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What Scares You Most?

Thursday, October 27, 2011

Life insurance is more often the object of jokes than the subject of our fears, but you don’t have to be kept in the dark with life insurance costs any longer. A Veralytic® Report can shine a light on policy costs and give you that independent review of your policy. 

Before Veralytic®, the life insurance industry used to be characterized by:

1) relatively high regulation of pricing by the insurers (i.e., more homogeneous pricing from the clients perspective meaning it mattered little/less which product was purchased from which insurer),

2) high profit margins for and little regulation of those in the business (i.e., agents and brokers), and

3) little responsibility or liability for those outside the business (e.g., CPAs, tax attorneys, trust officers, etc.). 

However, while progress is slow, many changes are taking place in the life insurance industry.

1)      Pricing disparity has increased dramatically with as much as an 80% variance between best-available rates and terms and poorly-priced products (Source: Tillinghast Towers Perrin study).  In other words, the costs of insurance inside some products are nearly DOUBLE that of other products.  In addition, while in the good old days of just whole life (WL) and term products, premiums were calculated by actuaries according to generally-accepted actuarial principals and regulated reserve regulations, the advent of universal life and variable life put premium funding calculations in the hands of the agents and brokers, who are motivated by the prospect of a sale to calculate the lowest possible premium, and NOT necessarily the premium that is adequate to ensure the policy actually pays the intended death benefits. 

2)      Increasing regulation that reduced/eliminated “sales ideas” that were previously the exclusive domain of life insurance agents and brokers. For instance, Stranger Owned Life Insurance (SOLI), Split Dollar Regulations, Fiduciary Standards, and other such guidance have emerged to bring transparency and clarity to life insurance assets that are managed by agents and advisors.

3)      Case Law for Trust Owned Life Insurance – Use authority to go beyond defending the old way of doing thing and instead use case law[1] (Cochran) and other guidance (such as, Uniform Prudent Investor Act) to avoid litigation, and provide new services that produce happy clients and new fees/revenue.

Clients fear getting a bad deal.  Agents fear having nothing to sell.  CPAs, tax attorneys and trust officers fear being held to a new higher standard for which they are not prepared.  Life insurance has clearly become a far more scary business than it was in the past, but it doesn’t have to be. The unknown is almost always scary.  Veralytic® can help you make what is unknown known.  Veralytic® can help you …

… help your clients understand what they are actually being charged and what they are actually getting in performance of invested assets underlying policy cash values so their family, children and/or business partners get what they deserve. 
… use new independent research that identifies when a client is being over-charged or getting inferior performance to get more referrals from independent advisors, eliminate competition IN ADVANCE with greater market intelligence, and close sales faster by answering the question that all clients and their advisors really want to know (i.e., What I am really being charged in my life insurance?). 

… use new independent research to document the exercise of your fiduciary duty that gives you the protection of precedential case law where “information from an independent third-party entity with no economic stake in the transaction”1 was so instrumental to the Courts decision in favor of the fiduciary. 

Veralytic® provides the empirical pricing and performance research essential to any complete investigation of life insurance policy suitability (as defined by the chief regulatory body of the financial services industry or the Prudent Investor Act) and which can then lead to independent and objective suitability determinations.  While due care is an emerging field, and while there is room for a difference of opinion in some areas, Veralytic® goes well beyond overly-simplified comparisons of comingled and hypothetical policy values to better protect and/or compete against those misleading Policy Review systems or services. 

Use the Veralytic® Report to determine the appropriateness of pricing, the reasonableness of performance expectations for invested assets underlying policy cash values, and overall suitability for your (clients) policies based on the 5 factors of suitability.  Click here and get up to 3 Confidential Policy Evaluator (CPE) research reports under our NO-RISK trial subscription.

[1] In Re: Cochran. , 901 NE 2d 1128 (Ind. App. 2009)

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