The reality of COVID-19 has affected us profoundly – personally and professionally. As a result, many of your clients may be re-evaluating their insurance and protection needs and asking what they should be doing to better protect their families and/or businesses. Is their current and/or proposed life insurance coverage enough considering the current health threats and economic conditions? It may be a good time to discuss policy servicing.
Opportunities During Covid
COVID has been devastating to many but it has also presented an opportunity for insurance advisors to check-in with existing clients on their health and well-being and suggest a review of their inforce policies and protection needs. Now is an excellent time to review older policies since NEW benefits, riders, and products exist that can prove very VALUABLE to your clients. Just in the last year, AgencyONE has experienced about 2-3 times more cases to review as compared to previous years. Following are a few examples worth sharing:
- Opportunity: A minimum funded plan that was originally designed to provide income to the client during retirement. A plan review revealed that no money would be available and that the contract would lapse at age 70. Result: An informal was submitted for a new plan.
- Opportunity: An older inforce IUL policy that was underfunded and had numerous cap reductions. After review, AgencyONE determined the original goals could not be met without the client paying additional premiums or dropping the death benefit. Result: An informal was submitted for a new plan.
- Opportunity: A client with 4 poorly managed whole life policies with loans, incorrect dividend options, and the mistaken belief that the policies were paid up. After AgencyONE’s review the client adjusted the policies’ dividend options to pay premiums and paid off the existing loans. As a result, the contracts are back on solid ground. Result: No additional sale but a very happy client whose advisor clearly has his/her best financial interests at heart.
- Opportunity: A 20-year old contract that the client could not identify. With AgencyONE’s help, the advisor determined the policy was a VUL contract with cash sitting in a fixed account. Result: Client decided to 1035 the cash into a new contract with an LTC rider that would better suit his current needs.
- Opportunity: An existing term contract with a few years remaining. After reviewing for a conversion, AgencyONE and the advisor determined the existing carrier’s conversion products were not competitive in cost and, since the client WAS insurable, new coverage was recommended. Result: A new term sale occurred to lock in more competitive coverage.
The cases above are a small sample of the cases that we reviewed. Every case is different and while some only need a few tweaks to fix any issues, others are in drastic need of help and possible replacement. The important point is that a policy review WILL help your clients and possibly get you an additional sale.
Requirements for Policy Review
You may be asking, “What information do I need to start a policy review for my clients?” Along with a generic policy review package, following are some additional items required to initiate a review for your clients who have existing policies:
A current annual or policy value statement. This item will provide the death benefit, current cash and surrender values along with any loan on the policy (loans may be handled more efficiently in a newer IUL contract but a review is required to make a determination). A statement will also show any subaccounts that apply and any monthly charges.
Two current inforce ledgers. The first should be run “as is” which will show the premium being paid and the current rate of return of the contract. (A UL policy illustration will show at the current interest rate. A VUL or IUL contract should be run at a level rate of 5% as a baseline). This first ledger will show us if the contract is performing according to expectations or not. The second illustration should be run at a current rate (or choose a 5% rate of return) solving to age 100. Additional scenarios may also be needed, but the first two can tell us quite a bit about the current contract. Please note: If you are not the agent of record, it is possible to obtain information on policies but the client/policy owner will be required to assist.
Essential client information including date of birth, state of residence, and possible underwriting class. We do not need a full underwriting file yet but we do need enough information to ascertain whether the client will qualify for new coverage, if it is needed.
Gathering the information above helps us identify the type of policy, determine if any riders are included, establish if the contract is holding its own or additional premium is required, and identify the existence of any guarantees. If an inforce illustration shows that additional premium is required, we consider replacing the existing contract with a new product and, in some cases, adding a chronic or LTC rider. Again, this is the first step in determining whether maintaining the existing contract is the best decision.
A Better Way to Service Policies
If you have legacy business, we suggest you have a look at an inforce policy management platform – called Proformex – that has streamlined and automated policy servicing needs.
Half of all existing insurance policies require some form of corrective action to ensure their protection reflects the clients’ needs. Under normal circumstances, servicing policies can require a significant and ongoing commitment of time. Proformex’s automated platform has significantly reduced the time it takes to manage your policies down to minutes rather than hours.
The Proformex system aggregates and consolidates all policy data into one location. It actively monitors individual policy performance and identifies at-risk policies thereby uncovering new sales opportunities. Advisors, agents, banks, and brokers who use Proformex have “generated up to 40x ROI through more meaningful client engagements and new policy sales.” Contact AgencyONE if you would like a demo of the Proformex platform.
The value and importance of regularly reviewing your clients’ policies and proposed coverage cannot be understated. AgencyONE possesses the tools and resources to help you initiate important conversations with your clients and analyze their inforce business.