward.

Riding it out, or working in the business until you die, is not the optimal way to handle closing your financial profession. As advisors, none of us would advise our clients to handle their own businesses in this manner.

Preparing a succession plan ensures not only that your business will succeed without you, but also that your clients will still receive exceptional service.

Gregory B. Gagne ChFC, is a 13-year MDRT member with four Court of the Table and four Top of the Table honors.

He is founder of Affinity Investment Group, LLC. Reach him at Gregory.Gagne@ innfeedback.com.

Every year, new tax proposals threaten your products and your business.

Only NAIFA protects both.

Find out more at www.NAIFA.org/ItPays

October 2012 Âť InsuranceNewsNet Magazine

57

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

LIMRA INSIGHTS

Guiding Emotion in Marketing T ap into a prospect’s emotions and positively influence your sales approach.

By Scott R. Kallenbach

E

motions have always been part of marketing, especially in advertising and promotion. Feelings of excitement, envy and love are commonly used in advertisements.

But some lament that financial services are not as appealing to consumers as other products such as automobiles or electronics. To make financial service products more appealing, we need to elicit more emotion from consumers when promoting our products. Emotional appeals can help companies and their distribution partners communicate with the buying public more effectively.

LIMRA recently conducted a study that uncovered the emotional responses that consumers have to financial products, particularly life insurance and annuities. This article outlines those findings.

Mixing the fear of death with the power of ensuring that loved ones will be financially secure is a strong emotional motivator.

Key Emotions

The emotions associated with life insurance and with annuities are quite similar despite the differences in the products.

Both products provide financial protection, and consumers have feelings reflective of this. Among the stronger emotions invoked by both life insurance and annuities are feelings of security and confidence. Annuities create stronger feelings of power than life insurance, but life insurance invokes deeper feelings of caring and loving than annuities.

Power Phrases

Power phrases that have traditionally been taught to sales professionals are not as strong as ones specifically designed to highlight particular emotions. These traditional power phrases fall short because they are not targeted at a definitive emotion such as joy or love. When developing power phrases, it is best to focus on a particular emotion.

Marketers must go beyond just reason-based appeals, as they have done in the past, and also make emotional 58

statements. If we want consumers to react strongly about something, and ultimately act, we must find the appropriate emotional appeal.

Positive vs. Negative Emotions

Some statements have a very positive emotional tone while others have a negative one. Depending on what type of reaction you wish to invoke, a different statement might be more appropriate.

Which are more effective, positive or negative emotions?

Not surprisingly, people want a positive reason to make the purchase decision. They do not want to feel pressured or be scared into making the purchase.

Consumers know they will die, but do not want that stressed to them. They are attracted to the positive feelings associated with life insurance helping their surviving loved ones.

Pressure does not work. When con-

InsuranceNewsNet Magazine Âť October 2012

sumers feel pressured, it makes the problem seem large, which ultimately leads to postponing the decision, or choosing not to make it at all.

Consumers also want to maintain a level of control. They do not want to be told what to do. When working with prospects and clients, sales professionals should use choice architecture to frame potential outcomes and solutions. Emphasize the good that the life insurance proceeds will do for the family – pay the mortgage and car payments. Show them how life insurance lets them take care of the loved ones left behind.

Pictures

Pictures enhance the emotions. In fact, when emotional phrases are added to descriptions of life insurance and annuities, the emotional response does not change significantly. On the other hand, including pictures with the power

ADVERTISER INDEX phrases adds to the overall emotional response. Images influence emotions, but they are highly subjective and must be well thought out in order to get the desired outcome. The key is to use imagery to fortify the emotional responses that lead to the decision to buy.

While a picture may be worth a thousand words, are they the words we want? A picture may support and strengthen the message we wish to deliver, but it may also dominate it, or convey a different message. Pictures do bring out emotions, but they may not be the emotions that we want. Consequently, we must be very careful when using them. Reactions to pictures should be tested before the images are used with the general public.

Conclusions

Effective ads and communication pieces have perceived relevance for the consumer or their family – the message connects to something meaningful. But there is more, the connection is emotional; it is something they could personally experience.

To improve a prospect’s affective reaction to life insurance and annuities, it is helpful to include emotional content in marketing material. But not just any emotions, the appropriate emotions must be activated. Power phrases that create fear and guilt are less inspiring than feelings of power and security. In addition, a mix of feelings (such as happiness and sadness together) is more powerful than individual feelings. Mixing the fear of death with the power of ensuring that loved ones will be financially secure is a strong emotional motivator.

Understanding how certain phrases and images influence the buying decision helps companies and sales professionals successfully engage consumers.

Triggering the appropriate emotional response will help consumers recognize the solutions for their needs, while strengthening the sales professional’s performance.

For more details on an advertiser, use the contact information below or visit InsuranceNewsNetMagazine.com/spotlight Advertiser Website Phone Page 3 Mark Financial www.iulbuyerguide.com 888-533-6275 41 American Equity www.american-equity.com 888-647-1371 3 American General Life Companies estation.americangeneral.com 800-677-3311 7 Asset Marketing Systems ww.amspuzzle.com 888-303-8755 10-11 Aviva www.avivausa.com/joinaviva 800-800-9882 36-37 Brokers Alliance www.iulsalesmachine.com 800-290-7226 ext. 161 1 Eugene Cohen Insurance Agency, Inc. www.cohenagency.com 800-333-4340 9 Fairlane Financial www.888fairlane.com 800-327-1460 39 Financial Independence Group www.figmarketing.com 800-527-1155 43 Foresters www.foresters.com 866-466-7166 opt. 1 23 Genworth genworth.com/indexannuities 866-498-7151 IFC Gradient Financial Group www.gradientib.com 800-407-4137 BC Great American Financial Resources www.gafrisinglesource.com 888-497-8556 45 Kramer Direct www.kramerdirect.com 888-572-6373 59 Life Sales, LLC www.joetheproducer.com 877-762-3824 5 M&O Marketing www.securethevault.com 800-228-5964 31 Mike Steranka www.advisorleadsystem.com 443-308-5216 IBC NAIFA www.naifa.org/itpays 877-866-2432 57 NetQuote www.netquote.com/oct15 877-415-5153 4 Ohlson Group www.ohlsongroup.com 877-844-0900 15 Pacific Life Insurance Company www.defendretirementnow.com 855-584-0661 35 Petersen International Underwriters www.piu.org 800-345-8816 47 Ritter Insurance Marketing www.ritterpartd.com 800-769-1847 33 Sagicor Life Insurance Company www.sagicorelifeusa.com 888-724-4267 opt. 2 51 Sentinel Security Life www.sslco.com 866-235-1892 29 Triquest www.iul-bootcamp.com 866-876-8437 27 Wealth Financial Group www.powerplayersconference.com 888-333-7771 17, Ins



      



  

 

                    

 

Scott R. Kallenbach, FLMI, is research director for LIMRA’s strategic research. He can be reached at Scott.Kallenbach@ innfeedback.com.

October 2012 » InsuranceNewsNet Magazine

59

THE LAST WORD

WITH LARRY BARTON

The Dangers of Monopolies in Financial Planning Designations “Power tends to corrupt, and absolute power corrupts absolutely.” - Lord Acton, British historian (1887)

By Larry Barton

A

recent statement made by Lauren M. Schadle, the incoming chief executive of the Financial Planning Association (FPA), in the financial services trade media bears close examination. She said that “one profession and one designation is the best way to build the financial planning profession.” There is only one word that fully describes Schadle’s view. Nonsense.

I understand that Schadle has to say this. In a recent media interview, FPA President Paul Auslander said that when the International Association for Financial Planning and the Institute of Certified Financial Planners merged, a condition of the merger was that the “CFP“ credential would be promoted as the designation for financial planning.

Unfortunately, this self-serving and myopic “one profession/one designation” perspective is detrimental to average Americans – especially those in the middle and lower income brackets. In addition, she promotes the less comprehensive CFP credential as the be all and end all of financial planning at a time when consumers need advisors with more education – not less – to help them navigate the complexities of preparing for the future. In both instances, Schadle puts her FPA contractual obligations ahead of consumers’ best interests.

As I see it, the FPA has mistakenly bought into the uninformed notion that fee-based financial advisors are best suited to serve all consumers. While fee-based financial advisors have many admirable qualities, the cost of their services makes them inaccessible to average Americans.

Don’t believe me? Take this simple test.

Call five or six fee-based financial planners in your area at random and ask them how much they would charge to develop a financial plan. It will become apparent, very 60

quickly, that fee-only planners typically charge around $2,500 just for a financial plan. And if a consumer wants to purchase additional products, they’ll be spending more – a lot more.

Twenty-five hundred dollars is an enormous sum for the vast number of Americans who live paycheck to paycheck. Before we start advocating a one profession financial planning model for all Americans, let’s make sure it serves all Americans – not just the well-to-do.

The financial problems facing Americans demand a more flexible series of solutions that can embrace every individual – regardless of their income level.

These solutions exist in banks, mutual fund companies, insurance companies and accounting firms. These organizations contain dedicated financial services professionals who can offer sound planning advice. They may not hold the CFP, but they have the education and experience, and more importantly, the trust of average Americans.

And frankly I challenge the idea that the CFP should be the one and only designation. In truth, education should be a lifelong pursuit for financial professionals. There are many quality programs that financial advisors should pursue over the course of their careers, including the CFP. For example, if one were interested in getting a more comprehensive education, one would enroll in the Chartered Financial Consultant (ChFC) program. A ChFC is required to complete all the same courses as a CFP plus an additional 50 percent more!

Don’t get me wrong. I like the CFP designation. In fact, The American College is one of the largest providers of courses leading to the CFP credential.

It’s just that no one individual or family’s financial situation is quite the same.

Everyone’s needs are different. No one designation fully embraces the full gamut of consumer needs. For consumers to be served effectively, they must have access to a spectrum of professionals.

Now there are those who will justifiably

InsuranceNewsNet Magazine » October 2012

point out that there is an alphabet soup of financial planning related designations available and that this is confusing to consumers. They feel that limiting the field to one designation will help clear up confusion. The problem is that it also limits choice. To use a political analogy, it’s true that one dictator is less confusing than the many voices of a democracy, but do you really want to live that way?

Time and again, monopolies like the one proposed by Schadle and FPA have proven to be counterproductive to the values we hold as Americans. Fighting to restrict consumer choice to any one financial designation, even to strong marks such as CLU, CFP, ChFC, CPA, and CFA, limits choice and access to specialization for consumers. No one mark is representative of the full financial services landscape.

And just as no one professional designation should have a monopoly in financial planning, “planning” shouldn’t be artificially defined as a separate profession. Instead, FPA and other organizations should encourage the process of planning to be used as broadly as possible regardless of the designations an advisor may choose to pursue.

Yes, competition is messy and it isn’t as single-minded as a monopoly, but consumers get better advice and service. Further, competition creates innovation and gives consumers options.

I think that Americans are better served when they have choices.

It is my hope that Schadle and the FPA will re-examine their short-sighted decision to ignore the hundreds of thousands of advisors who don’t fit their criteria along with the needs of the millions of hard-working middle-class Americans who can’t afford to work with fee-based advisors.

Do you agree? I invite you to write me and share your perspectives.

Larry Barton, Ph.D., CAP, is president, CEO and holder of the O. Alfred Granum Chair in Management at The American College, based in Bryn Mawr, PA. Contact Larry Barton at Larry.Barton@innfeedback.com.

It’s no secret that some financial advisors simply make more money than others.

What separates the good from the great advisors isn’t just talent, its having the right systems and the right people.

Get the complete blueprint to building a highly-successful financial advisor practice.

This FREE 3-part video series ($175 Value) will change your life! For the first time ever, mega producer Mike Steranka, is giving away some of his most guarded secrets to building a self-sustaining, lead and prospecting system that works in every market.

For a limited time, discover the secrets that have helped him place over $200 million in annuity premium and over one million in target life premium in just the last seven years.

Instantly discover:

“

Mike, I’ve been using the Retire Now software for 2 months now. I don’t even know how I wrote any business before using your system and software.

I have closed in excess of 2 million in annuity premium, about 50,000 of target life premium.

— Derek O., Utah

12 Steps to Dominate Your Marketplace The 5 Pillars of Strength in Marketing How to see more prospects every week How to effectively process more leads and more business The Systemized Sales Process How to be a truly “pressure-less closer” The Instant Referral Generator The video series will blow you away, register today! Act now and receive the best chapter from his critically acclaimed book, THE E MYTH FINANCIAL ADVISOR, that will provide you realworld strategies that you can actually implement and use in your business today.

Get Immediate Access to the Special 3-Part Video Series on How To Systematise Your Lead Generation to Find Qualified Prospects.

Mike Steranka, mega-producer and co-author of The E Myth Financial Advisor, is the creator of this video series and a brand new product called, The Complete Sales System.

Instantly access the FREE video series at AdvisorLeadSystem.com

CUSTOMWEBSITES Psychologists, business moguls and seminar leaders say you have only 17 seconds until someone forms an opinion of you. In today’s technology and information age, those 17 seconds are rarely face-to-face; businesses

USTOM WEBSITES

live and die by their Web presence.

Your website represents your brand, and it should be your viral face to the world.

Prospective clients will find your site and will form an opinion of you before you ever get the chance to shake their hands.

At Gradient, we will customize your website

CUSTOM WEBSITES INCLUDE: • Creative logo design

specifically to your business and highlight the

• Contemporary website styles

services that best showcase your practice.

• Engaging introduction videos

Your website will feature custom video, lead generation and much more.

• Lead capture technology • Prevalent consumer videos

“

We asked Gradient to create a website that would help us build our brand in the community. We utilize multiple advertising

outlets,

and

Gradient

Gradient Insurance Brokerage Gradient Home Mortgage

incorporated them into one state-of-theGradient Investments

our friends, family and clients. And, the REGISTRAR

“

- RALPH AND DAVID H.

GRADIENT

I NS U RANCE B ROK E RAGE , I NC.

800.407.4137 | www.gradientib.com

Gradient Tax

Gradient Securities Gradient Advisors

process was simple, inexpensive and professionally done. Thanks, Gradient!

Life

Gradient Positioning Systems

art website to spread our message. We are proud to share our website with

Annuity

Scan QR Code!

See More Success Stories