Thomas Archer, Elite Marketing Group
Peter Caneer, Carroll & Associates, Inc.
Dex Umekubo, Producer’s XL
Q: What do you find most exciting about the life insurance business?
Thomas Archer: The industry is always changing and evolving. While it can be frustrating from time to time, this also keeps our business exciting! I’m always amazed that as tax laws change, compliance, reserving and regulations change, the industry and our carriers find ways to respond and adapt. I always tell our employees, “If you don’t like something, don’t be too upset. It will change at some point.”
With 50 percent of middle class Americans without coverage, the opportunity is unlimited!
Peter Caneer: Being excited about our business today doesn’t mean blind optimism. It does mean realizing all the improvements needed—as well as the potential benefit to everyone if we’re successful. My main concern isn’t about the dwindling number of agents and the ages of those remaining (now average age 60) but more about the consumers we could help, and figuring out how to help them. Industry organizations and insurers have done what they felt was best for them for the last 40 years, and what we now have, both in numbers of agents and their competency, is the result.
We (and insurers) will find ways to reach consumers regardless. Some of us are working successfully with high-tech websites and online quoting and applications systems that really do work. And while the number of pure life agents is smaller, we can also work very effectively with financial planners and property/casualty agents who can all bring life insurance, LTC insurance and retirement products to their clients with the right help.
Dex Umekubo: What I find exciting about the life insurance business is the opportunity for financial security our industry provides to so many Americans. Most people, even some in our business, don’t realize the value our industry brings to our economy and to the public. Our products provide more than $1.5 billion a day in benefits versus the $1.9 billion that the government provides. We provide 20 percent of all the long term savings in our country. We provide 75 million American families with protection and peace of mind. That said, there is still a huge marketplace for people who want our products, so I think it is just a matter of getting out there, seeing people, telling our stories and helping people find financial security with the products we have to offer.
I also encourage all readers to become active in AALU, NAIFA and other industry associations, and get involved in the legislative side of our business.
Q: What about the life insurance business most concerns you?
Caneer: I’m more concerned about financial illiteracy (and not understanding what risk is all about) on the part of the public more than the aging and small agent force. As one our better general agents in Miami says, “I can’t do anything about that.” Agent concentration on cheap product rather than client solutions is also a concern. This preoccupation with only low-cost product is predominant—with some radio personalities, who only advise buying term insurance from endorsed providers, yet have website information about life insurance that is three years out of date.
Many risk problems for middle class Americans can be fixed with simple solutions like hybrid life with both critical and chronic illness benefits (particularly critical). Annuities with LTC riders are also terrific tools. But definitions for claims triggers are important, since a chronic illness accelerated benefit might be dependent on the condition being “permanent,” or could require the client to be in a facility. This is where a good BGA can help, doing the research to make sure product performance and expectations are clear. Some of the better hybrid products should also be provided as employee benefits—a new area to explore.
We have an agent force that needs more medical and financial underwriting training, plus a lot more tax knowledge. Great companies in the past did this training, but now it’s only available from a few BGAs who have the ability and inclination to spend their time with new agents or with P&C agents and financial planners who are curious and can learn at least the basics.
Umekubo: One of my biggest concerns about our business is the feeling that we have spent far too much time telling people (and brokers) what life insurance is and not what life insurance does. I am really concerned about this trend within our business. Many agents have never delivered a death claim. They have been taught all about why their products are better than the next guy’s. They focus their pitch on the illustration they’re showing, mesmerizing the prospect with projections that are sometimes “too good to be true” and never really focusing on the need for the insurance.
As a natural adjunct, I am concerned for those agents who have made a decent living churning blocks of business. Replacement activity will eventually dry up—a person’s life insurance can only be replaced so many times. Agents need to get back to basics and sell solutions to problems rather than the next best illustration, and we need more carriers and BGAs committed to that process.
Archer: What about the life insurance business most concerns me? Probably the same thing that concerns most BGAs out there: Where are new agents going to come from? With only a handful of career companies turning out licensed insurance professionals, who will be our future producers? Of course we, like everyone else, are looking to alternative distribution sources such as banks, wire houses and P&C agencies. With shrinking margins, those channels present their own challenges. The bigger problem, in my opinion, is that this is creating a severely underinsured American public. As the number of life insurance agents has decreased over the last two decades, you can see that there is a direct correlation to the decrease in the amount of life insurance owned by American families.
Currently more than 30 percent of American households have no life insurance at all, let alone enough life insurance.
Q: What new product twists or legislation do you believe producers should be aware of?
Umekubo: I think the expansion of interesting riders and linked benefits for life products is truly a game changer. I think some of the riders (such as income riders, periodic payment of death benefit proceeds) and the linked benefit riders (long term care and chronic illness) are really ways of “getting off the spreadsheet” and selling value instead of price. I also think that producers are getting smarter and perhaps a bit more cynical about some carriers’ illustrations that project performance that might be a bit beyond the realm of real possibility.
On the regulatory and legislative front, I think we’ll continue to see product re-pricing due to the impact of long term low interest rates on our industry. As a member of AALU and Past Government Affairs Chair for NAILBA, I have spent a lot of time on Capitol Hill “telling our story” so that the benefits we provide American families may not be underestimated, stressing the importance that our products maintain their current tax favored status. As an industry we must continue to explain that the inside build-up of life insurance is wrongly labeled as a “tax expenditure”; that life insurance is purchased with after-tax dollars; and that gain on the inside buildup should not be taxed until constructive receipt of that gain (like any other property) upon surrender of the contract.
Archer: With our aging independent life sales force, life companies are looking for ways to make a death benefit contract more attractive and easier to sell. Several years ago, most life carriers added a terminal illness benefit rider—to advance part of the death benefit during someone’s lifetime. Now many lifetime benefit riders from critical illness to long term care to money-back features give a lot more sizzle to our old, outdated contracts.
On the legislative side of the ledger, life insurance is unique because both state and federal governments allow an insurance contract to have very favorable tax treatment. With the growing deficits of our nation today, all sources of tax revenue and tax breaks are being studied. Tax-deferred buildup of cash value, the ability to create an immediate estate “tax free” for beneficiaries and the favorable untaxed withdrawal features are all under review. What other asset is not subject to creditors or lawsuits? State of Texas (and others) benefit.
Caneer: Hybrid products are, of course, number one—especially when the economics also make them very affordable. Agents who really want to make money and help clients would be very successful if they concentrated on just that one idea, especially with so many term policies initial guaranteed rates coming to an end in the coming years. Review and inclusion of living benefits in products for clients’ early retirement years is critical to protect retirement nest eggs and prevent real estate and investments from having to be sold at the wrong time. Term coverage to ages into the early to middle 70s with living benefits solve a real social and economic need.
In addition, understanding the ugly federal government’s lurking regulations (such as IRC 101(g)(5) and IRC 101(j) that make business insurance taxable) is critical to dealing with business clients. Transfer for value tax traps are always out there, too, and agents working locally can help prevent tax disasters. The alternative to good local advice, of course, is having a home office customer services person actually process a request with tax pitfalls or having a sales jockey in an internet operation 2000 miles away try to help without knowing anything about the tax code. Of course neither companies nor agents can give tax advice, but knowing the basics can help business clients avoid disasters like taxable life proceeds. Single premium par whole life contracts with living benefits for critical and chronic illness with good cash growth and very early liquidity are good products now, as well as hybrid annuity and LTC products. They will probably remain viable for a number of years, since interest rates are expected to remain low.
Q: What advice about building an insurance business do you have for producers?
Archer: Technology today allows consumers to run their own rates and plans and make purchases online. How can the agent survive? People in general do not realize how important a beneficiary designation is. They may not realize how important the convertibility feature is and what contracts are available for conversion. I compare the online life insurance purchase to that of preparing your will online—omission of one small item could change everything. The agent continues to provide vital service in the planning process.
Producers today may consider assisting people with the Affordable Care Act in order to build clientele. This is the first time in history that a person who ignores the purchase of insurance will be forced to pay the IRS a penalty. [TA]
Caneer: My advice to agents who want to help clients and make money is simple: Pick four or five things you really like. Don’t just play on the cheaper rate field. Look at business insurance issues (especially tax related), living benefits, tools such as income payout options instead of lump sums, and medical underwriting for major areas such as diabetes, cancer and coronary artery disease. Learn as much as you can, especially about field underwriting. In the near future underwriting changes might even impact the actuarial assumptions in current products, especially annuities.
Partner with a general agent with dedication to education and service, particularly if backed up with an educational “academy” (our national marketing group has an “academy” devoted to this very thing) that makes learning easy. Agents should realize that many clients are becoming “orphans” every day and no one is reviewing their coverage. This is a great opportunity.
There are millions of potential buyers in their 40s and 50s who’ve bought life insurance at least once before and whose initial term periods will soon come to an end. Who will they call? Will anyone call them? Will their insurer reach out to them? Probably not. We have a system that costs product manufacturers more than the customer’s first year outlay for a product that could be on the books for 20 years…or a lifetime. Is it any wonder why policies aren’t serviced? Many of these policyholders are now uninsurable and conversion is their only option, but who’s helping the orphan clients to make these tough decisions? Perhaps BGAs should go through their files and see which clients appear to be orphans—and just deal with it themselves. I know some are doing this.
On the LTC insurance side, the future trend will be for simpler, plain vanilla products that are affordable. This may open up the markets more. The industry leaders will spend a fortune on branding to coordinate with states for partnership plans.
And, finally, there are millions of baby boomers with kids in their businesses that will need help transitioning. But without planning and insurance, bringing sons and daughters into the business certainly does not ensure their future success, nor that of the business. Business clients, in particular, need advice as they try to transition from one phase of their lives to the next. People giving that advice really need to be experts in business insurance planning. [PC]
Umekubo: My advice about building an insurance business for producers? Find a good mentor. I could not have made it, or been blessed with the good career I’ve had ( hope it is not over yet), without those who have helped me along the way. I have a great business partner (John Rupright) who founded our agency. We’ve been together in business since 1984 and been partners in our agency since 1988. You really need to connect with others who are willing to help you, guide you and to have as a “second opinion” to make it in this business.
I also suggest education (I just returned from my fifteenth SFSP Arizona Institute) to increase your skills and expertise. There is so much to learn about our industry, and I truly believe that the producer with the most knowledge wins. Work on your CLU, ChFC or CFP. Commit to being a professional. It’s worth it!
Lastly, commit to seeing people! You can’t help them if you don’t “see ’em!” Get out of the office. Get out from behind your desk and tell people your story. Mine hasn’t changed in 35-plus years—“I help people with two financial problems: dying too soon and leaving their loved ones financially ruined, or living too long and running out of money. Can I help you with those two problems?” [DU]
