I’ll leave the definition of “It” up to the reader. In a Protective Today newsletter release dated 8/31/2015, Dave Sheridan, a vice president and national sales manager for Protective Life felt the need to help agents understand why they are a much kinder and gentler company than all of the others out there battling it out to see who can suck the most marrow of the indexed universal life phenom.
He opened his diatribe by saying,”Early in 2014, Protective Life proudly added the Protective Indexed Choice UL to our Choice Series of lapse protection UL products. Like the other products in our portfolio, we developed this solution with the consumer in mind. We could have down the same path as other carriers and easily introduced a product with a high crediting rate and high cap. However, we purposely chose not to go that route. Why? Because we wanted you and your producers (agents) to be able to market a product with a reasonable chance to perform the way the customer expected.” Dang. If Protective hadn’t just sold themselves to the Japanese conglomerate Dai-ichi, and spent the last five years shamelessly screwing their longtime, loyal customers and their longtime loyal brokerage general agents and producers, I might be impressed.
Their loyal customers and producers made Protective the giant that they are by believing that they were honorable and would stick with the industry norms, at worst, and as Dave implies above, maybe go above and beyond in order to give customers a product that would perform the way they expected. I hope Dai-ichi took a good close look at practices and not just profits when they decided to buy Protective. I’ve seen in movies that honor is pretty important in the Japanese culture. Let’s pick that apart a bit. ” Because we wanted…..to be able to market a product with a reasonable chance to perform the way the customer expected”. For the last twenty years Protective Life and their stepchildren, Empire General and West Coast Life, have been on the cutting edge of term life insurance sales, especially strong in impaired risk life underwriting. It was almost as if, as an agent, you had to really think hard for a reason not to use Protective over other companies. They were good. Together the three companies had a book of term life insurance business that dwarfed the competition.
Then someone, maybe Dave himself, came up with the brilliant notion that if the company positioned its’ term products so they attracted the most customers, but manipulated the products so the chances of paying death claims dropped dramatically, profits might go through the roof and some foreign company would gobble them up at a price way above market value. The key laid in maximizing profits. They noted that their loyal customers who had converted their life insurance to their amazingly priced no lapse guaranteed universal life, had a higher percentage of death claims than term insurance clients that hadn’t converted. Of course that shouldn’t have been any surprise. The percentage of permanent products ending in claims has always been higher than term products. So the solution to how to lower claims was easy, Protective had to make it a completely ridiculous decision to exercise your conversion option.
So they changed the conversion product to one that was only guaranteed for 10 years, but cost the same as a lifetime guarantee product. The result was that far fewer people extended their term life by converting because it was a waste of money, leaving Protective with a life insurance company dream come true. The collected premiums for 20 or 30 years and weren’t on the hook for a death claim anymore. Profit doesn’t get any better than that. Or does it? For those who paid through the nose to convert because their health precluded any other options, they are suddenly paying 10 or 20 times more than they were and lapse becomes a very real possibility. If the customer doesn’t let it go, in 10 year Protective is off the hook having pocketed unfathomable profits from a each loyal customer.
Bottom line. Protective-ichi didn’t give customers the chance to own a product that would perform as they expected it to then, and you can bet that they aren’t changing course now. Protective shafted their loyal term customers without telling the customers or the agents that serve them. If you have questions or want to look at practical replacements for your Protective policy, call or email me directly. My name is Ed Hinerman. Let’s talk.