Even though Protective and West Coast Life fired me years ago I still get their propaganda and that, along with an almost simultaneous run in with a Protective abusee has once again fired me up again to remind all of you out there who have Protective linked policies, even those that go all the way back to Federal Kemper, that they don’t love you.
You may remember that I took West Coast and Protective to task when, without telling agents or clients they removed their permanent coverage from their conversion options. They resented the truth being screamed at the top of my lungs, but clients were being hurt. People who had purchased term life insurance knowing that they would convert all or part of it when they determined what their long term needs were, were left holding a policy that had once promised to take care of their future, a policy that had been rendered useless for that purpose.
But that’s old news. Aptly named Protective Life seems to still be living up to it by offering new customers great products while taking their long time, loyal, invested customers to the cleaners if they want to convert some portions of their policy. They claim that they can no longer afford to allow people to convert to their best product because people are doing that when their health is failing. They claim it has put them in the down side of adverse selection because these people bought policies when they were healthy and want to claim their right to convert at their original rate class.
There is no doubt that many people use the conversion option because their level term period is running out, their health has gone downhill and they may not qualify for a new term policy. That’s one of the primary reasons the conversion option is in the policy. The other reason is simply financial planning. Very few people can guess 15, 20 or 30 years down the road what their long term permanent life insurance needs will be, if they even have any at that point. An honest life insurance agent won’t lock a person into a universal or whole life insurance policy at that time. For most this is the age when getting the most life insurance bang for the buck is important because they are at their peak of life insurance needs. Children, income replacement, wealth building and so on simply takes more insurance than people can afford to purchase in a permanent policy. Thus term insurance fills the immediate short term (less than 30 year) needs and with most companies they have the promise that once they have determined their permanent needs they can simply convert part of the term life insurance policy to fill that slot.
But here’s the deal. Companies have actuaries that determine all of this before products are even sold. They have a good idea how many term policies they will sell and they know with some degree of certainty when they sell those policies how many people will use the conversion option, which is a very small percentage. They also know with the same certainty how many of those people will do so because it’s their only option and how many will do so out of prudent planning for their future. Let me repeat the first part of that. “Companies have actuaries that determine all of this before products are even sold.” So when a company jumps into the term life sales mode they know what the future holds at that time. So for a company like Protective to go on a 10 or 20 year selling binge and then suddenly say that they can no longer afford to offer their best product for conversion means they have lied to their customers. And just to add a little frosting on the wrong side of their slumping cake, they knew that the people that would be affected most by this life insurance slight of hand were over 50 at best, many over 60.
Protective Life knew the time would come when they would have to pull that product out of the conversion option, but kept selling the term and letting agents and clients believe in them, trust them, thank them. So back to the most recent abusee that came asking my advice. This is a man who bought term from Zurich Life (a Protective purchase) did the right thing at the time. He was in perfect health but didn’t have his long term needs figured out yet. Recently he asked Protective to provide conversion information for his $1mm policy, still in great health although theoretically that shouldn’t matter on a conversion. The first option they showed him is their now infamous permanent policy with a 10 year guarantee.
This is a product that defies the imagination of an agent who knows how to work quote software. They quoted him $19,000 a year for his $1mm policy to be converted to a 10 year guarantee product. Here’s the part that defies imagination. You can double that premium and it’s still only guaranteed 10 years. You could raise it to $100,000 a year and it’s still only guaranteed 10 years. The question “why?’ comes to mind. It’s because they have no intention of letting that policy last more than 10 years. If you buy it they want you to outlive it, and the majority of people wanting to convert their policies will outlive it.
Bottom line. I’m going to let that sink in for a day and then offer the rest of the story. Protective Life is out to protect themselves after going on a term life sales binge which they knew would lead them to an eventual screwing of their loyal customer base. It was premeditated or their board of directors, officers and actuaries were all coincidentally stupid. If you have any questions or need to know what your options are with your Protective linked policy, call or email me directly. My name is Ed Hinerman. Let’s talk.