Life insurance is the last, largest, most-neglected asset on most clients’ balance sheets. Many policy review providers claim to be independent, compliant, and defendable in the face of complaints and challenges under the Prudent Investor Act. How do you know which policy reviews are more of a marketing-tool designed to sell “a better policy” than a fiduciary-tool designed to support your fiduciary duties? Ask the following three questions to get a better understanding of what you are (or should be) getting in any policy review.
1. Are product suitability, competitiveness conclusions, and/or recommendations based on independent research?
Case Law offers additional protection to trustees who rely on product suitability/competitiveness information from “independent third-party entities with no economic stake in the transaction”. Do your policy review reports give you this added protection?
2. Is the policy review compliant with industry regulations and generally-accepted authority?
According to both the Chief Regulatory Body of the Financial Services Industry and the Chief Actuarial Body of the Life Insurance Industry, policy reviews including comparisons of illustrations of hypothetical values can be “misleading” and “improper.” Are your policy review reports free from such potential violations that plaintiff attorneys could use to invalidate their results?
3. Does the policy review measure costs relative to the universe of peer-group alternatives?
UPIA Section 7 requires that trustees “may only incur costs that are appropriate and reasonable in relation to the assets, purpose of the trust, and skills of the trustee.” Case Law also reveals that premiums are not the measure of policy costs. Do your policy review reports give you the cost information you need to defend against claims that beneficiaries should have received more because you over-paid?
If the answer to any of these questions is NO, this policy review may be vulnerable to breach of fiduciary duty challenges under the Prudent Investor Act. Ask your policy review provider about the Veralytic Research Platform or go to Veralytic.com to learn more to begin protecting yourself and better serving your clients.