Thursday, March 28, 2024

A New Year, A New Resolution: Talk To More Clients About Disability Insurance

Happy New Year! Welcome to 2020 and a clean slate of new resolutions. If you are not talking to your clients every week about disability insurance, this is a great time to make it part of your new year planning. To start, you’ll need to make a list of clients who are good candidates for various types of disability insurance. To make it easier for you, we’ve given you a few scenarios that should be on your radar. Remember, everyone who needs to work usually needs some type of disability insurance. So, our number one request for illustrations is for individual disability insurance clients who work full time. The following list was designed to help you recognize opportunities that are sometimes not recognized and should be part of your 2020 planning.

Client: Business owner
Product: Business Overhead Expense Disability Insurance (BOE)
Think small business, usually a professional, such as a dentist, attorney, engineer, physician, architect, CPA, or any small business in which the firm is supported by an individual owner or two. You most likely have these clients in your database. When someone owns a business, they usually will have fixed expenses that they’ve obligated themselves to pay, regardless of whether they have the ability to work or not. The rent or mortgage still needs to be paid, the support staff still need their incomes, business equipment leases still need to be paid, the utilities, business loans, and other monthly obligations still need to be paid. Every business owner should look into BOE insurance. Be resolved to talk to your business owner clients about BOE coverage.

Client: Firms with multiple partners and a business operating agreement
Product: Disability Buy Out
Think about the firms you insure in which you have put in a life insurance policy to help fund a buy/sell agreement. I’m sure you can think of many cases in which you’ve put in life insurance, but didn’t even discuss the disability insurance aspect. Most operating agreements or buy/sell agreements have some type of disability provision…and if not, then there should be a provision to address what will occur if a partner is disabled.

Client: Business owner or individual client
Product: Loan Protection
If you have been selling life insurance for more than a few years, you most likely have been asked for life insurance to cover a loan or mortgage. This is a great entre to discuss disability insurance. Since most clients are more likely to suffer a disability than pass away before the end of a loan period, a plan should be in place in case of a disability. For a business, without some type of disability loan protection, even if the business owner survives, the business may not survive without disability coverage. For the individual who has a mortgage, having disability insurance is a must as well. For many people, full recovery from a disability may never happen and a permanent disability may become reality. If so, how will the mortgage be paid? In addition, most people have many other expenses that still must be paid regardless of whether they work or not.

Client: Dual income, no kids yet
Product: Personal Disability Insurance
These tend to be your younger clients who may be first time home buyers or clients requesting rental insurance or car insurance. You may have talked to them about some life insurance and perhaps they took your advice and bought a policy. Most people don’t realize that the risk of becoming disabled before age 65 is greater than that of passing. If one member of the couple gets disabled, the couple will have two financial pressures: First, the couple will naturally feel stress due to a decrease or total loss of income. The couple was relying on this income to pay their expenses and maintain their lifestyle. Second, due to the disability, many individuals will experience a sudden increase in unanticipated expenses. These include home and car modifications to accommodate the disabled partner, and extra medical bills for expenses not covered by insurance. An individual disability plan on one or both spouses will sometimes resonate better than some other types of insurance that may have been suggested.

This is not an all-inclusive list, as there are Key-Person DI policies, Retirement Security DI products, Guaranteed Standard Issue products, and Surplus Lines products that can fill many different needs. It’s essential to keep disability insurance on the top of your list of products to present.

If it hasn’t happened yet, there will most likely come a day when a client becomes disabled and wants to know the type of disability coverage they have with you. What will be your answer? Work with your manager, MGA, mentor, or just sit down and create a plan to review your book of business for disability insurance opportunities. It could be the best holiday gift you give your clients and their loved ones.

May you and your family have a happy and healthy New Year and a great 2020!

The Problem With Bonds Today

For the longest time it was conventional thinking that a “balanced” portfolio was a 50/50 portfolio. That is, in the securities world it was widely recommended that a “balanced portfolio” had 50 percent of the portfolio in stocks and 50 percent of the portfolio in bonds. This meant that many times when there were research pieces or sales pieces put together by money management firms that discussed “retirement portfolios,” it was the 50/50 portfolio that was used in the analysis. The use of the 50/50 portfolio was—at least partially—promulgated by the William Bengen four percent withdrawal rule study that took place in 1994 that most of us are familiar with. If you are not, email me and I will send it to you.

The 50/50 portfolio looked good for a good chunk of the last four decades because for those entire four decades bonds have not only been “safe,” but they have done quite well from a return standpoint. They have done well because prevailing interest rates have declined steadily and persistently over that 40 years. For instance, in September of 1981 the 10-Year Treasury Bond was yielding 15.84 percent and since then the yield has steadily declined to where it is today—at less than three percent. Because of the “inverse relationship” between bond values and interest rates, this period meant an almost 40-year bull market in bonds.

Furthermore, much of the historic research on retirement portfolios cite the lack of correlation (or negative correlation) that bonds have had to stocks over the last X years. When equities zigged, bonds zagged. Throughout a good chunk of history bonds not only contributed (past tense) a decent return to the overall portfolio but they also provided a hedge in recessionary times. It is no wonder that many consumers have grown accustomed to having bonds represent the “safe portion” of their retirement portfolios.

Then, some time over the last decade, the pundits started discussing 60/40 portfolios—as in 60 percent stocks and 40 percent bonds. Why the shift? Did the stock market get less risky over the last decade? Clearly I am being facetious here because although the last decade has been great in the stock market, we all know what happened the previous decade—it was chopped in half twice!

The reason for the shift to the 60/40 portfolio is because interest rates have gotten so low on bonds that a 50/50 portfolio looks very bad in the back-casting and the Monte Carlo models. So what did the pundits and money managers do in their sales literature and research pieces? They beefed up the stock side a little more to make up for the lousy yields consumers are receiving in the bond market today.

I understand that the conventional thinking of bonds representing the “safe part” of a portfolio is hard to buck, but if we know that bond yields are so lousy today that bonds seriously water down a portfolio, why aren’t the researchers looking at other options? Especially if we believe interest rates will increase eventually? Of course, I know the answer to that silly question as well. Because it is the money management firms that usually put out the research pieces! (Note: Folks like Roger Ibbotson have created great studies on bond alternatives.)

Let’s discuss the issue of rising interest rates for a second. Duration is a standard metric for bonds and bond mutual funds that measures the sensitivity of the price of the bond/bond fund to movements in interest rates. Typically, the duration of a bond/bond fund ranges from two years on short-term bond funds to 15 years on long-term bond funds. The chart above demonstrates the impact of rising rates given certain durations.

Example: If you are invested in a bond mutual fund with a duration of 10 and if rates increase by 1.5 percent, your fund will generally lose 15 percent of it’s value.

I am not the only one that questions the 60/40 rule. For example, I just got done reading an unnamed research piece by a very formidable bank that owns a very formidable wirehouse firm where they are stating that the “60/40 rule is dead.” One of the problems with the article is that they are suggesting the 40 percent bonds be replaced with vehicles like dividend stocks. Clearly, I agree with the fact that the bond math is getting very hard to justify, but ten years into a bull stock market and we are going to continue to suggest more equity exposure? Really?

It is interesting to me how today’s rules of thumb are tomorrow’s outdated misconceptions. When hindsight is 20/20, you have the tendency for “rules of thumb” and product development to revolve around how well that rule of thumb or product looks in hindsight. In other words, the rules of thumb and products many times are created as a result of the research on hindsight, instead of the other way around. This is flawed because the next crisis is always different than the last crisis that can make the previous assumptions and “rules of thumb” irrelevant.

I can think of a product that I would recommend for the fixed income side of the portfolio. Can you guess what it is?

Adult-Onset Special Needs: Five Planning Solutions Every Financial Professional Should Know

Many financial professionals understand the unique wealth planning challenges families face when caring for children with special needs. Coordinating government benefits, planning for future caregivers and creating a tailored estate plan are all important issues to consider.

What is less common is an understanding of the financial needs of families with a loved one facing adult-onset special needs. Consider several adult-onset conditions where financial planning is vital:

  • Accidents (motor vehicle, etc.)
  • Military injuries
  • Multiple sclerosis
  • Stroke
  • Early-onset dementia
  • Line of duty injuries (police, fire, etc.)

Initially, financial professionals can leverage their expertise to help clients understand what benefits they may already be entitled to receive. Moving forward, there are several important planning tools you can introduce to your clients to provide solutions they may not have considered.

Every financial professional should know these five planning solutions to help individuals with later-onset disabilities:

1) Special needs trusts
A special needs trust is a powerful estate planning device. However, not every client needs one. There are typically two factors that warrant discussing a special needs trust: 1) the individual qualifies—or may qualify in the future—for need-based government benefits, and/or 2) the individual will need help managing money. The special needs trust allows the individual to benefit from an inheritance to increase quality of life without disqualification from need-based government benefits. A trustee is appointed to manage the money on behalf of the individual and the trust document can set guardrails to protect assets. Depending on how the plan is structured, the trust may also provide estate tax management.

There are different kinds of special needs trusts. Clients should not create a trust on their own—an attorney who specializes in this field should be involved to draft the appropriate trust to fit the client’s situation. Families should take care to review all beneficiary designations and estate plans—including everyone in the family who could leave money to the individual—to coordinate with the special needs trust. A well-meaning family member could accidentally disrupt the plan by leaving assets to the beneficiary outright.

2) ABLE accounts
ABLE accounts, which were created by the Achieving a Better Life Experience Act of 2014, are a relatively new, tax-advantaged investment vehicle for individuals with special needs. Under current law, qualifying individuals may accumulate up to $100,000 in an ABLE account without disqualification from certain need-based government benefits. While tremendously useful, ABLE accounts are not without drawbacks. One is eligibility—to qualify, the disability must have onset before age 26. This means many adults with late-onset special needs may not qualify for an ABLE account.

3) Powers of attorney (POAs)
Many financial institutions will not communicate with anyone other than the account owner (such as a parent or caregiver) absent a valid power of attorney (POA) or court order of guardianship of property. Encourage clients to maintain updated POAs and living wills in the event of incapacity for all members of the family who are over the age of majority (age 18 in most states).

4) Life insurance
Life insurance in particular may help provide peace of mind for spouses, parents, guardians and caregivers of individuals with special needs. When policy benefits are channeled into a special needs trust, the impact is powerful and hard to beat. Caregivers and breadwinners providing for the individual should have adequate permanent life insurance coverage to maintain care if either passes away prematurely.

However, purchasing new life insurance on the life of the individual with a disability may not be an option (or even appropriate). It depends on the condition and the situation. Insurability is typically not guaranteed, so if an adult has dependents relying on his or her income, purchasing life insurance before disability strikes is essential.

5) Disability income insurance
Family members who financially support the individual with a disability (and many times other members of the family as well) should consider their own existing disability coverage. While many employers offer short term and/or long term disability benefits, coverage is often inadequate to replace income and benefits may be taxable. Insurable clients can supplement employer-sponsored coverage with an individual disability income policy to help bridge the gap between the coverage they have and the coverage they need. Even better, disability insurance can be structured to pay benefits income tax free.

Most clients should also work with an attorney who has experience in special needs planning to discuss solutions. Building relationships with other professionals in this market will demonstrate value to your clients and help establish trust.

Words have impact: Listen first
Ambiguity in language makes it even more difficult to talk about this important subject. When it comes to adult-onset special needs, we tend to be more comfortable using the term “disability.” In fact, the phrase “special needs” may pose problems for all ages. In a fascinating study, researchers found the phrase “special needs” does more harm than good, in particular when compared to “disability” or reference to a specific impairment.1 They concluded the phrase “special needs” is vague, conjures negative connotations and promotes segregation of individuals with disabilities.

Based on this research, financial professionals should choose their words carefully, listening first to the language used by the family and the individual. Some will prefer the phrase “special needs,” but others will prefer “disability” or reference to the particular impairment. Remember the need is great and your work is significant, so do not let your fear of using the wrong words prevent you from helping families get the quality financial guidance they need.

With advance planning, you can help your clients hedge the risk adult-onset special needs poses to financial well-being. For clients facing disabilities now, listening and mirroring language used by your clients will help you become a trusted advisor to help identify powerful solutions.

Footnote:
Gernsbacher, Raimond, Balinghasay, and Boston, “‘Special needs’ is an ineffective euphemism” (2016).

Legacy Planning For Your Life’s Stories

Everyone leaves a legacy; it is not just for the rich and famous. That legacy extends far beyond your finances-your estate includes all assets of any value that you own. What will your legacy be?

Our goal for our clients as brokers is to help them create and execute a plan while still alive to distribute their estate how they wish after their death. But life doesn’t always leave you with the best-case scenario; after losing both parents, one younger sibling, both in-laws, and various other family members, I have learned the hard way that some things do not always work out the way the person hoped-even with planning and wills in place. My perspective has changed, and my goals for my own legacy planning have a new focus. My memories need a permanent home; they need FOREVER.com.

Something that has always been important to me, and was important to both of my parents, is tradition-family history, stories and documents, not to mention those valuable photos and videos. For most of my life I thought if I just saved hard copies of everything it would be there to pass on. Growing up, I did as my mother did: I put my favorite photos and memories into photo albums and scrapbooks. It became such a passion that 20 years ago I started helping others find solutions to their photo dilemma. I thought if I used the best quality products that were archival safe that my photos would be around for generations. But would they? I realized that I must be conscious of how those items are stored in order to guarantee they will be there for generations.

As technology advanced quicker than any of us anticipated, our media is dispersed across different pieces of history: Printed photos, slides, negatives, memory cards, flash drives, floppy disks, CDs, laptops, external hard drives, videos, documents, letters, journals, our cell phones, free or temporary cloud storage, social media-the list goes on.

It is imperative that these items are saved properly and organized in order to be shared now and into the future. The illusion of permanence is everywhere but, as we’ve seen, few things live up to the promise. For many baby boomers, we are at a stage in life where we want to scale things back, purge, and focus on the important things like creating plans for our legacies. But for most of us, terminology and the dozens of options out there for storage can be very confusing.

There is only one company that includes permanency in their financial plan: FOREVER. FOREVER’s promise is that you will pay once for FOREVER Storage® and own it for your lifetime +100 years, guaranteed. They will never data mine, advertise or sell your information. They will migrate your stored content to the latest formats over time. They will protect them for generations to come, ensuring that your legacy thrives.

Growing up in Louisiana, hurricanes were a part of life. Many disasters and accidents strike each day. Without a well thought out plan in place for protecting these one of a kind physical items, we not only have to deal with the aftermath of the disaster (fire, floods, robbery, computer crashes, deterioration, etc.) but with the emotional loss of losing these valuable items and our family history.

Having a strategy in place will help you gain peace of mind. The process should include organizing, digitizing and protecting these items. Once digitized, they need to be stored where they are safe permanently, securely, and privately.

When I was in college most of my family and friends attended “in state” colleges and universities. Being from New Orleans, it was exciting to go to LSU in Baton Rouge. However, today, the children and grandchildren of all our friends and family go to college all over the United States or beyond. They much prefer going out of state than staying close to home. Many of them never return to their hometown except for occasional visits. Our families are spread everywhere and seeing everyone for Sunday dinner at grandmother’s house is not the norm. In order to share our photos, family stories and documents, they need to be accessible to everyone wherever they are located. Organizing and digitizing everything is a great start. But then what? The obvious answer of where to store and how to best share is online in the cloud.

That’s when I first heard of Glen Meakem and his newest venture. His vision was to offer the only permanent digital home for family memories and to guarantee their safety for generations. I immediately signed up to attend their first national conference in Atlanta in the summer of 2015, and I became an Ambassador with the company. As a memory keeper himself, Glen Meakem understands why their mission matters. The slogan reads, “Save, Organize and Share Memories / Your Lifetime +100 Years Guaranteed.” It is like insurance for your photos.

With your FOREVER account you can quickly sync, back up, and upload your high-resolution files anywhere, anytime. You can organize and find files easily with tags, albums, descriptions and search. You can connect, share and collaborate with your friends and family in FOREVER. You can easily create beautiful photo books, cards and other archival quality photo gifts at the click of a mouse. Family and friends can set up a free trial account in order to view everything you want to share with them in your account wherever they are located. You select what you want to share and with whom and can keep whatever you want private. Your friends and family can even download from your account.

What type of files can be stored in your FOREVER account?

  • Images: .jpg, .jpeg, .png, .gif, .tiff, .tif, .webp
  • Videos: .mp4, .avi, .mov, .mpg, .mpeg, .wmv, .mkv, .m4v, .mts, .m2ts
  • Audio: .mp3, .m4a, .wma, .ra, .mka, .ac3, .aac, .ogg, .flac, .wav
  • Documents: pdf, completed Artisan® and FOREVER® Print projects

How can FOREVER make these guarantees? One of the things that intrigued me the most when I first heard about FOREVER was how they can guarantee their storage accounts. You own your account; this is not monthly rental. You pay a one-time fee for the amount of storage you need, and you can add to your account over time. When you purchase your account, a large percentage of your payment goes into a fund that earns money over time, called the FOREVER Guarantee Fund™. The fund is fully restricted by contract and invested in a long-term global portfolio.

Have you ever read the fine print with other cloud-based storage companies? Many can suspend or terminate your account at any time; data is usually deleted after death and non-transferable. Often you give up your digital rights when you upload without reading the terms and conditions. Even if you upload at full resolution, often they reduce the resolution because it is less expensive for them to store it and when you go to download it again the lower quality is reflected when you try to print the photo.

You own and maintain your FOREVER account and its contents. You can control who can view what parts of your account with comprehensive privacy settings. You decide how your content is preserved during your lifetime and after your death by assigning an Account Manager to administer your account into the future.

Your FOREVER account is mobile. You can access everything on your phone, laptop, tablet-anywhere you have internet access. If you don’t have secure internet access, you can find broadband deals here. By having a good broadband connection, you’ll be able to access your account at any time of the day and check it whenever. Alternatively, your local library will also have an internet source you can use.

Since one of the first steps is to digitize outdated media, FOREVER offers one of the best in-house conversion services anywhere in the country with their white glove media conversion services. You can personally speak to someone at the conversion center which is located here in the United States. Many big box and small places ship their tapes to China or India. FOREVER’s pricing includes many “extras” that other services charge additionally for, such as removing the “heads and tails” of each video. That means there will not be 5 minutes of static at the beginning of your video or 3.5 hours of blank tape at the end.

Ultimately, there’s really no better option; begin by collecting outdated media and converting to digital format. Then, curate your digital files with guaranteed permanent storage so you can celebrate your memories by sharing with those you love. Sign up to join FOREVER now. Your legacy has already started-your insurance starts today.

Curiosity, The Cat, And You.

We all grew up hearing the proverb that “Curiosity killed the cat.” If we were to pause and reflect on what the underlying message of this proverb of fairly-recent origin is intended to communicate, it is simply to warn of the dangers of unnecessary investigation or experimentation. The original form of the proverb, now little used, was “Care killed the cat.” In this instance, “care” was defined as “worry” or “sorrow for others,” which certainly sounds exactly like what we do as long term care advocates where our focus is client-centric and all about asking questions for the benefit of others whom we attempt to serve with our products and services.

The earliest printed reference to the original proverb is attributed to Ben Jonson, a British playwright in his 1598 play, Every Man in His Humour, reading “Helter skelter, hang sorrow, care will kill a cat, up-tails all, and a pox on the hangman.” This was first performed by a popular guy by the name of William Shakespeare.

Shakespeare later used a similar quote in his own 1599 play, Much Ado About Nothing, “What, courage man! what though care killed a cat, thou hast mettle enough in thee to kill care.”

The proverb remained the same for the next three hundred years, when Ebenezer Cobham Brewer included this definition in his Dictionary of Phrase and Fable: “Care killed the Cat. It is said that ‘a cat has nine lives,’ yet care would wear them all out.”

The origin of the modern variation with which we are all familiar remains unknown. It is found in an Irish newspaper from 1868: “They say curiosity killed a cat once,” In the 1902 edition of Proverbs: Maxims and Phrases, by John Hendricks Bechtel, the phrase “Curiosity killed the cat” is the lone entry under the topic “Curiosity.”

The 1909 short story Schools and Schools penned by O. Henry, includes a mention that suggests knowledge of the proverb had become widespread by that time: “Curiosity can do more things than kill a cat; and if emotions, well recognized as feminine, are inimical to feline life, then jealousy would soon leave the whole world cat-less.”

One hundred years later, I prefer to think of Curiosity as a good thing that has fueled exploration of the universe and the oceans, launched countless advances in medical treatments and pharmacology contributing to a longer lifespan for all of us, as well as the development of the various and sundry insurance products that we can offer to our clients to provide for better lives as they continue to age in place.

A friend of mine just underwent quadruple by-pass surgery. You may think, “No big deal these days. It is a fairly routine procedure now.” While that is now the case, back in the 1950’s it was still considered taboo to even touch the heart, much less operate on it. One of the pioneer cardiovascular surgeons, Dr. Russell M. Nelson, was later asked countless times, “How do you go from being told in medical school that you could not touch the heart or you would be discredited as a doctor, to leading the charge in the creation of the first heart-lung bypass machine?” His answer: “Oh, I was curious.”

A master of innovation and a man of great vision, Walt Disney shared this about Curiosity: “It keeps us moving forward, exploring, experimenting, and opening new doors.”

A little while ago I had the privilege of participating in a webinar featuring one of my favorite leadership authors, John Maxwell. John was straightforward in his teaching and shared with us The Law of Curiosity as he wrote about it in his wonderful book The 15 Invaluable Laws of Growth.

A key takeaway from the webinar is that while leadership is influence, you must know how to lead yourself first. It is important to know yourself in order to grow yourself.

The Law of Curiosity basically says that Growth is subject to wanting to learn more, which seems to make sense. Socrates said that wonder is the beginning of wisdom. That may explain why Edison could find two thousand ways not to power the filament of the electric light bulb before finally finding the way that worked.

Curiosity tells us that we are missing something, and it is okay for us to always assume that we are still missing something. It is this wonder that will continue to drive us to grow and develop.

Curiosity connected to Imagination and Creativity, takes us well beyond ordinary. I suspect that Walt Disney and all that he created is concrete evidence of this theory.

Curiosity begins with the existence and posing of more questions. Which in turn leads me to wonder, why don’t people ask more questions?!? I loved it when my own kids were young and “Why?” and “How come?” were very common questions heard around the house. Questions help you get beneath the surface and discover the truths of nature and science.
In his webinar, John challenged us to live a life of questions because Imagination creates options which is something that we should all be striving to do for ourselves, our families, and our clients. Imagination allows us to know that there are different ways of doing something. Creativity provides more solutions.

Don’t be afraid to seek out new products and carriers as alternative solutions to your clients. It may require you to be uncomfortable as you learn a new product, but once you have this additional arrow in your quiver it will be there time and time again in the future.
Curiosity is in fact the fuel that allows us to escape from our comfort zones and to become “comfortable with the uncomfortable.” Curiosity allows us to present ourselves to our prospects, clients, and centers of influence with confidence and without appearing arrogant. This is important because confidence is attractive to clients while arrogance is often nothing short of repelling.

Curiosity allows us to grow professionally as confidence is accompanied by competence. Confidence and competence allow us to provide our clients with the professional clarity and decisiveness that they are craving from us as their advocates. If we are truly placing ourselves on the same plane as doctors, attorneys and other advisors, this clarity and decisiveness is critical. I cannot imagine that too many of us would feel confident if any of these other professionals were to render advice either sheepishly or with an “I think” tagged on the end! Likewise, our clients need to see and feel the confidence and conviction that you have in the work that you do. They depend on it when following your recommendations and making these often life-altering decisions.

Curiosity allows us to ask the “what if?” questions that permit us to formulate appropriate recommendations. Like the fictional detective Lieutenant Columbo who seemingly always had just one more question, it is our natural curiosity that allows us to frame up and ask the important and necessary questions with evidenced resolve. Curiosity also strengthens us to make recommendations with a certainty that will move people through their inertia to make the decisions they keep putting off.

At the end of the day, if you don’t have confidence in your value others won’t either. Sooo…be Curious! It may have killed the cat but will place you in good stead with your clients.

Be The Broker: Study Shows Consumers Want A Life Insurance Agent

Here Are The Qualities They Are Looking For In A Specialist

Let’s face the facts: Life insurance simply isn’t selling in the United States like it did in previous generations. In 1965, Americans purchased 27 million policies, either individually or through their employer. By 2016, with a population more than 50 percent larger, only 27 million policies were sold. Could this be the death of life insurance? Why are fewer and fewer Americans protecting their loved ones with this priceless policy type? A recent study has helped shed insight on the barriers that prevent many Americans from ever purchasing life insurance.

This new study commissioned by AALU and its Future of The Industry Working Group surveyed 500 Americans between the ages of 25-75 that have never purchased an individual life insurance policy. One of the most alarming findings in the survey is that only about one-third of respondents said they feel fully knowledgeable about planning for the unexpected death of themselves or a loved one. This statistic alone shows that there is a clear knowledge gap that is contributing to America’s protection gap. However, the survey’s findings are also exciting for the industry as it appears there is a growing demand for life insurance with 63 percent of uninsured Americans believing they either need a policy or are unsure if they do. Additionally, nearly half of all Americans believe life insurance (in any form) is very or extremely relevant to their needs.

This growing demand proves there is a huge opportunity for agents today. And while it may not always feel like it, the survey also found that the majority of Americans (68 percent) prefer to purchase life insurance from a professional as opposed to online. Even further, when asked who their preferred professional was to buy from, the life insurance agent was the leading category (35 percent) ahead of financial advisors and planners.

This means that not only do the majority of Americans believe that they need a policy or are unsure, but they also want an agent that specializes in life insurance to help guide them through the process. Unfortunately, this proves there is a disconnect between the uninsured consumer and the life insurance broker. As an industry, how can we bridge this gap so that agents can help more consumers purchase the coverage they need?

It’s time for financial professionals to be the broker. Throughout the past 40 years, many have worked hard to shed the perception of the “life insurance agent” and have become a “financial advisor.” But while changing their title, it seems the majority of us have suddenly forgotten how to successfully sell life insurance. More than ever, it’s time to embrace your expertise as an insurance agent and at the same time, improve your sales process so that you can be the broker that consumers are seeking. The AALU survey also identified the following as the top-rated qualities of an ideal insurance professional:

  • Not pressuring clients
  • Being unbiased
  • Customizing recommendations to specific needs and goals
  • Listening
  • Simplifying without being patronizing

These five characteristics lead to one conclusion: It’s time for agents to amplify empathy. The survey also found that 73 percent of consumers feel they need to arm themselves with as much research as possible before meeting with an insurance professional to avoid being “talked into” buying something they don’t need. So, while America’s uninsured admit that they would value advice from a human expert, they are still bracing for a bad pitch from an agent. By amplifying empathy, life insurance professionals can break through this barrier and help consumers take the next step in purchasing a policy.

What does it mean to amplify empathy? Consumers are looking for agents that are listeners—not salespeople. They don’t want an agent that will pressure them into a quick decision. They need someone who can teach without judgment or condescension while also customizing recommendations to their specific needs. These client-centric behaviors can help agents overcome obstacles and provide the trusted advice needed for consumers to feel comfortable, knowledgeable and confident in their decision.

Additionally, for consumers to feel the most at ease with an agent, we must start closing the knowledge gap on financial education and the role that life insurance plays in this planning. By closing the knowledge gap, we can help reduce America’s protection gap. The survey found that less than half of respondents think they have enough knowledge to manage their own finances, which leaves a large percentage of consumers who are looking for guidance and feeling insecure about their decisions.

Our industry is facing a crossroads: It’s time that we become more client-centric, or we will be left behind. This study has helped not only identify the perceptions of life insurance today, but it has also uncovered the demand for a human-centered future. It’s time to embrace it—be the broker your clients need by providing the valuable service of life insurance through an educational, consultative and customized approach.

Get Ready To Take On Your Client’s Data And Technology Questions

Far too often I see employers struggling with HR and benefits technology systems. Too many of them aren’t set to accommodate the way that today’s employees, benefit and tech providers operate. The employers aren’t to blame, nor are their broker partners. These systems are a result of myriad factors culminating over several years. But, while brokers aren’t to blame for many of the benefit technology challenges employers are facing, more and more they’re being asked to fix them.

So how did we get here? Every year new systems are coming out with new features and new ways to manage the data in those systems. These systems can serve all kinds of functions: Benefits enrollment, benefits administration, payroll management, time off requests and performance management, just to name a few. On top of that, you can have multiple third parties (carriers, payroll systems, etc.) that need to access data in these systems. And, even further, an employee can make changes by contacting HR, by going into some of these systems and making changes, or by contacting a carrier directly.
You can have a variety of technologies, serving a variety of functions, to a variety of users, with a variety of ways that data can be modified. It’s easy to see how it’s become such a challenge to manage.

These employers are looking for simplicity in a complex world. That’s why so many brokers are getting asked questions about technology. Technology is supposed to make our lives simpler, but with the different systems employers are using, achieving that simplicity has become a challenge.

You don’t have to become a technology whiz to succeed in our increasingly technology-reliant industry, but you do have to know enough to be dangerous. If you did want to become ultra-educated on the subject of technology and really enhance your knowledge, you could take the comptia it fundamentals exam. Aside from that, below are helpful tactics I’ve found that will make the technology conversation easier when meeting with employers and their HR staffs.

Know your goals-One of the most important things you can do when setting out is clearly establish your goals. You’re probably going to encounter more systems and solutions than you can keep track of, so make sure you’re well aware of what it is that you want to accomplish for your employer when setting out and don’t lose sight of that goal. It’s easy to get lured by fancy technology that doesn’t really fill a need or doesn’t fit what you set out to do.

Understand the key players-There are solutions that are cropping up to try and handle the data confusion, so you need to at least be familiar with some of the key options. Some are looking to all-in-one solutions that handle a wide variety of HR functions. These can be challenging, however, because it’s hard for any one system to be all things to all people. Another promising solution is API (Application Programming Interface) which is a more easily-configurable technology solution allowing different systems to pass data back and forth in real time.

Ask lots of questions of technology providers-Not all of these solutions are the same. Especially when it comes to API technology, you can run into a variety of providers claiming to offer API, but they’re offering a one-way solution or a solution that may not be passing data back and forth between systems in real-time. Vet your options thoroughly and make sure what you think you’re getting is what you’re actually getting. That starts with asking lots of questions about the technology providers before you bring them to clients as a solution. Once you have received your technology, perform some api testing tricks on it to ensure it’s working efficiently.

Seek flexibility-To the point made earlier about the difficulty of any one tool being the solution to all people-you need to seek flexibility. Either with an all-in-one solution that has enough options or features to account for varying needs or with API that can be configured to connect to multiple systems, you have to look for tools that offer you flexibility. That way you can suit multiple systems, employer needs and handle the required data necessary to speak between systems. You’ll have more confidence that the tools you’re providing will work for your employers if you know there’s flexibility coming from the provider.

Understand the implementation process-There’s nothing worse than having a client excited about an opportunity to fix their technology problems only to find out that they’ll have to commit significant time and resources to get their solution up and running. Take the time to understand what the timeline and time investment looks like for implementing your technology solution. Remember, the goal is to make life simpler. A provider with an easy, replicable process for implementation leads to quicker, easier implementation for your employers and will save everyone time, money and energy.

Find long-term partners-As with any solution you bring to the table, your technology solutions won’t work perfectly 100 percent of the time. Seek a trusted, long-term partner that you can work with who you know will be responsive as issues come up. Part of the solution you’ll bring are the actual tools or technology, but sometimes the company behind the technology is just as big a part.

Managing a company’s data is a challenge and brokers are increasingly being asked to find a solution to that problem. Arm yourself with knowledge about the providers and solutions for solving the HR data challenge to set you and your clients up for success.

Apply Best Practices To Build Stronger Carrier Relationships

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Today’s insurance brokers face new challenges and market trends that their forerunners did not. To succeed in the 21st century, brokers must adapt to the changing landscape by leveraging best practices across all operational areas. One area of particular importance is their relationships with the carriers. Knowing how to apply best practices to address key industry trends and build strong carrier relationships is essential.

Key Industry Trends and Market Conditions
The insurance marketplace is in a transformative state. The landscape is now marked with new distribution models such as online aggregators and InsurTech firms. Willis Towers Watson-CB Insights’ research found that from 2012 -2017, $312 million was invested in life and health insurance global InsurTechs. There has also been entry into the insurance market by major retailers like Amazon, Walmart and various banks and credit unions, all of which may have more robust e-commerce platforms through which to reach customers. The presence of these new players, coupled with industry consolidation, has introduced new competitive pressures on brokers.

Besides the pain points coming from within the industry, there are higher expectations coming from customers. They expect brokers to have a broader portfolio of products to meet their specific financial wellness goals, have a deeper understanding of their needs, and have product information accessible on a 24/7 basis via their PCs, tablets and cell phones. There is also the ongoing expectation that the broker still will be accessible for in-person meetings. This was confirmed in the LIMRA Insurance Barometer Survey 2018 which found that 69 percent of all respondents and 72 percent of Millennials agree that meeting with an agent/advisor before buying life insurance is important to them. This same survey also noted that customers expect a more seamless, self-service experience when it comes to researching and learning about a broker’s product offerings. Customers expect to continue their relationship with their broker over the life cycle of their experience with any given carrier. In fact, based on a J.D. Power 2018 study, customers go first to their broker or agent for advice or support relating to an insurance matter rather than a carrier’s website or call center. This wasn’t always the case.
Given these factors alone, what worked in the past may not be as effective today. The current insurance distribution environment requires that brokers have a clear value proposition which not only addresses new market conditions, but also requires them to assess their performance and then develop best practices that accommodate their customers as well as the carriers.

What Carriers Want from Brokers
There have been many surveys covering what brokers want from the carriers. For example, a 2017 Cannel Harvest Research Report, focusing on personal lines insurance, found high percentages of brokers to place a high value on these aspects of a carrier’s operation:

  • Competitive pricing (65 percent);
  • Carrier technology (61 percent);
  • Customer service (57 percent);
  • Agency compensation (55 percent); and,
  • Underwriting flexibility (51 percent).

What carriers want from their brokers has not been the subject of as many surveys. What we do know, however, is that carriers want clear and complete communications from brokers, greater access to customers in order to improve the customers’ experience, and less use of them (carriers) for testing quotes against other carriers and/or soliciting lower quotes and then not transferring the business to them.

Regarding communications, both carriers and brokers alike strive for more collaborative, open communications with the other. It’s one of the reasons why carriers are establishing broker advisory councils. These forums are proving very effective in facilitating productive exchanges between these two symbiotic entities. Also relating to communications, there is a heightened expectation by carriers that brokers will embrace more digital communications that help support their mutual customers’ service experience. Further, carriers want brokers to be that “in-the-field” presence in order to remain connected to their customer base. Even with all of the virtual communications through digital platforms, carriers recognize the importance of the human connection and believe brokers need to continue focusing on this.

Carriers also want their brokers to be strong generalists in terms of their product knowledge. If the carrier has a broad suite of solutions, they are more inclined to want to do business with brokers who can master more than just one or two of their products. This requires that brokers remain up-to-date on product developments and how they relate to the marketplace and especially the demographics of the region(s) they serve.

Technology is also a tool carriers hope the brokers will fully leverage. A small broker applying technology, for instance, to target Taft-Hartley multiemployer plan sponsors or middle market companies, can project an “easy-to-do-business with” identity that conveys a strong customer-service orientation more so than a larger, more established brokerage that is not deploying the latest digital technologies.

Along with accommodating the carriers on these factors, brokers can put themselves on a path to greater success by adhering to best practices that are in step with today’s insurance marketplace.

Best Practices Pave the Way to Success
Best practices aren’t confined to areas of carrier communication or customer service. They should envelope all aspects of a broker’s operation. They shouldn’t be static, but rather evolve to reflect changing market developments and customer expectations. Best practices should be a function of the broker’s business value proposition which answers such questions as:

  • What differentiates the broker from others as it pertains to the carrier relationship and the customer relationship?
  • What are the short- and long-term benefits derived by the carrier and the customer when working with this broker?
  • What expectations can the carrier and the customer have of this broker?

In support of their value proposition, brokers should establish best practices that include:

  • Consistent reporting on prospects indicating interest in the carrier’s products;
  • Sharing with the carrier their short- and long-term business goals with respect to increasing their marketing/sales of the carrier’s products;
  • A distribution strategy that embraces both digital technologies as well as the human touch, and keeping the carrier informed about this strategy designed to deliver optimum customer service, attract referrals, and facilitate new customer relationships;
  • Highlighting the carrier’s products in its customer newsletters or on their social media pages;
  • Regular product and industry training of their staff;
  • Marketing and sales initiatives that effectively target industry niches and/or other market sectors on which their business is focused;
  • Continuous benchmarking of sales performance and customer service metrics wherein performance data is regularly analyzed, demonstrating a strong commitment to a high quality operation;
  • A robust cyber security program that encompasses systems vulnerability assessments, penetration testing, data breach prevention/cyber security policies and procedures, employee training and cyber security awareness, maintaining a strong firewall, the deployment of leading-edge technologies (i.e., anti-virus software, encryption software, and key logging software to impede the key logging effect of malware, etc.), and a formal digital governance policy; and,
  • Policies and procedures that support the confidentiality of the carrier and its proprietary information.

Final Thoughts
The end game for brokers and carriers is the same. They both want to see their mutual customers gaining the financial protection insurance provides, and they each want to derive the financial rewards that come with doing business the best way they can. If that means changing with the times as needed, updating internal systems when required, investing in regular staff training, and remaining vigilant and ready to adapt to new market conditions, whether the influx of new players like the InsurTechs or the pervasive presence of cyber criminals, then that is what needs to be done. Above all, the best practices a brokerage can adopt to build stronger carrier relationships will also position it for long-term viability and success.

Insights Into Disability Financial Underwriting

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No matter how long you have made a living in the financial services industry, you are at the very least somewhat aware of the amount of time and usual care that goes into the underwriting of insurance policies by carriers. Insurance companies employ learned, specialized professionals to analyze risk and weigh the financial gain of making a profit by collecting premiums versus providing financial protection products to consumers. Underwriting is defined as accepting liability under the form of an insurance policy, guaranteeing payment of benefits in case of loss or damage. In the eyes of the insurer, there is a delicate balance of indemnifying risk and paying out monetary claims while still making money.

Underwriting methodology is, dependent upon the type of insurance, often broken down into two categories—medical underwriting and financial underwriting. As medical underwriting is a complicated subject unto its own, it quite rightly deserves a separate discussion at a later time. Here we will focus on the other imperative aspect of insurance risk analysis—financial underwriting.

Financial underwriting involves the evaluation of insurance policy applicants and classifying them so appropriate rates may be charged and appropriate benefit levels may be provided. It further involves assessing whether a proposed sum insured and product limitations are reasonable when considering the potential financial loss to a client.

Many of you sell life insurance and are probably very familiar with the underwriting standards and financial guidelines set forth by your usual life carriers. Benefit limitations are generally based upon calculations of multiples of income, varying proportions of net worth or even estate tax liability snapshots of your prospective clientele. In general, the equations measuring the financial underwriting of life insurance tend to remain straightforward and less complex than other insurances. Disability insurance financial underwriting, on the other hand, tends to be less elementary, requiring extra diligence by both insurance company underwriters and the consumer’s representative insurance agent.

Disability financial underwriters are commonly certified public accountants or at the very least have strong backgrounds in accounting on top of professional financial degrees. Expertise in the position doesn’t happen overnight and it can take years to develop the craft as they analyze risk after risk, case after case, while heading toward a common goal of reasonable financial protection of the carrier while providing marketable and affordable income-protection benefit programs to consumers.

Financial underwriting methodologies can differ among disability product lines. Regarding personal disability insurance, underwriters tend to maintain the insured person as their focus in terms of fiduciary needs and over-insurance concerns. Requested benefit amounts are commonly reduced to save the client from overpaying for benefit levels that wouldn’t come to fruition during a claim because of the client’s relatively lower annual income. However, reconsideration of benefits are available once an applicant’s financial situation has improved. Over-insurance is a main concern of dutiful financial underwriters while underinsurance should remain a rightful concern of insurance advisors.

The first step in consideration of the financial insurability of an applicant is the thorough review of the application itself and the financial summary provided by the applicant. In some cases additional information and proof of insurability is needed—like two consecutive years of recent individual federal and state income tax returns. Benefit eligibility is measured upon a percentage of net earned non-passive income set by the insurance company. Domestic DI carriers often penalize applicants for having passive “unearned” income such as rental property or investment proceeds. Specialty-market carriers like Lloyd’s of London and other Surplus Lines insurers often times ignore passive income without reduction of available benefits. If the applicant’s current work year is showing more positive signs in terms of higher income levels compared to previous tax years, financial underwriters will review employment pay stubs, fully-executed employment agreements, K-1 earnings and sometimes corporate financial statements in the sincere attempt to prove financial insurability among clients whose taxable earned incomes aren’t measuring up to their requested benefit amounts.

There are differing ideologies when it comes to domestic carrier underwriters and specialty-market underwriters regarding their respective maximum benefit limitations and participation caps. Domestic carriers stick to strict benefit participation levels of 50 to 60 percent of income with usual monthly benefit caps anywhere from $10,000 to $25,000, dependent upon on the applicant’s age, occupation class and income level. Specialty-market carriers lean more liberally and flexibly in their offerings, allowing participation of benefit levels up to 65 to 75 percent of income without monthly benefit caps often regardless of age, occupation or income level.

Underwriters are regularly presented with unique cases and situations which raise concern and require a more investigative approach. An applicant’s earnings history can show significant income fluctuations and volatility in employment confidence which will require underwriters to analyze the occupation, industry, and economic trends that may have impacted past earnings and contribute to future income streams. Business owners showing unwavering earnings in industries ripe with historical earnings fluctuations will often require additional financial documentation to support the earnings stated on the application. Spousal business partnerships may require additional detail since income splits can be convoluted and unclear as to how the earnings are truly being generated. Newly self-employed individuals with no previous earnings history often require a more cautious approach since earnings trends are not established and accounting records may not be readily available. Seasonal employment opportunities can be challenging, as well as the income variations and earnings advancements seen with occupations stemming from the entertainment, arts and literature industries.

Circumstances may arise in the underwriting process that commonly call for a reduction of available benefit or even the ultimate declination of coverage. Applicants who report gross revenues instead of net income are problematic as well as those that include passive real estate income in their earnings when they are not considered real estate professionals. Another “red flag” is the inclusion of distributions from an S-Corp or draws from a partnership in personal income instead of appropriate non-passive taxable earnings as reported on a K-1 schedule for a given tax year. Also, applicants commonly leave out details of in-force disability insurance policies through other carriers as well as failing to indicate whether said coverage is employer-paid and/or taxable to the insured person. On the contrary, underwriters will seek to advise applicants if their eligibility for higher benefits exceeds the benefit level for which they applied.

The disability financial underwriting of business cases is similar to that of personal DI, but the fiduciary analysis becomes more focused on the corporate entity rather than proposed insured person’s personal finances. And again, over-insurance remains a primary concern, but underwriters assume a business owner knows his or her business needs better than the insurance company. Underwriters employ supplemental questionnaires to evaluate risk for the underwriting of key person, business overhead and buy/sell insurance policies. The financial underwriting is fairly straightforward as opposed to underwriting personal benefits, yet all business disability cases still require substantial in-depth review.

Key person DI underwriting uses a simple multiple of personal annual income of the proposed insured key person as a beginning measurement for financial justification of the benefit. Underwriters will take other factors into consideration in their analysis such as potential fiduciary loss to the company, potential loss of current and future accounts, corporate ownership value of the insured person as well as perceived value of the key person to the company.

Business overhead expense underwriting requires the applicant to provide a detailed listing of average monthly tax-deductible expenses including mortgage interest payments, utility bills, insurance premiums, accounting services, maintenance costs and certain employee salary expenses.

Buy/sell DI underwriting requires an accurate outline of corporate structure as well as an executed buy/sell agreement and corporate or partnership tax returns.

As an insurance professional, your role is absolutely important in the support of attaining disability insurance for your clientele. You can read between the lines and address certain criteria as to what attributes disability underwriters will favor and fault in a prospective risk. You can also help streamline and accelerate the financial review processing of your client’s file by providing missing information that was mistakenly not disclosed on the application. Be proactive in assisting your clients by providing tax returns, year-to-date pay stubs and any details pertaining to changes in employment or income fluctuations. Providing these items can simply help provide a sense of goodwill with underwriters, demonstrating the client is forthcoming with their overall financial situation, and will most likely help in the ultimate approval of the risk and the issuance of the insurance policy in a timely manner.

The financial underwriting of personal and business disability insurance policies isn’t always black and white and is much more than just numbers, dollars and cents. Underwriters will look at all the provided figures and data, but additionally take the inherent value of the prospective client into consideration, in hopes of providing appropriate insurance levels to paying consumers while still maintaining a profitable bottom line for the insurance company.

Give The Gift Of Planning This Year

As the holidays draw near this year, encourage your clients and families to give a gift whose value will be shown for years—even generations—to come: The gift of planning ahead for a possible need for care.

November is a great time to use and share planning resources. It’s National Alzheimer’s Disease Awareness Month, National Long Term Care (LTC) Awareness Month and National Family Caregivers Month.

Caregivers are an often-overlooked, but critical, piece of the long term care picture. As a national supporter of the Alzheimer’s Association, OneAmerica® is committed to shining a light on caregivers and sharing resources to support them.

As financial professionals, talking about caregivers is a great way to encourage people to think of planning as a gift. We often hear people say, “My spouse will take care of me if I need it,” or “My daughter is a nurse, I’ll live with her.” We have an obligation to help people think of those they care about and plan for their futures. Sometimes planning starts with outlining care wishes or designating a power of attorney. Other times families are in a position to think about how to best protect the retirement income they’ve planned for from the effects of long term care expenses, which is where considering asset-based long term care protection comes in.

Regardless of how many assets people have, encouraging those around us to start building their plan is a special opportunity we have to help others. It’s true that family members are usually the first line of caregiving when long term care needs arise. More than 16 million Americans provide unpaid care for people with Alzheimer’s or other dementias1—and that doesn’t include millions more providing care for people with other diseases or chronic ailments.

When people rely on family members to provide their long term care, they may not realize the full consequences of that decision. Caregivers face tremendous financial, physical and mental burdens. For the Alzheimer’s Association, understanding the role of caregivers is important not only because of the sheer numbers, but because research shows caregivers of people with dementia face even higher burdens than caregivers of those with other conditions.

Consider:

  • More dementia caregivers reported some effect on their own employment, ranging from leaving early or arriving late, to reducing hours, turning down a promotion opportunity, or quitting their jobs entirely to provide care.2
  • 59 percent of Alzheimer’s caregivers rate their emotional stress as “high” or “very high.”
  • 35 percent of Alzheimer’s caregivers report a decline in their own health because of caregiving.
  • Alzheimer’s caregivers often have to provide care over a longer period of time, because the average life expectancy after diagnosis is four to eight years, but can be as long as 20 years.

Is this what people want for their caregivers, who are often the same people they’ve spent a lifetime working to protect? Probably not.

One of the reasons I became a financial professional was to help people avoid the sometimes devastating effects of caregiving. After caring for my grandfather after a long illness, my grandmother was left with virtually no assets to live on. My mother then became her mother’s caregiver, which affected our entire family.

We can’t predict the future to know who will be affected by significant long term care expenses and who won’t, but we can plan for the possibility and help build a retirement strategy that includes protecting retirement income from long term care expenses. When we consider how long people may need care for Alzheimer’s or other dementias, asset-based long term care protection offers a way to protect that income, with long term care benefits lasting up to a lifetime and a death benefit if long term care benefits aren’t used entirely.

Fortunately we, as financial professionals, are in a great position to help people think of long term care planning as an opportunity for hope—hope that families can plan together for how care will be given and who will provide it.

This November and beyond, we’ll be encouraging people to use Alzheimer Association resources, like the “10 Common Signs of Caregiver Stress” pictures, to start conversations with their clients, their colleagues and their own families. We’ll be distributing them in person at conferences and online in the future.

Consider them a “gift-starter.” They could be just what you need to encourage your clients to give the gift of peace of mind and hope for the holiday season.

Footnotes:

  1. 2019 Alzheimer’s Association Facts and Figures, www.alz.org/facts, copyright 2019.
  2. https://www.caregiving.org/wp-content/uploads/2014/01/Dementia-Caregiving-in-the-US February2017.pdf, February 2017.
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