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The Hidden Benchmark

Thursday, July 19, 2012

Hidden Not everything is as difficult as it may seem and sometimes things that are completely obvious to some may not be as obvious to others. Veralytic has patents on life insurance benchmarks and the process in which to research, rank and provide results, but once you have results, then what?

A Veralytic Subscriber’s ultimate goal is to run Veralytic Reports and see how life insurance policies that they are recommending or already service compare to industry benchmarks. The star ratings are straight forward in this regard; each star corresponds to a factor of suitability. Having a star for each of the 5 factors would be the most desirable result, but what if you have only 4 stars? What if you are missing the second star for cost competitiveness?

Take a look at the Executive Summary in Section 1 of the Veralytic Report.  The second star measures the Cost Competitiveness of the policy under evaluation.  The Veralytic Report will give you the Star Rating and a brief explanation of what it means:  a Full Star, indicating that the policy costs are MORE competitive than the relevant Veralytic Benchmark, a Half Star indicating that the policy costs are roughly comparable to the Veralytic Benchmark, or No Star indicating that the policy is LESS competitive than the relevant Veralytic Benchmark.  The User Guide of the Veralytic Report gives a more in depth explanation of the significance of cost competiveness, but it what it can’t tell you is what to do next.  That is the role of the Advisor.

The second star tells the advisor about the cost competitiveness and if there is an opportunity to either confirm adequate pricing or an opportunity to look for better pricing.

Below are some examples of Veralytic Report Star Ratings and what an Advisor might do in each hypothetical situation.

Example: No Star

Maybe this policy is 10 years old, and now the Veralytic Report tells me this policy’s costs are high.  How do I explain this to a client especially if I was the original agent 10 years ago and recommended this product?  Everything changes over time, including life insurance products.  The policy being evaluated may have been competitive 10 years ago, but with the reduction in costs of life insurance due to longer life expectancies, it may not be well priced compared to what is currently available in the marketplace today.  Your client should be thrilled to know that you are continually managing their life insurance portfolio and looking out for their best interests.  Now is the time to look at new products available in the marketplace.  Once you have done your search, and found the product that best meets the client’s portfolio objectives and is more competitively prices, run a Veralytic Report on that product to confirm your findings.

Example: Half Star

A Half Star for Cost Competitiveness indicates that the policy being evaluated has costs that are average as compared to the Veralytic Benchmarks.  This seems fairly straightforward.  The policy costs are not bad, but they are not great either. There are products available in the marketplace that might have lower costs.  As long as there are no health reasons that would preclude new life insurance on the insured, now is the time to look at products available in the marketplace.  Once you have done your search, and found the product that best meets your client’s portfolio objectives and is more competitively priced, run a Veralytic Report on that product to confirm your findings.

Example: Full Star

A Full Star for Cost Competitiveness always means that the insured should keep this policy, right? Not necessarily so.  A Full Star simply means that the policy being evaluated has lower costs than the Veralytic Benchmark.  This benchmark is a representative average.  Just like in school, a letter grade that is better than average is an A or B.  This policy may only be a B.  Everyone wants an A policy.  Look more closely at the Policy Expense Breakdown graph in the Veralytic Report.  How far below the Veralytic Benchmark are the costs of the policy under evaluation?  Studies have shown that the pricing of policies can vary by as much as 40% about the mean.  In other words, are the costs for the policy under evaluation close to Veralytic Benchmark?  If they are within 40%, then there may be an opportunity to reduce costs. There are other factors to consider, has there been a change in the insured(s) health since this policy was issued?  Does the product type still match the client’s objectives and risk tolerance?

The advisor plays an important role.  The Veralytic Report is a research tool for the Advisor in much the same way that accountants subscribe to information services like BNA (Bureau of National Affairs), CCH, Inc, and Thomson Reuters/RIA so they can look-up relevant tax authority to properly advise their clients. This is also why attorneys subscribe to information services like Lexis/Nexus, Martindale and Westlaw so they can look-up relevant case law to properly represent their clients. And this is why investment advisors subscribe to information services like Lipper, Morningstar, and ValueLine so they can research those investments that are well-priced, performing well and most suitable to the needs of their clients.

Veralytic is simply the fastest, easiest, and most comprehensive and cost-effective way to independently verify to clients and their advisors whether or not the pricing and performance of existing or proposed life insurance is in their best interest.  Only Veralytic is accepted for independent client representation, endorsed by the New York Bankers Association (NYBA) and compliant with industry regulations and established case law.

Use the Veralytic Reports to determine the appropriateness of pricing, the reasonableness of performance expectations for invested assets underlying policy cash values, and overall suitability for your (client’s) policies based on the 5 factors of suitability.  Click here and get up to 3 Veralytic research reports under our NO-Risk trial subscription.

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