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Make the Complex Simple

Friday, April 11, 2014

The 2013 LIMRA Barometer study found that many consumers are still not knowledgeable enough to make decisions about what they perceive to be an expensive, complex product. LIMRA found that, in fact, consumers really don’t know much about life insurance. Only 30 percent of consumers were able to pass LIMRA’s Life Insurance IQ test, and most failed completely.1

 “A Crisis of Complexity” is what a recent Siegelvision survey has discovered. “American consumers are confused. They are overloaded with ambiguous information with time consuming and complex transactions. Borrowing money, buying products, selecting insurance and financial services have all become complicated tasks.”  This survey found that over half (55%) of consumers have difficulty understanding life insurance/annuity statements, 87% find them time consuming to read and 8 out of 10 consumers are unfamiliar with insurance terms. So if the statements are difficult to read and the consumer doesn’t know the terms used on those statements than they don’t know what they are actually paying for cost of insurance charges (COIs), fixed administrations expenses (FAEs), cash value based “wrap fees” (M&Es), and premium loads or what they are actually getting in the performance of invested assets underlying policy cash values.  Given findings from independent studies2 indicate there can be as much as 80% difference between best-available rates and terms and poorly-priced products, the opportunity to bring reduced policy expenses and/or improved performance of invested assets underlying policy cash values can be both significant and meaningful today. Also, because the neither cash‑value‑based investment expenses, cash‑value‑based insurance expenses (e.g., M&Es), nor life insurance policy earnings are generally reported in a standardized manner, you need to measure cash value performance and cash‑value‑based expenses.

To add to the consumers confusion, agents/brokers (too) often use illustrations of HYPOTHETICAL policy performance to compete, comparing illustrations can be "misleading" and is "strictly prohibited" by the chief regulatory body of the financial services industry, and are "fundamentally inappropriate" according to a study by the chief actuarial body of the life insurance industry, and "are subject to a high degree of fluctuation" and thus not reliable for determining the suitability of a given policy according to the U.S. Office of the Comptroller of the Currency.

Veralytic is the only patented, objective and rules-based research tool that goes beyond the overly-simplistic comparisons of illustrations of hypothetical policy values that can be considered “misleading” and “inappropriate” by both financial and insurance industry authorities. Veralytic’s independent research reports provide a facts-based solution that is both compliant with industry regulations and established case law.

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.

1 What do They Know, Anyway?, LIMRA, 2012

2 Tillinghast Towers Perrin study referenced in the May 2003 issue of Trust & Estates, CASCO survey reported in the April 1999 issue of Trust & Estates magazine, and research from the Veralytic database.

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