Archive for April, 2009
Let’s face it. If you want to turn a few stomachs in a discussion about the recession all you have to do is throw out the name AIG, the epicenter of the current economic meltdown. AIG owns life insurance giant American General.
So, if you can control your gag reflex, should you actually consider American General as a company to apply with? I am as cautious as the next guy, but I think there are a couple of real upsides to going in that direction. Keep in mind that American General is not AIG, but rather they are owned by AIG. American General is a very respected and very profitable life insurance company, something that will bode well for AIG and all of us taxpayers as AIG begins to shed assets and start repaying debt.
My two thoughts go something like this. Historically when companies are positioning themselves for sale, their underwriting relaxes a bit. It doesn’t get sloppy, just maybe not quite as tight as a year ago. The more paying business they have on the books, the higher the value to potential suitors. With giants Met Life and AXA Equitable doing more than just sniffing around, the good news for AIG and I think for policy holders is that there are good companies out there big enough to write the checks.
The second upside is that when a company buys a block of term insurance business, by law the purchasing company has to honor all of the guarantees of the original company. Not unlike having a mortgage sold, the check may go to someone new, but the payments and contract remain the same.
Personally I think Met Life will win the day and to me that is good news for anyone that has American General life insurance. Heck, that’s a no cost upgrade since Met Life is a higher rated company than American General anyway.
Bottom line. Don’t let a knee jerk reaction to AIG spill over into passing up a good deal with American General. American General is a solid company that will end up being owned by another solid company.
April 30th, 2009
Some of the life insurance leads I work are faxed advertisements that show a grid of preferred plus prices based on different ages and amounts of insurance. It clearly states at the top of the grid that these are “The lowest rates that exist. Preferred plus term insurance plans.”
I know that the names of the different rate classes are industry lingo, preferred plus, preferred, standard plus and standard being the most often used. I suppose it may not be reasonable to assume that someone would know all of the criteria that should be met, or what criteria differ between, say, preferred and preferred plus. But when it states that the rates shown are the “lowest rates that exist” is it really a reasonable assumption that everyone qualifies for the those rates?
Even those in real live denial are aware that obesity is a health problem and presents the opening for even more healthy problems. If I’m 5′6 and 225#’s, on some level I have to be at least wondering if I really qualify for the “lowest rates that exist”. Surely someone with diabetes must have an inkling that the lowest rates that exist are probably not in the cards. If I have bipolar disorder, a reasonable goal is for an approval at rates I can afford.
I don’t use those leads very often with most of my traffic generated from our website. I wouldn’t use them at all if they had fine print or were misleading, so I’m always kind of surprised when someone who is obviously not preferred plus and should know it, blows up when they hear the reality of that.
Bottom line. We fight and fight hard for the best rate a person can qualify for on every case and I understand that everyone wants to pay the lowest rates that exist, but that’s just not the way it works.
April 30th, 2009
When the view out the office window looks like this sometimes it feels like we are protected by those 14,000 foot peaks from the real world. Thanks to fiber optics and the internet we can sit here and do life insurance business with those out in the “real world” and never have to really participate in it.
Until today. With the World Health Organization, WHO, raising the Pandemic level to 5, we were wondering if even our mountains could be breached. I get the local paper here in the mail everyday. Even though I could get our little 16 page paper online, I still wait until I get the mail each day to see the headlines. Usually pretty boring until today when it reported that there may have been a case of swine flu right here in Salida.
This is certainly all new territory for us, the country and the world. I can’t say that I remember WHO ever giving a Pandemic alert before. And the foreign travel advisories and warnings are certainly active which has already changed plans for several people I know. While this flu situation has caused the government to warn people not to go to Mexico, it has moved our neighbors to the south to the top of the alert list.
I know the question will come up this week. A client will call and ask, “if they happen to travel to Mexico or have traveled to Mexico and happen to get swine flu and die from it, are they covered”? And of course the answer is yes.
Bottom line. Who knows where all of this is going. It really seems so small to have the whole world on edge the way it does, but I suppose that’s the way most big things start.
April 29th, 2009
There are days that stand out for me in life. My marriage. The day I gave my heart to Jesus. Each day that I have been able to deliver a death benefit check to a family of a client.
There are people who touch me and make a difference. Today I had an opportunity to share prayer with an 80 year old life insurance client of mine who’s business has been rocked by the recession. Imagine! 80 years old and still working everyday and living life the way you should, being honest and playing by the rules, and getting your tail kicked anyway. I can’t even begin to explain how this hurts my heart. All I could do was listen, pray and then put him in touch with a Dave Ramsey counselor. I feel blessed that I could be there for him when he needed someone to talk to.
There is a blessing that comes from no where, well of course from God, but seemingly out of the blue. There are moments or even something on internet that gives me hope.
Bottom line. I am humbled by life.
April 29th, 2009
When I got my briefs in a bunch earlier this year in a little spat with ING Reliastar, on the surface it would seem that we were arguing semantics. Just underneath the surface is a gray area about half the size of the universe where life insurance companies seem to make underwriting decisions just because they can, and because it makes more money for the company. In their mind there is no overriding need for logic.
And I scream, “Show me the mortality risk”!!!!! Back in the day (been wanting to say that) I distinctly remember being taught as a new agent that underwriting decisions were based on mortality tables and mortality experience. Forgive me, but there is no stinking difference in mortality experience that anyone can show me between a cholesterol ratio of 5.0 and 5.1. In this particular instance we were fussing about a guy whose total cholesterol was 253. His HDL was 49.6 and they said it needed to be 50.6 in order to get preferred rather than one rate class difference. That one rate class change would have made his premium 30% higher. Show me the 30% higher mortality risk!!!
I realize that there have to be lines drawn in the sand. There are readings that can change a little and truly do have a noticeable, dramatic mortality experience impact. Someone with prostate cancer whose grade was a Gleason 6 can get good rates on life insurance and a Gleason 7 is scratching to get any offers at all. That’s because the difference between those two grades is like the difference between an earthquake Richter scale 6 or a 7. One shakes you up and the other knocks your house down.
I have never been one to fuss with underwriters when they have a legitimate reason for changing a rate. I can handle the fact that they have guidelines that they need to follow, but when they call them guidelines and to the detriment of common sense, they treat them as hard and fast, set in concrete rules, we have a problem. This may just be the world according to Ed, but if a company can’t show the difference in mortality experience between their “guideline” and, for instance, a specific lab result, the default should go to common sense.
Several states have already force companies to take this approach when it comes to foreign travel. Unless a company is willing to supply mortality experience that shows travel to a certain destination is an additional risk, they can’t decline or rate someone for that travel. Some states have even taken the stance that absent mortality tables for foreign travel, a company can’t even ask about foreign travel.
Bottom line. While I do occasionally fuss, the truth is that most life insurance underwriters are willing to give a fair hearing and make a fair decision, but for those that won’t or don’t, again I scream, “Show me the mortality risk”.
April 29th, 2009
I certainly am not going to minimize anything about the swine flu outbreak and if it meets the WHO definition of a “Pandemic” it’s OK with me if they call it that. So I’ve often referred to the type 2 diabetes epidemic and wonder if it would really be more appropriately called a pandemic.
While the outbreak or onset hasn’t necessarily been sudden, it has certainly become widespread and impacts and kills more people. Whatever you call it, and by the way WHO calls it an epidemic, the fact that there are about 180 million people with type 2 diabetes worldwide today and that is expected to double in the next 20 years, is significant. Over a million people die annually from complications of type 2 diabetes. As I wrote in a recent post, that number is likely to rise in these tough economic times as those with diabetes try to balance budgets with medicine.
From a life insurance standpoint the only good news in all of this is that as the numbers increase, education and treatment options are becoming more available and hopefully more affordable. Underwriters really don’t care what it’s called though, but focus squarely on the mortality risk. Unfortunately those at the bottom of the economic ladder, the people who arguably need life insurance the most, are the group that is most at risk and also most likely to be financially unable to afford the type of treatment it takes for good control.
The answer for most, at least during this recession, will be to lower their expectations on the amount of life insurance they would like to carry. The truth is that in all cases something is better than nothing.
Bottom line. The fact is that life insurance is available at reasonable rates as long as your diabetes is well controlled, A1c under 7.5. As control worsens, the price goes up and there is a point when your A1c is over 9 when underwriters may choose to decline your application until you have resolved the situation.
April 28th, 2009
Till I’m blue in the face!!! Does the word guarantee mean anything to anyone? It seems like perfectly sensible people’s eyes fog over as soon as someone flashes totally non guaranteed, unsubstantiated, unproven life insurance projections in front of them. Wake up stupid!!
ING Reliastar announced today that they have a new indexed universal life product that they are illustrating with returns of 7.94%. Why 7.94%? It’s just a non guaranteed projection. If you want to win over the greedy, brainless types why not illustrate it at 27.94%? I have a better idea. Why not illustrate the product at the guaranteed rate and just let anything that happens to outperform that be frosting on the cake? Clients like it when your product out performs their expectations, not when it doesn’t meet them.
Of course maybe ING figures that is a reasonable assumption with all the savings they are seeing from laying off the equivalent of small Colorado town and instituting new rules that virtually ensure that there is no communication flow between the home office and the agents that would at least like to sell their guaranteed products.
I imagine we are going to see a lot of overstated assumptions coming from universal life, variable universal life and whole life in the near future. They all had to shut up and be quiet for the last year and it’s kind of hard to suppress the need to assume even though it’s proven to be less than a brilliant idea over the years. On the other hand I can see why companies might start hanging out aggressive assumptions when it’s become so crystal clear where our economy is headed(?) Recession over! Let’s start assuming again!
Bottom line. Anyone whose first shot out of the cannon is an illustrated non guaranteed assumption ought to have the cannon turned around and fired right back at them. If the past year hasn’t driven prudence home as a new direction for consumers, well, possibly you just can’t fix stupid.
April 28th, 2009
It seems to me of all the major cancers, being the second most common among men, prostate cancer has been a hot bed of breakthroughs and I believe (the world according to Ed) will be the first major cancer that will be rendered null by scientific research.
Today more good news came to the subject. It turns out that a common prescription medicine for treating an enlarged prostate, and a major supporter of some of my favorite TV shows, Avodart, has shown great results in keeping prostate cancer at bay.
With prostate cancer already being one of the most insurable post treatment cancers, knocking a quarter of the cases completely out of the loop can be deemed as nothing short of great news. The way I see it is the lower the risk of getting the cancer, the better the mortality experience and ultimately the lower the life insurance rates.
Just to recap some of the criteria that lead to the best possible, standard or better, rates with a history of prostate cancer, they begin with a diagnosis level PSA of 10 or less. One of the most important factors is the grade of the cancer and for the best rates it should be a Gleason grade 6 or lower. Depending on the treatment, with a prostatectomy the post treatment PSA should be 0. With a seed implant a stable reading below .5 is the benchmark.
Bottom line. Any day there is good news about any cancer is, well, a very good day indeed.
April 27th, 2009
I did a series of posts last year on life insurance policies and have referred back to those posts on several occasions when explaining some specific clauses and options such as the suicide clause and incontestability clause and the conversion option.
Now I would like to start from the beginning and talk about the application. The application itself has been something of a sore point with some customers and for a few who are more concerned than the average person with identity theft, a cause for deciding against applying. I have actually had clients pull the plug completely on purchasing life insurance to protect their family because of questions about their social security number, their income and their net worth.
For the purposes of this subject I’ve chosen to use a West Coast Life insurance application mostly due to the simplicity of the document. west-coast-life-application Notice that they don’t beat around the bush with identity information. Coming out of the first line of the application they have your name, date of birth, social security and driver’s license numbers.
The social security number is right up there with the most frequent “Why do they need to know that?” questions I get. It’s not questioned that often, but probably 1 out of every 100 clients has some issue with it. There are really two reasons. The SSN is used to confirm identity on both the application and upon death. The other reason is that your death is an event that has to be reported to the IRS. Even though the death benefit is not income taxable to your beneficiary, the amount of the death benefit is added to the gross value of your estate for estate tax purposes unless it is owned by a life insurance trust. So, like it or not, if you want life insurance you’re going to have to share your social security number.
I get less grief over the driver’s license number, but the reason for the life insurance company having it is because most life insurance applications require a copy of your motor vehicle record. Most people never think about it, but the type of driver you are does have some impact on your mortality risk.
The application then moves into your occupation. While you do need to provide your employment information, I can honestly say that I haven’t heard that insurance companies necessarily verify your employment. But here is where two other questions come up that people aren’t that keen on sharing the answers to, income and net worth. “Why do they need to know that.” The need is less sinister than those who are concerned about might think. Income and/or net worth are determining factors in how much life insurance a company will underwrite on an individual. For non estate purposes, a multiple of income determines the max. For estate tax purposes, the amount of insurance is determined by the net worth minus the exemption times the tax rate. So, they don’t really care or necessarily check on how much you make, but the insurance companies do have some interest in not insuring someone who makes $20,000 a year for $2,000,000. That goes a bit beyond the whole replacement of income idea.
Next comes a synopsis of the type and amount of coverage being applied for followed by the beneficiary designations. It’s important to note that the application actually becomes part of the policy when approved and issued and the beneficiary designation in the application is actually the only place in the policy where the designation is noted.
This is followed by non medical history covering such things as foreign travel and whether or not you are a private pilot. After that is medical history. The application is kind of a synopsis in these areas. If there is more information needed in non medical history questionnaires are completed for things such as aviation, scuba diving or foreign travel. A more complete medical history is done during the exam.
And last on the list of information needed is a list of life insurance currently in force and whether you intend to replace it or not. This is another area where people get a little testy, thinking that it’s not the business of the company to know whether they are replacing anything or not. But keep in mind that it is the business of the company to know whether they are going to be a party to over insuring you. It is also the business of the company to be compliant with state laws and provide the appropriate forms for replacement.
Bottom line. There are a lot of personal questions on a life insurance application. It’s important to keep in mind that they have have valid, important reasons.
April 27th, 2009
Compliance and control! I haven’t beat that drum in a while, but that doesn’t change the fact that those two issues are the major underwriting issues in almost all life insurance applications where health is less than perfect.
I have used that soapbox most often pertaining to diabetes and the fact that without the two C’s, you are not going to like the rates you are approved at (best case) or the fact that you get a decline (worst case). But compliance and control weigh heavily on most health issues from high blood pressure to bipolar disorder.
Compliance could be defined as doing what it takes to stay on top of the health issue. If you have diabetes, for instance, compliance might mean that you check your glucose regularly and that you take your medication exactly as it is prescribed. There is a real tendency for people to get lax with these things and check glucose or take medications when they are having those low glucose kind of feelings. There is also a tendency to be lax about the quarterly followup visits that most doctors want to see. Having full labs done every three months is exactly the way to stay on top of your diabetes and away from all the collateral health issues that could pop up.
So, the same things that are going to positively impact your health are what the underwriters are really looking for. If obesity is an issue, a doctor monitored diet and exercise program. If sleep apnea is an issue, consistent use of a cpap machine. If skin cancer such as basal cell carcinoma is an issue, regular visits to a dermatologist is prudent and reasonable.
Bottom line. Doing the right thing pays dividends. Ignoring them carries a penalty.
April 24th, 2009
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