Archive for July 25th, 2007
Along with the changes of the last few years in life insurance underwriting has come some serious scenery changes in the companies. There has been a rash of large companies gobbling up smaller companies and in some cases large companies gobbling up large companies.
Growing up I used to think that the only insurance company in the world was Mutual of Omaha. Needless to say, Marlin Perkins and his wild kingdom show had an impact on my life. Well, Marlin is long gone, but Mutual of Omaha is still there, although not much of a player in the life insurance market.
But thinking back I do have a faint memory of the Kemper cavalry, the advertising thrust for Federal Kemper. About 10 years ago FK started slipping away. It was bought by Zurich Life and changed to Zurich Kemper (no more cavalry at that point). Then they did away with Kemper and it was just Zurich Life. That was then purchased by mega bank Chase and it became Chase Life and Chase Life was then bought by and is currently part of Protective Life. I can imagine being a Federal Kemper policy holder and wondering if you should just send your premium check and leave the pat to part blank.
Empire General, one of the best impaired risk companies in the business two years ago, was a subsidiary of Protective Life. Under the guise of cost cutting, Protective folded all of EG’s operations into West Coast Life, another subsidiary. Now it is starting to appear that West Coast Life will soon be gone and all of the good underwriting will go with it.
And Traveler’s (the umbrella folks). They were purchased by Met Life. I was sorry to see Traveler’s get out of the business. They were an outstanding life insurance company, one of the real leaders in the universal life market.
Probably the acquisition with the biggest impact for my business was when AXA Equitable bought MONY and US Financial. Three years ago these two companies were the best in the business for private pilots, diabetics and people with heart disease. AXA didn’t buy them because they liked the way they did business. It really appears from the outside looking in that the purchase was to get them out of the business and out of the way. They bought them and dismantled them.
The good news for the customers of the companies that have been purchased is that the guarantees in the original policies have to, by law, be honored. So the check may go somewhere else, but the policy is the same as the day you bought it.
The bad news for new consumers is that it appears that one after another, the companies that have been at the leading edge of offering the best prices and the best underwriting are being picked off and stomped in a mudhole, never to be seen again.
Bottom line. There is no better time to be using an independent agent. Other companies step forward to fill the underwriting voids, and it will take a good agent to keep up with all the changes.
July 25th, 2007
I promised in a post yesterday to shed some light on the changes that have impacted life insurance underwriting over the past two years. The life insurance business and life insurance underwriting have undergone dramatic changes over the past two years. It has changed the way business is done and has changed the kind of approvals that clients get.
The underlying (or overshadowing) cause of the changes is the consolidation of reinsurance companies that started 3-4 years ago. Reinsurance companies are mega risk holding companies for lack of a better definition. Reinsurance companies accept the risk on insurance policies over and above what a life insurance company’s retention limit is.
XYZ company might have an internal retention limit of $1,000,000. If someone purchases a $3,000,000 policy through XYZ, $2,000,000 of that risk is held by a resinsurance company such as SwissRe, the largest of the reinsurance companies. A customer never sees that transaction. Their policy shows that they are insured by XYZ for the full amount. When a death benefit is paid, the check comes from XYZ.
So, how does all of this impact life insurance? Back when there were a lot of reinsurance companies, a life insurance company could be somewhat independent and go to the reinsurance company that would work with them to carve out niches and back them up when they wanted to offer a lower rate to win a case. Back then an agent could negotiate with an insurance company because insurance companies could negotiate with reinsurance companies.
Then the takeovers and consolidations began and now there are only a handful of reinsurance companies in the world. They hold most of the risk. They make the rules and they aren’t as flexible as they once were. They have slowed down the practice of getting exceptions. They have even put companies on notice that it will impact their reinsurance relationship if they offer out of line exceptions, even within the company’s own retention limit.
As I mentioned in my post yesterday, this has resulted in very tight underwriting. Cholesterol a little too high! Blood pressure readings just slightly elevated! Three years ago those kinds of things were negotiable most of the time. Now it is truly an exception when it is even considered.
Bottom line. Now, more than ever, an independent life insurance agent is critical for finding the best rates. With exceptions and negotiating out of the picture, the best rates come from knowing the subtle differences between competing company’s underwriting guidelines. There are still ways to get where you want to go. It’s just more important to have a good guide.
July 25th, 2007
You know the rates I’m talking about. You see them on TV, in magazines and on the internet. Rates so low that they make even the most seasoned, die hard, disliker of life insurance consider running right out and getting some. They’ve been called Superman rates. Life insurance agents who don’t sell for those companies claim that those rates are the bait in bait and switch.
The actual rate class, depending on the company, might be called preferred plus, preferred best, select preferred, or my favorite………….SUPER PREFERRED!!!!! Whatever they call it, needless to say, you have to be healthy to be approved at that rate. And that doesn’t necessarily mean healthy in your way of defining healthy, but rather healthy as defined by the company’s underwriting guidelines.
I’ll get into some of those guidelines in a minute, but I want to dispell with one of the myths about the best rates available. A rumor, started no doubt by someone who didn’t qualify for the best rates (I used to, but don’t anymore), is that companies will look for some way to keep you out of that rate class. They might even make something up just to disqualify you and make you pay more. Nothing could be further from the truth. Hundreds of my clients, the oldest being 81, were approved at the best rates available. None of them admitted to being Superman (or woman), but they did all have one thing in common. Every part of their exam, from their height and weight, their blood pressure, their cholesterol, blood sugar, liver functions, protein levels, family history, and on and on, were all within the guidelines.
Companies set these guidelines based to the best of their ability based on the study of the mortality experience for people who are and aren’t within the guidelines. The further out of the guidelines you are, the higher the rate you will pay. Is it fair? I think it is although I have certainly questioned my fair share of underwriting decisions. But, the line has to be drawn somewhere and if the underwriting criteria and associated rates are going to have any integrity, they have to be followed somewhat diligently.
I’ll just touch on a few real life guidelines and a few cases where people were so close they could see super preferred, but they didn’t get it. Many of you who have life insurance policies more than two years old might say that the companies aren’t this fussy. They weren’t two years ago. They are now. I will explain why that happened in a future post.
Now keep in mind that there is generally about 20%-30% difference between the best rates and the second best rates a company offers. So, when you don’t qualify with Superman, it hurts a bit.
One company guideline allows a total cholesterol of 220 and a cholesterol ratio (total cholesterol/hdl) of 5.0. I have had clients not allowed the best rate with a total cholesterol of 222 and another with a cholesterol ratio of 5.1. The beauty of working with an independent agent is that they can, if the company digs in their heels about those kind of results, move the business to a more flexible company or one with guidelines that fit the situation.
Bottom line. The rates are available. Working with an independent agent will give you the best possible chance of acquiring those rates. If you don’t get the best rates, like me, don’t let your ego get in the way of doing the right thing and buying life insurance.
July 25th, 2007
