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Don’t Give Up on your Life Insurance Replacement Sale Before you Call AgencyONE!

 

 

AgencyONE sees cases every day that seem straight forward but end up becoming very complicated as their story unfolds. In this ONEIdea, we will discuss a case with a similar trajectory. The story begins as a very basic comparison where the advisor and his client want to replace an inforce policy for another with the same face amount but a lower premium. The plan is to use 1035 cash value to solve for this new lower premium. The client purchased his inforce Variable Universal Life (VUL) policy 25 years ago at the age of 29 when his needs were much different, and he and his family were just starting out. At his current age of 54, the client’s goal is to have a policy with a lower premium that includes a Long-Term Care (LTC) option – plans that reflect his family’s current needs.


THE FACTS

The client’s inforce VUL policy details are as follows:

Male – 54 years old
Rate Class: Preferred Non-Tobacco
Death Benefit: $1,000,000
Current Annual Premium: $4,800, supposedly guaranteed to 100
1035 exchange: approximately $80,000

Because the VUL is considered a more volatile product and given the client’s current situation, AgencyONE and the client’s advisor believed that an Index Universal Life (IUL) policy would suit the client’s needs better and still provide the growth potential of the VUL. Upon running an IUL comparison, we discovered that we were not comparing “apples to apples” and that the premium for the proposed IUL policy was quite a bit higher than the current VUL premium which DID NOT help the agent with his sale.

Following are the details for the client’s proposed IUL replacement policy:

Solve assuming 5%
Male – 54 years old
Rate Class: Preferred Non-Tobacco
Death Benefit: $1,000,000
Current Annual Premium: $7,673 with death benefit only

Annual premium for policy with the LTC rider: $8,629

TOO GOOD TO BE TRUE

AgencyONE thought it was too good to be true that the existing VUL’s $4,800 annual premium would insure the client to age 100. To get a definitive answer, we ordered two additional inforce ledgers:

  1. An “as-is” illustration using the current $4,800 premium and a 6% assumption. This would identify how long the current policy would run at this level.
  2. An illustration solving for the premium required to carry the policy to the insured’s age 100 assuming 6%. This would give us a new baseline premium with which to work.

With the inforce ledgers in hand, it was evident that the $4,800 premium was in fact too low to carry the policy to age 100. Following is what the inforce ledgers revealed:

  • That the current $4,800 annual premium would only run to age 83 – 17 years less than what the client wanted and thought he had;
  • That the actual premium required to carry the policy to age 100 was approximately $11,000 per year – $6,000 more than what was originally thought;
  • That the policy funds were allocated to a very conservative account for the last 15 years; and
  • That the account value was below basis since it was underfunded and invested in a conservative account.

Now that AgencyONE had ALL the facts regarding the existing policy, we were in a better position to help the advisor achieve the client’s financial goals. As it turns out, our IUL recommendation DID HAVE A LOWER PREMIUM that would carry the policy to age 100 – with or without an LTC rider. Upon further discussion with the client, the agent discovered another twist to the story – the client wanted to add coverage for his wife while maintaining the same premium he is currently paying for his VUL.

The client requested the following:

 

  • maintain the same face amount;
  • keep the same premium; and
  • Add LTC coverage for both him and his wife.

THINKING OUTSIDE THE BOX

It quickly became evident that we couldn’t provide the $1,000,000 of permanent coverage for the price the client wanted so we proposed a split policy design using both term and permanent insurance. The overall cost for the policy would increase but with better planning and management, we felt certain we could provide much of what the client wanted.


The new proposal included:

  1. $250,000 of IUL insurance on the male client using a $10,000 dump in with a solve to age 100 and a policy guarantee to age 95. A chronic care rider was included, and the annual premium was $2,941.
  2. $250,000 of IUL on the client’s wife also using a $10,000 dump in with a solve to age 100 and a policy guarantee to age 94. A chronic care rider was included, and the annual premium was $2,784.
  3. $750,000 of 15-year term insurance with a $1,750 annual premium on the male client with a convertibility period to age 69 – planned retirement age.
The new proposed total annual premium outlay was $7,475. While this number is higher than the premium on his current VUL policy, in this new proposal, the client maintains the full $1,000,000 of current death benefit for 15 years until his planned retirement age – if the term insurance remains in force. He also has the remaining $60,000 (after the planed $20,000 dump ins) of his current VUL policy’s cash value to use as needed or this amount can be paid into the contract over time in order to shorten the pay period or lower the annual outlay. This additional premium also provides coverage for his wife AND an LTC rider for both of them – tremendous benefits (not to mention peace of mind) for a small premium increase of $2,675 annually.

The client accepted the higher annual premium considering that he and his wife were getting so much more for the money spent. As a bonus, the client was VERY PLEASED with the information that he could access the remaining $60,000 cash value from his existing VUL policy and decided to keep that amount in a reserve investment account to draw down as needed. The client took this a bit further and decided to pay for the permanent coverage without using any dump in and just use level premium only. Without the dump in, the client now has $80,000 to invest and use as needed!

THE CONCLUSION
The final proposed numbers:
  1. $250,000 of IUL on the male client using NO dump in with a solve to age 100 and a guarantee to age 95. A chronic care rider was included, and the annual premium was $3,540.
  2. $250,000 of IUL on the client’s wife using NO dump in with a solve to age 100 and a guarantee to age 94. A chronic care rider was included, and the annual premium was $3,379.
  3. $750,000 of 15-year term on the male client with a convertibility provision to age 69 – planned retirement age. The annual premium was $1,750.


The total proposed premium for this final scenario is $8,669.

With the final approval from the client received, the advisor and client plan to meet to complete the applications and get the case formally submitted. The next chapter is to work on preferred life offers since the clients purport to be healthy with no medical issues.  But, with underwriting you never know – that is a totally different story – or ONEIdea!

Successful Case Design requires knowledge, creativity, determination, and the ability to “think outside the box” – AgencyONE has them all!

Please call AgencyONE’s Case Design Department at 301.803.7500 for more information or to discuss a case.

Three Tips To Grow Your Wealth Advisory Practice

AgencyONE recently held a webinar where we hosted the Life Insurance Trust Company (LITCO) as our presenter. Located in South Dakota, LITCO is the first trust company in the country focused exclusively on life insurance trusts and provides fiduciary services to grantors and beneficiaries of irrevocable life insurance trusts that go beyond typical corporate trustee services – it is their sole business.

Later that day, I spoke to an advisor, who is in his mid-sixties and located in CA, who had been on the call. He told me that as he has aged, so has his client base and that his practice, which is both insurance and wealth management, has paid out over $100,000,000 in life insurance claims to trusts and other beneficiaries over the years. BUT he had retained “very little, if any” of that money on an ongoing basis into his book for investment management services.

Think about it … if this advisor had been able to retain that $100 million (and growing) in his AUM portfolio, at a 1% of assets under management fee,he lost $1,000,000+ of annual revenue! At a 3X multiple, that is over $3,000,000 of lost value to him personally in business value.

I asked the advisor why he thought this had happened and after reflecting on the LITCO webinar he heard earlier that day, he told me something that I had never really thought about. Most trust departments are part of larger financial institutions, with private banking and wealth management services. After the death of his client(s), this advisor diligently delivered the claim check(s) to the trustee(s), as is his job. And the advisor believes that within days of him delivering these checks, that the beneficiaries of those trusts were likely getting a call from the Private Wealth teams from those organizations who were already sitting on millions of dollars that HE HAD DELIVERED TO THEM. Without a relationship with the spouse or the children, the advisor did not stand a chance to manage these funds in the future. He had set himself up for failure – a VERY expensive mistake.

According to an April 2018 Investment News survey, 66 percent of inheritors change advisors. As seen in the chart above, of those, 30% of these individuals had no relationship with the primary account holder’s advisor and 12% showed no interest in having the same advisor manage their assets. Likely, the second is as a result of the first. This information is meaningful considering that it is estimated that $1 trillion dollars pass from generation to generation each year.

TIP #1 – Involve life insurance in your practice to solve client liquidity, income and asset replacement and tax issues, but more importantly, develop and maintain a relationship with the spouse of the account holder and ultimately with the children. Finally, consider using a trust company like LITCO, who not only specializes in Life Insurance Trusts and provides in-force policy services, among other things, but also DOES NOT HAVE a Private Wealth Group that will compete with you for those assets at the time of your client’s death.

The adjacent chart was shared with me during a study group that I belong to by Dan Allison, President of Brokers Clearing House. Dan asked the study group what the numbers meant.

Consider a wealth management practice that has $1 billion of assets under management serving 1,000 households.Statistics show that 70% of households will have some form of long-term care or chronic illness event, costing as much as $500,000 per event on average.

The wealth management practice has a $35,000,000 exposure to asset attrition due to the families (households) needing money to pay for the care of mom, dad or both in the absence of some form of insurance.This results in a $3.5 million loss in recurring revenue and ultimately a $10.5 million loss in practice sale value at a 3X multiple.

The accounts that you manage for your clients will be one of the first places that clients and their children go to fund end of life needs.

TIP #2 – Involve long term care and chronic illness insurance into your practice. It will not only safeguard the value of your practice as your clients age, but will also create a bridge with the next generation as you provide coordination of care and financial resources to protect them from depleting their own inheritance.

A recent Merrill\Bank of America study starts with a story about “The Parkers” who “spent decades building their family business by taking risks, pushing for strategic growth, and relying on instinct and hard-earned experience in their field. But when their children became teenagers, they began to feel out of their element when it came to managing their personal wealth and discussing it with their family. The mentality that allowed them to build wealth was not the same mentality that would preserve their wealth – or even effectively pass it down”.

Two thirds of wealth holders in the study said that they had never talked with family members about how or why they intended to pass on their assets. This is mind blowing.

The discomfort that successful people feel about talking to their children or even, at times, their spouses about their intentions for their hard earned wealth is impossible to fathom. In the absence of guidance and direction and a discussion of family values and history as well as long term intentions, many a fortune has been squandered.

As a financial advisor, you have the opportunity and, I would argue the duty, to engage in generational wealth planning and coaching. Change the conversation from portfolio construction and creating alpha, or how much life and long-term care insurance costs to what the client’s commitment to leadership, service, stewardship and significance is. Create value to the client and the family on a multi-generational basis and you will never have to prioritize performance, product or pricing again because, as the saying goes,“cost is only an issue in the absence of value”.

This is the perfect opportunity to create and build upon the generational relationship that will be required to preserve not only the financial wealth but the “true wealth” of the families you serve. It will also have the consequence of preserving the value of the financial assets you manage on a generational basis.

TIP #3 – Engage in training on generational financial and values coaching or associate with an expert in the field. Once you move away from the quantitative aspects of what you do for clients and focus on the qualitative aspects, your career and your practice will change forever.

I will end on this note ….. As you consider the long-term future and value of your own practice, which boat would you buy from the two in the adjacent picture?

If you have a lifestyle practice, it may not matter to you, but if you ever plan on selling arguably the largest asset in your portfolio, I think that you know the answer.

I am not saying that my three tips will give you the perfectly polished red hull, but they will certainly help plug some of the holes that may currently be impacting the long-term value of your business.

 

PBR and 2017 CSO Compliant Product Deadlines Are Coming Soon!

Principle Based Reserving (PBR) and 2017 Commissioner Standard Ordinary (CSO) Compliant Product Deadlines are quickly approaching!The PBR and 2017 CSO mortality tables phase-in and transition period ends on December 31, 2019. Beginning January 1, 2020, any new life insurance policy that is issued MUST use the new mortality table and the new way of calculating reserves to pay future claims. This week’s ONEIdea will help you identify what these changes are, what they mean to your clients, and why the December 31, 2019 deadline is so important.

First, what is PBR? 
Principle Based Reserving is a new reserve method established by the National Association of Insurance Commissioners (NAIC) that will change the reserve calculation from a standard formula across the industry to a new formula that is more aligned with the actual risk that carriers assume. Essentially, the PBR is a revised reserve calculation that helps establish how much insurers will pay for future life insurance claims.
These new calculation methods will benefit your clients in the following ways:
  • insurers are required to hold a certain amount of money in reserve based on the specific product and product feature chosen;
  •  insurers will have better solvency control which enables regulators to ensure that carriers abide by their written contracts;
  • product pricing alignment has been established which ensures that the premiums clients pay really reflect the specific insurance coverage being provided; and
  • investment performance and financial strength of the related insurance companies are reported and available to you and your clients.

Second, what is the 2017 Commissioner Standard Ordinary mortality table? 

This is an actuarial table that is used by insurance companies to compute the minimum non-forfeiture values of ordinary life insurance policies. The CSO mortality table reflects the probability that people in various age groups will die each year. See the data table below showing how much more information is available on the 2017 CSO Table than the previous versions from 1980 and 2001.

These changes in the 2017 CSO Table will impact you and your clients in the following ways:
  • As of January 1, 2020, ALL carriers’ insurance products will be updated to become PBR/CSO 2017 compliant (please note that some less “attractive” products will be discontinued all together if the changes negatively impact their functionality/pricing, etc.). It is very important that you review ALL your cases currently “in process” to make sure that they are either using a “compliant” product or confirm that they will be placed and paid and in the hands of the insurance carrier by December 31, 2019.
  • Mortality rates will be updated in the 2017 table. Please note that these rates are only one of several factors used in product pricing, so the overall impact on premium rates may or may not result in a premium increase.
  • Policies designed to maximize cash value growth are likely to be less efficient in the long run because the maximum premium that can be paid per dollar of death benefit will be lower as a result of the changes.
  • When considering insurance products for your clients, it is important to determine whether the products have been updated to include the new requirements.
  • Manage the transition window to ensure that IF you have a non PBR compliant policy, it is placed and paid and in the hands of the insurance carrier prior to the December 31, 2019 deadline. If you are unsure whether you can meet this deadline, it is recommended you select a product that is already compliant.

ALL insurance carriers are required to modify their products to become compliant with both the PBR and the 2017 CSO table.  Many carriers have already rolled out their new products in anticipation of this deadline. You MUST watch for end of year transition rules since a non PBR product must be placed inforce with premium paid no later December 31,2019.

THROUGHOUT THE INDUSTRY, THERE WILL NO EXCEPTIONS MADE ON THIS REQUIREMENT! AgencyONE is keeping track of the PBR and 2017 CSO carrier compliance transition rules.

Please call AgencyONE‘s Case Design Department at 301.803.7500 for more information or to discuss a case.

Underwriting Pregnancy Complications

Starting a family is an exciting time in life and often motivates one to think about additional financial protection AND the purchase of life insurance. Generally speaking, pregnancy for a healthy woman holds little mortality risk. However, there are some complications that can affect underwriting offers. In this week’s ONEIdea, we will cover the mortality implications of pregnancy.

Possible Complications
 
There are many complications that can occur during a pregnancy. Those with the greatest risk to mortality include embolism (clot), hemorrhage, pregnancy-induced hypertension, and infection. Pre-existing conditions, such as cardiovascular disease, diabetes, kidney disease, etc. can be greatly exacerbated by the physiologic demands of pregnancy and need to be carefully monitored and managed. The risk of pregnancy-related death increases with age, with the greatest risk after age 40. Some of the most common questions regarding pregnancy that AgencyONE encounters from our advisors center around the mother’s build, gestational diabetes and pre-eclampsia.

For a woman with a normal Body Mass Index (BMI), healthy weight gain during pregnancy is about 25 to 35 pounds. Underwriters will request the pre-pregnancy weight to assess for a healthy weight increase. Assuming an allowable weight gain during pregnancy, the pre-pregnancy build will be considered for the underwriting offers.

Gestational Diabetes

Increasing body weight combined with hormonal changes can lead to the danger of insulin resistance, possibly resulting in the body’s inability to effectively lower blood glucose levels. Gestational Diabetes is typically diagnosed between 24 to 28 weeks of pregnancy when fasting blood glucose levels exceed 105mg/dl. Treatment typically combines dietary modification and insulin.  Pregnant insurance applicants diagnosed with gestational diabetes will be postponed for coverage until after delivery, when blood sugars typically return to normal. However, up to 50% of women with Gestational Diabetes will go on to develop Type 2 Diabetes within 10 years of the pregnancy. As such, many carriers withhold Preferred offers until 10 years after delivery of the child. Prior to that time a Standard offer is generally the best that can be expected.

Pre-Eclampsia

Pre-eclampsia is the presence of hypertension (high blood pressure) and proteinuria (protein in the urine) during pregnancy. Diagnosis is typically made after 20 weeks of gestation. Pre-eclampsia can lead to a condition known as eclampsia (onset of seizures in a pregnant woman with pre-eclampsia). The complications of this condition are very dangerous and include:
·     stroke;
·     cerebral edema;
·     massive hemorrhage;
·     HELLP Syndrome (hemolysis (destruction of red blood cells), elevated liver enzymes, and low platelets); and
·     fetal and/or maternal death.

Treatment for pre-eclampsia/eclampsia is delivery of the baby with the aim at saving the mother’s life. As such, if a pregnant applicant carries this diagnosis, she will be postponed for coverage until after delivery. Once the mother fully recovers, this medical history can be disregarded in the underwriting process.

Case Study

As with all medical impairments, our carrier partners possess varying underwriting philosophies and niches for pregnant applicants. The following is a recent AgencyONE case study for a woman with a history gestational diabetes.

Dr. Gerber is a successful 40-year-old vascular surgeon who approached her advisor earlier this year seeking $4,000,000 of Variable Universal Life (VUL) coverage. The advisor and client’s goal for the case included securing Preferred Non-Tobacco rates with a Single Pay scenario and guaranteed coverage. Dr. Gerber’s medical history showed that, while pregnant with twins in 2015/2016, she was diagnosed with Gestational Diabetes. Dr. Gerber received the necessary pre-natal care and delivered her twins, without complication, in May 2016. Dr. Gerber subsequently lost the “baby weight” and has maintained a favorable build and hemoglobin A1c since that time. AgencyONE sent the case to a number of our carrier partners for evaluation. AgencyONE’s successful negotiations with Carrier C resulted in securing the PREFERRED rating desired by Dr. Gerber and her advisor!
 AgencyONE has the underwriting knowledge and expertise, along with well-established relationships with carrier underwriters, to successfully place even your most challenging cases.

Please call AgencyONE’s Underwriting Department at 301.803.7500 for more information or to discuss a case.

AgencyONE Annual Advisor Conference Recap

About two months ago AgencyONE hosted our Annual Advisor Conference at the Watergate Hotel in Washington, DC. The meeting room was filled and there was so much content presented that we had to add breakfast sessions beginning at 7:45 a.m. Much to our surprise, these breakfast sessions were jam packed as well. The feedback we received from this Conference included “best meeting ever”, “so many actionable sales ideas presented”, “so that is what LinkedIn is all about”, “we need that video of Dennis instructing our clients HOW TO ACTUALLY PREPARE for the life insurance exam”, “I FINALLY understand IUL” and “I can actually become a shareholder in an agent owned re-insurance company – why would I place my business anywhere other than AgencyONE?” – we liked that comment!!!….

If you were not able to attend this meeting, or even if you did, we thought it would be beneficial to highlight some of the ideas that were presented during the meeting.

The In-Depth IUL Discussion

Indexed Universal Life products are some of the best-selling products in the market right now and we spent a great deal of time discussing them. Presentations included whether Accumulation IUL products are suitable for premium financing, and the answer is “YES” so long as all of the risks inherent with these products and the financing (including product performance, interest rate risk, collateral call risk, credit availability and renewal risk) are understood, and there is also an understanding of how bonus multipliers work and how illustration design and cost of insurance charges can impact the performance of both the policy and the associated loan. We also spent time explaining the importance of stress testing IUL products in the illustration process and why you must look beyond the guaranteed column when selling IUL. And finally, we heard from “the numbers guys” behind the IUL process (an actuary and a market strategist) who discussed the details of IUL product design and how to make appropriate product recommendations to your clients.

Marketing Presentations & Sales Ideas

Marketing presentations took front and center as Advisors are always asking us how they can differentiate themselves from their competition. We heard from one of the leading authorities on LinkedIn and Social Networking on how to use LinkedIn to create meaningful connections with prospects and increase your visibility. We also discussed how to attract million-dollar clients through a proven 3-step marketing formula. Advisors were hanging on every word of these presentations and many Advisors followed up after the presentations to inquire how they could obtain additional information on these processes.

Sales ideas were abundant during the meeting. We watched Advisors take copious notes during the presentation on the Section 199A tax deduction and make lists of small businesses and individual investor clients that they could present this concept to. A panel discussion with three of the best legal and insurance planning minds in the industry covered a variety of topics including “New” Wealth transfer planning including long term care, the need for wealthy clients to create long term investment vehicles that should buy life insurance as an investment class, the estate market versus the business market, and how life insurance is currently being used as an employee retention and recruitment tool. Advisors also paid particular attention to a session which offered solutions to clients that have taken loans from policies to pay for premiums and/or to fund cash withdrawals.

Long Term Care & Technology

Long term care sales strategies were also discussed, including utilizing a new vocabulary which must be incorporated into your presentation if you want to successfully sell Lincoln’s MoneyGuard product. Furthering the long-term care discussion, one Advisor showed us how he successfully sells these products and the unique evaluation process that is utilized when considering different carriers and their offerings.

New technology opportunities were also introduced to our attendees. Proformex, the industry leading inforce policy management platform for policy performance monitoring and annual policy reviews, gave a presentation on their system. Advisors left the meeting wanting more detailed information about this platform and AgencyONE recently hosted a webex on this much needed technology and introduced preferred pricing opportunities for our AgencyONE 100 Advisors¹.

Underwriting Discussion & AgencyONE News

Some of the most popular presentations included our very own Underwriting Team and an update from AgencyONE.  The Underwriting discussion focused on how unique negotiating skills and carrier intelligence is critical to both navigating the reinsurance marketplace and bringing our Advisors the most competitive offers. The most popular part of the presentation was the video that was shown featuring Dennis Bartos on how clients should be prepped for their medical exams.

The AgencyONE update immediately caught the attention of our Advisors – you could hear a pin drop in the room. We introduced the opportunity for our AgencyONE 100 Advisors to become part of an agent owned re-insurance company; the comments from the Advisors were a resounding “this is a game changer!”. The opportunity is being launched later this summer and more information will be provided in the next few weeks.

There were many more presentations, including state of the industry updates, an update on the life settlement industry, cyber security best practices, how one Advisor re-invented his practice after walking away from a 7-year relationship with an independent RIA, and where the financial markets are headed.

If you have any questions about any of these presentations, would like to go discuss any of the concepts that were presented, or want to make sure that you do not miss the next AgencyONE Advisor meeting, please reach out to us.

Please call AgencyONE’s Marketing Department at 301.803.7500 for more information or to discuss a case.

¹If you are an AgencyONE 100 advisor and would like additional information about preferred pricing that is available to you from Proformex, please contact AgencyONE.

The Long Term Care Discussion, Continued

Concerns about Long-Term Care (LTC) continue to be on the minds of the aging Baby Boomer population – 66% of Americans surveyed say Long-Term Care planning is important, but only 20% have discussed the topic with an advisor. Why does this discrepancy exist? Part of it may be the reputation of “old-school” stand-alone LTC policies with the “use-it” or “lose-it” benefits or maybe LTC coverage is not traditionally included in the conversation people have with their financial/wealth advisors during their planning. Whatever the reason, the conversation about Long-Term Care MUST be an integral part of any retirement planning you do as a wealth advisor. Being proactive before care is needed can make a lasting impact on your client’s quality of care, ability to maintain dignity and their family’s financial security.

Another Level of Financial Security
AgencyONE’s Case Design Department has seen an increase in requests to illustrate life products that include some type of LTC or Chronic Illness benefit. These products have improved tremendously over the years and offer a great way for you to provide more value to your clients and their families. These life products with living benefits provide more than just a desired death benefit; they add another level of financial security for your clients in the event they become ill and require expensive, long-term medical assistance. These hybrid benefits provide additional options to consider and typically include the following features:
  1. They are primarily designed for LTC coverage but linked to a life insurance policy;
  2. They are not tied to market performance;
  3. They pay benefits whether the client needs LTC or not (Benefit could be through a death benefit if not used for LTC); and
  4. They offer clients guarantees in premium, amount of LTC benefit, death benefit and even a refund of premium option.

The Long-Term Care Conversation

Many of AgencyONE’s carrier partners offer excellent Long-Term care hybrid products. During our Annual Meeting this past April at the Watergate Hotel in Washington, DC we invited Lincoln’s MoneyGuard Regional Marketing Director, Mark Buehner, to discuss their new MoneyGuard II product along with the new client presentation approach! Mark’s presentation garnered lots of interest and resulted in our hosting two MoneyGuard II webinars earlier this week (we hope you had the time to attend one of the two webinars on June 10th). If you were unable to attend the webinar or you would just like to hear it again, you may link to the recording here (recording password: eP6GpJqi).
Mark did an amazing job positioning the Long-Term Care conversation by providing the tools to educate your clients on the myths around Long-Term Care, a resource  for researching the Cost of Care in your clients’ area, and helping you assist your clients’ in identifying existing assets that could be used for Long-Term Care planning.  Click here for all the necessary MoneyGuard II marketing documents (these can be branded or private labeled for you) you will need to re-frame the conversation with your clients about Long-Term Care and its importance in their financial planning.
Let AgencyONE’s Case Design department assist you and your clients in navigating the LTC, Chronic Illness and Hybrid product landscape. AgencyONE has the product knowledge and planning expertise to help you and your clients find the best solutions to satisfy their insurance and financial goals and assist YOU in gaining the edge over your competition.
Please call AgencyONE’s Case Design Department at 301.803.7500 for more information or to discuss a case.

How AG-49 Has Changed IUL Sales

By Ed Stark, CLU

I recently read a very good article by LifeTrends which discussed the industry’s response to AG-49 focusing on the shift in Carrier Trends and Distribution Perspectives.

What is AG-49? It is an Actuarial Guideline adopted by the National Association of Insurance Commissioners for Index Universal Life (IUL) Insurance Illustrations and was designed to help create more uniformity around how life insurance carriers illustrate their index life products.  Implemented in 2 phases, the first of which took place on September 1st, 2015, AG-49 Phase I addressed how illustrated rates are calculated. Phase II took effect on March 1, 2016 and instituted additional illustrative stipulations.

The overall guideline provides uniform guidance for policies with index-based interest and:

  • provides direction in determining the maximum crediting rate for the illustrated scale and the earned interest rate for the disciplined current scale;
  • limits the policy loan leverage shown in the illustration, and;
  • requires additional side-by-side illustrations and product disclosures that will further the consumer’s understanding of the product.*

When the illustration restrictions were first instituted, many of our producers thought that IUL products would no longer be competitive. I reminded them that these products were still capable of obtaining higher rates but that the industry was now restricted in illustrating them according to the new guidelines. AG-49 addressed an illustrative issue and now product designs were forced to be shown in a more level environment with these maximum illustrated rates.  The products themselves remained mostly unchanged and could possibly perform as well as in the years before the regulations.

The LifeTrends article details the methods carriers are using to adapt to the AG-49 Regulation. Carriers have added key features and benefits that enhance the value of IUL products such as:

  1. Interest Bonuses – these help boost the returns of the underlying indexes without violating AG 49.
  2. Index Multipliers – these can be considered index bonuses since they also help improve the return on the crediting rate.
  3. Spread Death Benefit Options – these help to improve cash accumulation and income solves.
  4. Alternative Crediting Approaches – these offer options with different cap accounts, uncapped, and par rates.
  5. Volatility Control Accounts – these replace non-S&P type options in an effort to stabilize interest returns.

Many of our carriers have products that offer one or more of the features I listed above.  A couple of them have products that offer all 5 of them.    While these features can improve certain scenarios, they can also create more confusion with product design when we are trying to benchmark against other carrier products.

The key to the IUL sale is a thorough understanding of how the product works and how best to communicate the product “ups and downs” to your clients.  I regularly discuss IUL product design and differences with our producers. Let us help you offer your clients the best possible IUL solutions for their business, retirement and estate planning needs.

*AG-49 Regulation, National Association of Insurance Commissioners