Thursday, March 28, 2024

Factoring Employee Benefit Impact Into Future Remote Workforce Plans

After transitioning most of their workforces to operate remotely for the past year, businesses now face the decision of if and when to have employees return to offices. Before jumping full bore into an ongoing remote workforce situation, there are critical factors to be considered when it comes to employee benefits.

Companies recognize that, on the surface, working away from the office has its perks for employees. There are less workplace distractions, such as office drop-ins, impromptu meetings, and office noises, which can make it easier to focus for some people. People have truly appreciated not having to spend large portions of their day commuting. And most have enjoyed an improved work-life balance.

For many people, another perk of all meetings taking place remotely has been the ability to not just work from home, but also relatives’ homes, favorite vacation spots, or even another country, so long as there was strong dependable internet.  Some workers have gone so far as to make those favorite vacation spots a new home.  Employers, eager to ensure continued productivity and retain valuable employees, have rushed in to support working away from the office making it easier than ever before to be productive from anywhere.

The elephant in the room now that employers are considering when, how, and if to bring employees back to the office is how do employee benefits (a key component to attracting and retaining employees) function in this new work-from-anywhere world? In 2020 many employers experience a decrease in employee benefit costs. The main factor in this was the fact that many people delayed and avoided health screenings and procedures during the pandemic. According to a survey by Aon, the average decrease in employer healthcare costs in 2020 was five percent, and a two percent average increase is expected in 2021. This increase in costs this year is being attributed to both the cost of care for COVID and people catching up on care that was skipped last year.

Any company that plans to allow workers to truly work from anywhere moving forward should focus on ensuring their benefits programs address:

Physical and Virtual Access
Before your company embraces working from anywhere, carefully consider the complexities and nuances of giving employees free rein of working from the environment of their choosing, without managing their expectations of significant challenges in the benefits your company offers. Benefits are sometimes limited or even very restricted by geography.  As an example, if Kaiser is a company’s primary medical plan, moving to a location outside of where Kaiser is offered leaves an employee with no or very limited medical coverage.  Under a PPO plan, a less densely populated area may have a very limited network, or perhaps out of network only coverage, exposing both the employer and employee to significantly increased claims costs. Telehealth services can help bridge the coverage cap in some situations. Rather than paying increased costs to see an out-of-network care provider in-person, an employee working remotely could get sufficient care and diagnosis via a video call with a physician who can phone in a prescription. Another change to be considered is that disability may function entirely differently from state to state due to state-mandated disability coverage. Also, there may be more simple limits to the benefits program like participation in the company wellness program, health fairs, or flu vaccines offered on-site. Understanding these limits and communicating these clearly to the employee who is looking to relocate is extremely important to managing employee expectations and ultimately job satisfaction.  Employees need to feel like their work cares for their well-being, and employers need to ensure that they are doing the right thing for their employees, this is why factoring in job management software that can oversee and streamline systems is a fundamental part of helping employees with their working environment.

Effective Communication Methods
Technology-aided attention deficit disorder was here well before COVID, but now it attacks with a sweeping vengeance. Video conference call upon video conference call produces attention fatigue. Most people are guilty of answering emails and texts on these calls while pretending to pay attention. Scientists have provided much data over the years that prove multitasking and lack of focus limit the ability for best thinking outcomes and reduce productivity. But most people charge on, ignoring this advice and doing as much at once as possible. Employers must cut through all of this noise and communicate and develop an understanding of their programs in a fresh and concise manner, beyond just the obvious of conducting all this virtually. What has been successful this past year is shorter, more frequent messaging. Keep presentations and video training shorter in duration, 20 minutes or less, preferably 10 minutes. Also, do remember cybersecurity is critical during remote working. Employees should be provided the best vpn for mac or their specific computers. Provide a higher frequency of communication to reinforce key concepts and messaging and be creative. While it will require a different type of planning, it is possible to host virtual health fairs during open enrollment with exercise, and cooking classes, while peppering in benefits education. Making use of Online Conference Management software and tools can aid well in hosting a successful interactive educational program.

Varying Regional Nuances
Unfortunately, there are a lot of differences between states in not just taxes, but also required benefits.  State short-term disability is a common difference where some states require employers to provide this and regulate how it is to be provided.  If an employee moves to one of these states, like New York or California, an employer will be required to provide the appropriate disability coverage.  The statutory disability coverage can also impact any benefits under disability the employee may currently be enrolled in.  Some states do not allow for the tax-deductibility of HSA plans, which can be a bit of a shock for an employee who has relied on these for tax savings and any tax-free employer contributions.  In a place like Hawaii, benefit coverage, employee contributions, and plan design are regulated, requiring employers to provide coverage to even part-time employees. For employers new to a geographically diverse workforce, knowing, understanding and executing a wide variety of benefit plans can be overwhelming and it is a maze that must be planned for in advance before giving employees the green light to pack their bags and relocate.

Embracing Technology
For the few companies who have not embraced technology for enrolling employees in benefits and managing changes to plans, now is the time to just do it. Too long employers have assumed that not every employee will have adequate enough technology access to use the HRIS/Benefits Administration system, but almost every employee does now with the advances that have been made in mobile technology.  For companies that already use an HRIS/Benefits Administration system now is the time to re-examine just how efficient and user-friendly the benefits administration system is.  With the complicated virtual world now, and competing priorities, a company’s benefits administration system needs to be clear and easy for employees to understand and use.  With the enhancements and improvement of UX (user experience), consider making this tool a magnet for employees as a place to go for learning and development, company community, and company values and culture.  Leaning on these tools to fill in the natural office culture and sense of community that occurs when everyone is together in a workplace, but is lacking when employees work from anywhere, has never been more important.

Impact on Attracting and Retaining Employees
According to a recent report by McKinsey & Company (April 1, 2021), most employers have not clearly communicated their plans for post-pandemic work. This is making employees anxious, as 47 percent of employees surveyed feel lack of clear vision about post-pandemic work is a cause for concern. Most employees prefer a hybrid work model when returning to work, wanting more flexibility.

If employers are not proactive in communicating their plans to employees now there is a risk of losing key individuals to other companies who have been clear about allowing for remote work or a hybrid working arrangement. Not defining, implementing and communicating a return-to-work strategy could be very costly to businesses right now, as we all are seeing the economy begin to return to normal.

Managing the many complications and nuances of benefits that work from anywhere can be overwhelming. Slow down and take the process step-by-step and consider how, in the long run, embracing the virtual workplace can result in a more productive, engaged and happy workforce than was ever possible within the confines of an office-but do not forget to weigh the impact this will have on a benefits program.

Capture Higher Life And Benefit Sales

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Life insurance sales have inherent challenges regardless of market conditions or consumer trends. First, many people simply do not understand insurance or its value proposition. If they do, its association with end of life or illness causes many individuals to keep putting off a purchase. With that said, the pandemic did heighten awareness of the importance of life insurance and did, in fact, increase its sales. LIMRA reported that the number of life insurance policies increased two percent in 2020, largely in the whole life and term categories. Do not, however, count on this trend persisting as industry data suggests that concern over the mortality risk has been steadily declining over the past years and likely to continue. To overcome these and other challenges associated with life insurance sales, brokers will need to leverage market conditions, consumer trends, new technologies and best practices to expand their insurance and benefit sales.

Current Challenges and Market Conditions
Its unpopular purpose and the declining concern over mortality risk notwithstanding, brokers face other challenges in selling life and other insurance products. Getting back to the perception issues, a major one relates to price. In the LIMRA 2021 Barometer Study, it was found that over half of Americans overestimate the cost of insurance by as much as three-fold. Erroneous cost values were more pronounced among the younger generations with 44 percent of Millennials incorrectly estimated the annual cost of a 20-year term life insurance policy for a healthy 30-year-old at over $1,000 per year versus the actual average cost of approximately $165 per year. The good news is that many consumers admit to not understanding life insurance basics with the Barometer Study finding that less than one third said they were “very” or “extremely knowledgeable” about life insurance.

Another challenge brokers need to overcome is the heavy reliance on employer-sponsored coverage. U.S. Bureau of Labor Statistics found the median life insurance coverage offered at the workplace to be either a flat sum of $20,000 or an employee’s one year salary. This is hardly sufficient to cover the expenses of an individual, two-income household or a family. LIMRA’s data suggests that there are an estimated 60 million uninsured and underinsured American households with an average coverage gap of $200,000.

Industry Measures
Recognizing the need to build greater financial literacy specifically where life insurance is concerned, the industry has taken measures to address the problem. LIMRA and LOMA, the American Council of Life Insurers, Finseca, the Million Dollar Round Table, the National Association of Insurance and Financial Advisors, the National Association of Independent Life Brokerage Agencies, and Life Happens, a nonprofit whose mission is to help consumers take personal financial responsibility through their purchase of life insurance and related products, have joined forces and launched the Help Protect Our Families campaign. As part of this campaign, these associations will be developing consumer insights and industry best practices to help insurance professionals reach those families with inadequate coverage.

Apart from this initiative, another measure being applied is that of automated underwriting. It is believed that more consumers would purchase coverage if underwriting procedures were simplified; for example, if they could avoid a medical exam. There is also a growing trend toward continuous underwriting, which applies data and digital connectivity to personalize underwriting based on a customer’s personal data and engagement with the insurer. This process also will help insurers to direct leads to their sales channel to better meet a customer’s needs. A multichannel approach which reflects a higher degree of customer personalization will be used to increase life insurance sales, as well as extend the relationship to encompass the sale of other products. McKinsey & Company’s The Future of life insurance: Reimaging the industry for the decade ahead projects that this approach will not only help reduce the cost of acquiring a customer by up to 50 percent, but will also increase new premiums by five to 10 percent, and lower customer turnover by up to 30 percent.

Another example of how the insurance industry is transforming is the so-called “engaged wellness ecosystems” and “pay as you live” systems. Reflecting a shared-value economic approach, these systems reward customers who follow healthy behaviors (e.g., annual check-ups, exercise, healthy eating, etc.) with lower premiums.

While the emphasis on health management is not new, the approaches coming from insurers directly to consumers, along with the greater emphasis on personalization, increased consumer engagements through mobile devices, and a receptivity to more flexible underwriting are new. There also has been an expansion of value-added services by insurers who realize that helping their customers with challenging insurance-related administrative or health management tasks is advantageous in keeping policies in force and expanding the customer relationships.

Technology
Not to be underestimated is the role of technology in helping increase life insurance and benefit sales. Currently, many brokers rely on outdated information management systems that are not keeping pace with today’s tech-driven communications. Customers, especially the younger generations, rely on their mobile devices heavily to communicate, bank, pay bills, research purchases, and make purchases online. Brokers who leverage new technologies to facilitate customer engagements, as well as to capture more data for better targeting, have a competitive advantage. Today, there are insurance broker-specific platforms that enable a broker to manage a prospect’s entire journey through the sales cycle and beyond to customer status. These platforms optimize prospecting, customer communications, data entry and overall productivity.

Mobile apps have become standard today with carriers providing them to share product information, policy features, pricing, etc., all readily accessible at any time. More and more insurance apps today display features such as AI chatbots to expedite customer and broker/agent communications, as well as push notifications to keep customers updated. There are also apps for broker employees to help them with everything from onboarding a customer to keeping track of important customer data, and accessing policies, quotes, notifications, claims and documents.

Artificial Intelligence (AI) driven solutions will continue to expand with insurance carriers leveraging AI and related technologies such as Machine Learning, Fuzzy Logic and predictive analytics to improve their prospect-to-customer conversion rates, advance their risk assessments and related pricing, and optimize their claims processes. In the most advanced applications, we are now starting to see next-generation digital insurance agents support the role of their human peers. With an Alexa-like approach and human-sounding voice, these digital agents are helping improve broker productivity, answer customer inquiries quickly for faster resolutions, reduce risks, and promote better customer service and satisfaction.

Best Practices and the Human Touch
Digital agents are by no means a replacement for a broker/agent. The best brokers know how to expand their life insurance and benefit sales by tapping into what matters most to prospects and customers. They have not waited for industry initiatives to take a proactive role in educating prospects and customers regarding life insurance; the different types, their roles and how to supplement one sale with other products in order to promote optimum financial protection. They are actively involved in the industry, staying abreast of new laws, regulations and trends affecting carriers, brokers, employers/plan sponsors, employees/plan members and the general public. They are also routinely cultivating new strategic alliances with carriers, accountants, attorneys, investment advisors and other professionals.

To increase sales, successful brokers also are looking at the changing skills needed in their businesses. In addition to having “digital natives” among their staff to navigate new technologies, platforms and apps, it is also important that there be skilled customer-facing professionals able to serve in today’s multicultural, multigenerational marketplace. That requires having some multilingual staff, as well as individuals who can relate to the younger generation and aging baby boomers. In other words, brokers need to future-proof their workforces so that they can succeed into the future. At the core of all these practices should be a focus on personalizing the customer experience and adherence to proven best practices for those selling life insurance and benefits—which are to conduct annual reviews, always introduce new products/solutions and, when selling to employers, unions and/or associations, make sure that the focus is not just on group products, but also on voluntary benefits which continue to show increasing demand.

How To Expand Your Portfolio Through Cross Selling

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As more people return to the office over the next several months, business will really begin building to pre-pandemic levels and beyond. We will continue to see unemployment trend downward as companies hire additional staff, as well as an increased emphasis on better supporting the workforce in a post-pandemic world. Both will create unique opportunities for brokers as they work with their clients to create a package of offerings to help them attract and retain employees in an increasingly competitive world.

Cross selling complementary products is not a new practice to our industry. But uncertainty caused by the pandemic and the scramble to shift to a virtual environment had many of us prioritizing our selling focus on core coverages. Ironically, the pandemic seems to have accelerated a trend toward clients and employees looking for additional coverages to enhance their benefits in an uncertain world.

This presents a unique opportunity. Your book of business will naturally grow as clients expand their workforces. Yet it is important to remember to analyze how you can increase revenue even more by cross selling with your current clients.

To effectively cross sell without looking “money hungry” or too sales driven, consider some out-of-the-box thinking and setting up an honest conversation on the needs of the client’s workforce.

Begin With Reflecting on Your Own Business
As a broker and manager of your own business, there’s a lot to consider and track. Am I ensuring none of my clients slip through the cracks? How is my marketing? How could I sell better? Are my margins healthy?

Begin by first analyzing your business and finding areas of improvement that create greater efficiencies and help you operate better. For example, how do you communicate with clients and is it effective? If you’re going to cross sell effectively, you need to ensure you’ve got your own administrative items in line. Also, look at the types of insurance you offer and the partners with whom you work. If you need to reevaluate, let’s say your life insurance or short-term disability offering, now is the time.

Search for Insights With Clients
That same thought process we apply to our own business, and the package of benefits we offer, suggests the approach you should consider when approaching your clients about enhancing their own offerings for their employees. As you catch up and learn how their business is doing, listen to their pain points. What worries them most in the night? What do they worry about in terms of their workforce and supporting their employees? The answers to these questions will reveal areas of opportunity for you to better support your client. Ask detailed questions and give them the freedom to answer honestly.

Additionally, focus on the relationship and really get to know your clients. Approximately 80 percent of a company’s future revenue comes from 20 percent of its existing customer base. Therefore, enhancing your relationships with your best customers is the best way to increase profit, because you not only have the opportunity to cross-sell to them but you gain valuable insight about ways to attract more clients like them.

Discuss Future Needs and Wants
In these crucial conversations, you can begin discussing what types of support you can offer the client through benefits that address these pain points. Some that will and should be more top of mind this year include:

  1. The Importance of Mental Health
    Mental health is not a new topic, but it was pushed to the forefront of workplace issues due to the pandemic. Employees want more access to mental health services than ever before and employers that are capable of providing that access will reap the benefits. Productive workforces are comprised of team members who are highly functioning, a state which depends on their mental health. In 2021, being “healthy” is no longer only a physical state, but a mental one as well.
  2. Coronavirus-Related Coverage
    All carriers are approaching coverage for the coronavirus differently, and it is critical you familiarize yourself with the various approaches and coverage plans. Additionally, make sure to discuss short-term and long-term disabilities with your client, as many carriers are evaluating these in relation to potential short or long-term treatment plans and effects of COVID-19.
  3. Supplemental Insurance Options
    Previously overlooked by many, supplemental products that can fill the gaps left by traditional insurance plans will be more top-of-mind this year—particularly those related to critical care and income protection. The pandemic unfortunately forced many families to wonder how they will make ends meet due to being laid off, or what would happen if one of their family members became hospitalized or, heaven forbid, died unexpectedly. If the families are thinking about these topics, so are decision-makers among your client base.
  4. Retirement Plan Reviews
    In addition to our daily lives and everyday expenses being impacted by the coronavirus, our retirement plans were likely impacted as well. Consider encouraging your client to evaluate their retirement offerings and conducting a formal plan review. This analysis is likely to reveal gaps or areas of expansion that you can offer them. It is also critical to have conversations with all employees on the value, particularly with the economy in flux, and ensure each individual is set up with a plan if not already in one.
  5. Worker’s Comp Assessment
    There are still some unknowns when it comes to COVID-19’s impact on worker’s compensation and work-related injuries and illness. However, as states evaluate this change and inclusion in the context of worker’s comp, it is a good time to review what is and is not covered under a client’s worker’s compensation insurance. Particularly if a client has had numerous employees contract the coronavirus, a discussion about how to best protect them is certainly in order.

Move Beyond Traditional Health Insurance
While health insurance is still your go-to revenue producer, there are more product lines available for you to focus on and begin talking about regularly. One place to start is by looking at non-insurance products you can offer to clients.

For example, many small businesses do not have a dedicated HR manager or full HR department. Consider combining employee benefits administration with an HR function and offering your clients access to an HR software platform for which you can charge a fee that addresses both needs. There are also vendors you can partner with that can assist companies in compliance, technology/IT support and staff training.

Persistence is Key
With open enrollment season right around the corner, it’s critical to start the conversations now. Particularly if an employer is hiring new employees right now, they may just want to push off any conversations until closer to the open enrollment period. However, onboarding each of these new employees is an opportunity for you to start gaining that critical data on their needs, bring up options and educate them on your offerings.

Sometimes it takes multiple conversations and multiple points of contact for a consumer to actually make a purchasing decision, and the same is true, if not even more so, with insurance. Employers will worry about the costs to them, or wonder if employees will actually use it, so begin those conversations and that selling process early so you can make those critical cross sells during open enrollment.

Expanding Benefits Sales With Non-Insurance Alternatives For The Remote Workforce

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How Brokers Can Expand Business With Flexible Healthcare Solutions For The Remote Work Revolution

The world’s reliance on remote work has been permanently altered thanks to the social distancing measures put in place during the pandemic. This reliance on technology has been implemented across industries and has affected employer groups large and small. As employers continue to adapt to this new normal, it’s unlikely things will ever return to the way they were pre-pandemic.

Instead, we expect even more client groups to join the remote work revolution in the years ahead. These tough economic times have been challenging for everyone but especially for small groups. And as companies pivoted to remote or hybrid workforces during the past year, many learned that having a remote workforce across multiple states provides a unique set of challenges for some employers.

In an effort to fight rising healthcare costs, large and small groups are shopping around for a new healthcare alternative that might equate to lower premiums and fewer claims to impact their profits. By providing timely solutions, brokers can reinforce their value and position themselves for growth in the years ahead.

Traditional Insurance Options Are Incongruent
Traditional health insurance has been a staple of health plans for many years because that’s all people knew. But now that technology has enabled companies to be geographically dispersed, having a healthcare plan with state limitations provides a new set of restrictions.

As the migration outside of offices and city centers continues, companies find it is often more cost-effective to hire 1099 employees rather than W-4 employees. These employees are generally forced to find their own health coverage, and costs can escalate quickly. To stay competitive, many employers want to provide the same quality of health plan options to all employees, no matter how far-flung they may be.

There is also a rising population of digital nomads who roam the country at their discretion. They are just as dedicated to their work but choose to do it in a non-traditional setting. The need to receive first-rate healthcare when traveling from state to state is a growing need in the current landscape and will continue to grow as more workers become untethered from corporate headquarters. Traditional insurance options don’t provide the flexibility required for this growing segment of society.

Customize Benefits for the Remote Workforce
Employee benefits are a vital component of attracting and retaining employees. If a benefits plan is limited or restricted by location, it can not only make recruiting top-notch talent more difficult, but it can also impact profits significantly. For example, suppose a company offers a PPO plan. In that case, an employee working in a remote location may have a very limited network or even out-of-network only coverage, which exposes both the employer and employee to severely increased claims costs.

As employers discover the increased productivity and happier employees who accompany working remotely, they embrace this change and take steps to implement it long term. This change has caused clients of all sizes to seek solutions outside of the traditional realm of health plan options. They’re looking to brokers for customizable benefits that mitigate the costs of claims and provide the flexibility needed for a conventional workforce as well as a remote workforce.

Take a Fresh Look at Old Problems
Evolution presents fresh challenges and opportunities, regardless of company size. If a broker never revisits strategies or offers new solutions to improve a client’s health plan, he leaves the door open for more savvy competitors to take his clients. To differentiate yourself in the marketplace, you must think differently than everyone else and stay ahead of the curve.

Companies are so desperate for cost-saving solutions that they take matters into their own hands and do their research to find new options for better results. Brokers who are not aware of the changing landscape of healthcare solutions will likely lose clients in the days ahead.

A Contemporary Solution
One solution that employers are flocking to for the remote workforce is direct primary care (DPC). DPC is different from traditional insurance because there are no premiums or deductibles to pay. It’s a monthly healthcare membership that allows employees to get unlimited primary care for a low monthly fee. With a nationwide direct primary care provider, employees in every state can get the same level of care for the same monthly payment. There is consistency in quality and pricing across the board for all employees, no matter where they work.

Because DPC isn’t insurance, there are no insurance claims to impact the employer when an employee sees a primary care physician. This membership has been a game-changer for employees with chronic illnesses. Managing a chronic disease with traditional health insurance generates claims that continue to impact an employer for the life of that employee.

DPC memberships offer chronic disease management for a number of common conditions—all without generating claims. Even employers who offer the traditional BUCAs have found that adding DPC to their plans diverts claims for acute and chronic conditions, leading to significant savings.

Layered Solutions are Key
When employees understand the importance of primary care to prevent higher health spends downstream, options like DPC can help employers and their staff protect themselves from the impact of insurance claims. Employers also view direct primary care as a valuable solution because they can easily pair it with other benefits to provide even more meaningful coverage with minimal increases to the cost of the health plan. One of these benefits is a limited benefit indemnity plan.

Having unlimited access to a primary care physician for day-to-day care is extremely beneficial for long term health outcomes. But traditional and mobile employees also want coverage for accidents, hospitalization, intensive care, and other unexpected health crises without breaking the bank. By combining a DPC membership with an indemnity plan, brokers can provide these benefits at a very affordable rate.

Telemedicine is Here to Stay
Because of millennials and their affinity for technology, telemedicine and virtual doctor’s visits were gaining popularity before the pandemic. It’s no surprise this modern convenience continues to grow in popularity as former skeptics have discovered how easy and inexpensive it is.

Employers no longer see telemedicine as optional, but many don’t know they can provide this benefit without generating insurance claims. This is where offering a non-traditional, no-claims option like direct primary care can set you apart from competitors.
By educating employer groups on the benefits of a DPC membership with telemedicine and virtual visits, a knowledgeable broker can build a health plan that appeals to workers across multiple generations. Employers aim to attract and retain innovative talent, and benefits that are both robust and cost-effective are an integral part of recruitment strategy.

Easing the Pain
Establish yourself as the one employers call for resolution when their old health plans no longer fit. Disruptors add value to their clientele by proactively pitching solutions that are outside the status quo. Businesses change year over year, so yesterday’s solutions may no longer apply. By reviewing health plans annually and addressing new or old issues, you remind clients of your value as a broker.

Rising healthcare costs are impacting businesses and employees alike. Direct primary care is a powerful alternative to incorporate into health plans because it addresses many of the pain points facing companies and employees today:

  • Employees who struggle to meet high deductibles for primary care
  • Workers who can’t afford to insure dependents
  • 1099, part-time, and seasonal workers who don’t usually receive benefits
  • Remote workers who require access to healthcare in different states
  • Constant claims for chronic disease management and primary care eating profits

The ground is shifting beneath our feet, and knowledgeable brokers have a prime opportunity and responsibility to learn about new products for the remote workforce. How are your health plans different or better than those of your competitors? Opportunities to build better health plans abound, and a well-rounded broker must offer clients a full range of traditional and non-traditional benefits.

Employers want to provide quality care for employees while spending less. They also desire personalized benefits packages that meet the individual needs of a diverse workforce. Speaking directly to a client’s needs without them having to ask is a great way to build relationships and expand sales.

COVID-19 Response: Agility, Collaboration, And Engagement

T.S. Eliot once said that “Last year’s words belong to last year’s language. And next year’s words await another voice.” That’s very beautiful and poetic, but little did we know that 2020’s voice would be heard through a mask.

December 2019 seems like such a long time ago. Like most other companies, American National was looking back on the accomplishments from the prior year and looking forward to ambitious plans made for 2020. I recall leaving the office on the last workday of 2019 with a two-sided whiteboard full of goals and plans for the next year. Things were exciting. Research and various pilots were being conducted. New opportunities were to be explored with ambitious and hopeful plans attached to each. The first few weeks of 2020 weren’t much different than the early parts of previous years. There were, to be sure, some vague stories about a viral illness in China, but like most, it wasn’t really on my radar.

That all changed on January 17, 2020. I was traveling back from an industry meeting in California when a family member called me and said that the CDC had started some health screening at a few American airports due to the virus that had originated in China. Four days later, the CDC announced the first U.S. case of COVID-19. This was followed by news of lockdowns in Wuhan, China. By January 30 the World Health Organization had declared a global health emergency. This was followed by lockdowns, travel restrictions, national emergency, the “15 days to slow the spread” effort, masks, social distancing, businesses closing, and rising unemployment.

By March 2020 we were hearing of difficulties in obtaining paramedical exams. Something had to be done if we were going to keep the flow of business continuing. In addition, we had the additional task of attempting to mitigate the risk of this new virus when still very little was known. American National’s corporate culture stresses the importance of agility, collaboration, and engagement (we refer to it as ACE culture). All of this was about to be put to the test. Underwriting, Actuarial, IT, Marketing, the Medical Director’s Office, and senior management would be tasked to change how we do business in a very short period of time.

To keep the business flowing, we adjusted our accelerated underwriting programs (Xpress and Xpress Plus underwriting). We decided that since the COVID-19 risk seemed to be less impactful in younger ages and those with no chronic health conditions, we expanded our acceleration rate on clients age 50 and under who didn’t have chronic health issues. This allowed for more cases to be approved and issued without traditional medical exams. This was accomplished by taking many proofs of concepts efforts that were in a pilot or research stage and putting them into production.

In late 2019 we had embarked on a pilot to determine the effectiveness of utilizing a secondary prescription history provider. By March 2020 we had compiled results that were impressive. We had found that by reflexively ordering data from the second provider after inadequate data was provided from the first, our meaningful hit rate substantially increased. The results came at a perfect time. Increasing our acceleration rates in response to COVID-19 required more robust real-time medical data. By enhancing our prescription history data, we were able to improve our understanding of the risk which, in turn, improved our ability to provide a non-medically examined underwriting path.

Prior to COVID-19 we had been utilizing real-time clinical lab data on an as-needed, underwriter-discretion basis. This is a tool that allows us to check for lab and other medical data that has been conducted by a couple of the nation’s largest private labs. In our effort to enhance the accelerated underwriting rates, we made this process part of our normal accelerated underwriting rules. We also eventually added medical claims and Electronic Health Records to our underwriting tool belt in the months that followed.

These efforts all helped push up our acceleration rates for those aged 50 and under, but we also had to take action to reduce the risk the virus posed at older ages, impaired risks, and foreign travel risks. Like many companies, we added underwriting restrictions to help reduce the risks of those uncertainties.

To communicate and explain these changes, the underwriting department worked closely with our marketing partners. We met regularly (in virtual meetings, of course) with marketing to explain the various changes and the reasons behind them so that they could also communicate these changes to our agency partners. In April 2020 underwriting and marketing held a joint webinar on this topic with over 1,000 in attendance. It was our highest attended webinar to date.

In July we were hit with another blow. A key industry vendor that provided paramedical exams and APS services abruptly closed shop. Another pivot was required. All hands were on deck as we shifted to other existing vendors and eventually added new service providers. This was no small effort. New vendors require new contracts with legal review, new security reviews, new training for staff, as well as extensive IT work to create new connections with new vendors. Agility, collaboration, and engagement were the name of the game once again.

Throughout the remainder of the year we were in constant review mode as the data was monitored closely. Internal data as well as data involving the virus itself. The underwriting staff worked harder than ever as many of these new processes put in place required manual workarounds. While the speed to approval increased, the amount of work required of the underwriter increased. Slowly but surely we began automating some of these new processes, but the bottom line is that our underwriting staff stepped up and made it happen.

And here we are. It’s been more than one year since COVID-19 changed everything. There seems to be light at the end of the tunnel with quite a bit of encouraging news, especially with the rollout of efficient vaccines. However, it is still too soon to tell where all this leads. What is the impact of long-COVID? What about the variants and their impact on the future efficiency of the vaccines? Time will tell.

One thing is for sure, the world of underwriting will never be the same. The use of alternative digital health data is here to stay. Proper implementation of this data is key, not only to meet mortality expectations to keep life insurance rates affordable, but also to improve client experience. Another thing that is here to stay is the paramedical exam. That is not a bad thing. The paramedical exam has been crucial in keeping the cost of insurance down. The exam and accompanying labs are outstanding tools to predict risk and, therefore, are second to none in providing information that allows the industry to appropriately underwrite risks. Contrary to popular opinion, the exam and labs are not as consumer unfriendly as they are made out to be. The industry gets very excited about finding ways to partner with our insured clients in improving their health. We get downright passionate about the prospect of helping our customers improve their lifestyle using new technology. But, what better way is there to help improve the health awareness of our clients than to provide them with a comprehensive blood and urine panel that provides a close look into their health status—markers for diabetes, kidney disease, liver disease, lipid control, etc.? Providing this information along with keys to help them improve their health based on the results is something we at American National are already doing.

That two-sided whiteboard that was full of plans and ideas for 2020 still sits in my office. I occasionally go into the office and just can’t bring myself to wipe it clean and start over. It seems to represent a time past. Maybe it even represents a bit of hubris. One virus changed all those plans. However, it also represents the idea of continuous improvement. You can’t predict everything, but it is the human spirit to keep moving on. The goals and plans for 2021 are different, but perhaps a bit wiser because they are seasoned with an experience from 2020 that taught us how much can be accomplished even when circumstances send us down a different path. I’ll be keeping those plans and goals on a spreadsheet this time.

Talk About Layers Of Protection With Young Clients

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There are a lot of preconceptions about the millennial generation that make some financial professionals shy away from working with them. For instance, you may hear that they are laden with student debt and lack disposable income let alone a savings account. They are renting longer and starting families later than previous generations, which means protecting loved ones from unexpected expenses (like loss of income or mortgage payments) may not be a concern. While these things may be true for some, there are millennials that are open to conversations about life insurance…as long as it doesn’t look like their parents’ process (I’ll get to that later).
Here are some things I’ve found helpful when talking to younger clients about life insurance.

Young clients don’t want to talk about dying
Death can be a touchy topic with a client who is in their 20s or early 30s. They feel invincible at this point in their lives and may not have the life experience to understand the need to protect their loved ones in the event of an untimely death. However, they’ll admit they may get sick or sustain an injury and be in need of financial help if that happens. So rather than focus solely on death benefit (which of course you need to mention because it is the primary purpose of life insurance), talk about a life insurance feature they don’t have to die to use—living benefits.

I often tell millennials, “Life insurance with living benefits helps take care of life’s ‘what if’s.’” Heart disease, cancer and stroke are prevalent in America and your client likely knows someone who has had one of these or other chronic, critical or terminal illnesses that can quickly cripple personal finances. A life insurance policy with living benefits can give them access to a portion of the death benefit to help pay for medical expenses.

Millennials are practical about money
Millennials aren’t known for having sizeable savings accounts. They usually have just a little set aside as they are still paying off student loans. According to Business Insider, Millennials typically have a practical approach to money and know they need to save for emergencies and contribute to a retirement account.1 In many cases they are better educated than previous generations, which leads to better employment and financial well-being.2

Millennial clients can benefit from conversations about supplementing their ability to save for the future with the potential cash value accumulation of an index universal life insurance policy. And if the policy has a lifetime income rider, they can have guaranteed tax-free income in retirement.

Helping build a better future
When discussing life insurance with any client it is important to tell a story they can relate to. One way to describe an index universal life policy is “layers of protection.” Personally, I think of layers of clothing I have to wear to an early season baseball game in the Midwest. For instance, many carriers offer index universal life insurance products with multiple benefits (or layers) including: Death benefit, living benefits, cash accumulation potential and retirement income via tax-free loans from the cash value.

Layer one, T-shirt. While a millennial may not be interested in conversations about their own death, the first layer of protection offered by an index universal life is the death benefit. You can relate the importance of the death benefit to your millennial clients by explaining how it can help pay off their student or other debt, and not leave it to their loved ones if they die unexpectedly.

Layer two, sweatshirt. A living benefits rider can help in the event your client gets a serious medical condition. With qualifying chronic, critical or terminal illness, clients can access a portion of the death benefit to help pay medical expenses while preserving their other assets.

Layer three, coat. An index universal life (IUL) insurance policy will accumulate cash value that will grow tax-deferred based on the growth of various indices. IUL policies are protected from market turndowns and can be appealing to the practical approach to saving that millennials are known for. The cash value can be used to build a better future and help pay for various things like a down payment on a house, a wedding, or even child’s college expenses—so they don’t face the same student loan debt as their parents!

Layer four, hat and gloves. The ability to supplement other retirement income streams with tax-free loans from an index universal life (IUL) insurance policy is the fourth “layer.” Millennials acknowledge that in the next few decades more and more people will be receiving social security benefits. During that same time, fewer workers will be contributing to support that program.3 That means it is essential for younger generations to identify additional income streams to access going into their retirement years.

Have you ever seen a filing cabinet in a millennial’s home?
Do not overlook the millennial generation as an important client base. They are interested in financial advice, but not from a salesperson and maybe not while seated across the kitchen table from you. Millennials have questions and are willing to do the research on their own before talking to you. They also expect you to be comfortable communicating via text, email, social media and your website. Zoom or other virtual meetings can be effective with younger clients even when we’re not in a pandemic. Younger clients don’t consider them “virtual” meetings, they are a legitimate way to fit meetings into their busy schedules.

To answer the question on the filing cabinet, the likely answer is no. We may be used to a four-drawer filing cabinet, but a millennial wants a touchless, paperless process if possible. Insurance products are important, but so are the processes of doing business. Look for carriers that support electronic sales tools, applications, signatures and an electronic application delivery process.

One last comment before you go out into the world of millennials to sell layers of protection: If you are wondering where to find these clients, look right in front of you. They are your current clients’ children. Or your clients’ friends’ children. If you can advise them when they’re in the early adult years, your practice could earn a client for life. 

References:

  1. https://www.businessinsider.com/average-american-millennial-net-worth-student-loan-debt-savings-habits-2019-6#and-the-typical-millennial-has-less-than-5000-in-their-savings-account-3.
  2. http://Spendmenot.com/blog/millennial-spending-statistics.
  3. Social Security Administration Fact Sheet, published 2020.

Withdrawals and loans will reduce available death benefit and policy value. Withdrawals beyond basis may be taxable income. Excessive and unpaid loans will reduce death benefits and policy value and may cause the policy to lapse. If a policy lapses, unpaid loans are treated as distributions for tax purposes.

Lorelai: The Reason Insurance Exists

Over the years I have written periodically about disabilities that have unfortunately occurred in my family, to which having or not having various types of insurance made the difference between disaster and financial stability.

In one disastrous case, a dive instructor and dive store owner was hit by a drunk driver, causing severe injuries, necessitating having to learn to walk correctly again and endure arduous physical therapy. In that case, the absence of appropriate disability overhead expense protection meant that within 90 days of the accident, the business evaporated and had to be liquidated.

In another case, the young, two-income family that finally found and bought their “dream house” suffered catastrophe when the wife tumbled off a hiking trail that had collapsed, breaking her spine. Their new home was in escrow and the lender approval was based upon two incomes. Now faced with the very real possibility of a permanent injury (and loss of one source of income to qualify for the loan), what was the couple to do? The loan officer’s first question was, “Does she have disability insurance?” The answer was yes, and the dream house was saved!

We forget that disability insurance (and even life insurance for that matter) isn’t about terms and conditions. It is about saving the dream house.

St. Patrick’s Day 2021, my son and daughter-in-law delivered our first grandchild–Lorelai. In just those first few days of her life, I see the next generation, perpetuity of my family, and all of the same struggles that I faced when I was the new father.

New life means you get to rediscover the world from a fresh perspective. I still recall the first time my son Erik ran outside during a rainstorm when he was a year old. He laid down in the grass, looking up at the clouds as the raindrops fell. I followed him, and after seeing what he was doing I laid down in the grass next to him…we both laughed and laughed as the water splashed on our faces and into our open mouths. Now there is a chance to do this again, only this time Lorelai’s mom and dad get to rediscover the world. Life goes on.

Looking forward is difficult if you have not been through tribulations before. The basics of life must be taken care of immediately–food, clothing and shelter. But then there comes: Dance lessons, trips to Disneyland, family vacations, school activities, car shopping and college.

Yes, there will be a lot to do over the next many years.

Life insurance is not for the person buying the insurance. It is for the ones we love who must stay behind should an early life departure occur. Although the insurance proceeds would never replace the person who is deceased, the added security helps reduce the stress of securing funds to make sure the spouse and kid(s) can stay in the house, still go to Disneyland and take those dance lessons.

Disability insurance is equally if not more important. The disablement of one parent who is an income earner automatically reduces the chances of being able to do these things that we so look forward to doing. In terms of disablement, instead of the family just receiving benefit proceeds, the disabled person is still alive and part of the family, but now the disabled person is a total consumer and no longer bringing in any income. He/she is now the one needing care. While most families would gladly take care of a sick or injured family member, the reality is a disabled person becomes a drain on the family–mentally, physically and financially!

Disability insurance is not for the disabled person. Disability insurance benefits, like life insurance, are for the remainder of the family members. The insurance is meant to provide funds to help household and lifestyle continuity, to pay the bills and even to allow family members to go to Disneyland once in a while.

Of course, we always hope that a long-term disablement will never occur within the family. Life is amazing and it is breakable and bendable. I have been through enough to know that in a blink of an eye, life changes forever.

I cannot wait to see, and be a part of the many future life adventures with Lorelai. I know there will be many! I also know that for me, Lorelai is the reason disability insurance and life insurance exist.

College Planning—Helping Families With Their Most Expensive And Important Investment

Over the span of my 15-plus year career I have personally witnessed many industry-affecting regulations that significantly changed the way advisors sold our products, conducted their practices and how clients were able to access our services and support. From the recent Actuarial Guideline-49 series, to the Department of Labor’s Best Interest Contract and Fiduciary Guidelines, to FINRA’s Notice to Members 05-50 and the NAIC’s 10/10 rule, it should not come as a surprise to anyone that our industry is under a microscope from the government, Wall Street and the regulators. Ultimately, although difficult to navigate, for those of us that were not taking advantage of potential abuses it made our pure and noble industry even stronger and more valuable to the consumer by protecting them from the all too many bad apples ruining it for the moral agents and their clients alike. Well known financial institutions have taken additional consumer protection steps by testifying in front of congress in regard to some of the abusive tactics rogue parts of the field force were engaging in. Unfortunately, even as some of the best top-rated carriers have increased their compliance and suitability reviews, it’s still not enough. There are those in any type of business that will find ways to take short cuts or even advantage of prospective clients in order to achieve a perceived boost to their bottom line. The irony is that they achieve the exact opposite over time as well as harm individuals and the industry they are practicing in.

College planning is a relatively new financial planning concept in our industry and, in my opinion, it’s the purest form of financial planning because it’s not 100 percent predicated around selling a product or fund. Rather, the whole strategy is built on helping families with their most expensive and important investment: Their children’s future success.

When I took over the college planning division at LifePro Financial almost 10 years ago we immediately implemented one simple rule. Getting students into college is the first and most important priority.

I know this should sound like common sense, but unfortunately it’s not.

Therefore, every college planner we partner with must demonstrate how they achieve this rule, or they are required to use a college planning service center that will serve this vital role for them. There is no ambiguity about the necessity of this piece of the puzzle.

When we first got involved in college planning our founder, Bill Zimmerman, and president, Ben Nevejans, insisted that college planning could not be just an asset sheltering tactic but needed to be more holistic planning based. This was one of the main reasons we were the first and only college planning firm to incorporate index universal life into our college funding designs, because solving for college funding alone does nothing to help families with their future or current retirement challenges. Initially we were viewed as mavericks in the college planning industry because we were the first and primary firm to look outside of MEC-ing whole life contracts as a sheltering tactic. As time went on however, our concepts proved to be more beneficial for families. Carriers who at one time shunned all of college planning strategies began allowing us and our advisors access, and we still use many of them today. In fact, we have had the opportunity to teach some of the carriers how college funding should really work and how to manufacture products to support it.

Six years ago we started to notice a decline in RSVPs and attendance at our college planner’s workshops. Previously it was common for a college planner to spend approximately $1,000 on a direct mail campaign which would result in enough RSVPs to host four to six live workshops, and generate 20-30 new hires per month. As time went on the $1,000 direct mail budget was increased to $4,000—$5,000 and most were lucky to get enough RSVPs to host one or two live events. Knowing that this trend was not sustainable, we began looking for ways to help our planners improve their seminar marketing game.

We relied on marketing beta tests looking at everything from direct mail options to digital marketing. Every aspect of the process from A-Z was examined and used and eventually we delivered a full-service college planning seminar marketing system.

Now, Instead of spending $5k for a direct mail campaign, a college planner could spend $500-$750 resulting in 75-100 RSVPs with a 40-60 percent show up rate. What we also discovered during our testing was how the budgeting works for most seminar marketing companies. For example, out of a $2k budget to fill a room that holds 50 people, only $1,200 went to the actual campaign with the remaining $800 going to undisclosed “service charges.” This did not sit well with unsuspecting planners. Another tactic we learned about was to “pay per head.” There are some seminar marketing companies that will guarantee as many people as you would want to attend but it can cost you up to $200 or more per attendee. So, a $2k budget would be gone with just 10 attendees. This arrangement is just too expensive to sustain long term.

An important element of a strong seminar marketing system is transparency. A daily breakdown of exactly how the budget is being spent per RSVP is crucial. Many times an RSVP goal can be achieved well below a planner’s budget, with the remainder of the budget either being refunded or going toward a future campaign. An important question for a planner to always be asking is, “How are my business partners and vendors getting paid?” If the answer is “off of me” and not “with me” or even better, “after me,” then there is probably little to no alignment in the relationship. Ultimately, if a college planner does a wonderful job for his clients, the clients achieve what they were hoping to when the planner was hired. That’s a win/win. Better yet, if the marketing firm they partnered with helped them maximize their budget and get them in front of large amounts of prospective clients, and insurance and annuity products were used in the strategies, it would be a win for all involved.

Having a predictable, transparent and efficient system is paramount to solid College Planning, but there’s another crucial piece. Specifically, making sure that those engaged in the funding and planning are doing it correctly for the clients they serve. Naivete and inexperience are never an excuse for bad behavior and it’s up to the planners and those that support them to ensure that they are doing it the prudent and most beneficial way. Unfortunately, many planners were originally taught, incorrectly, how college planning is supposed to operate. Basic principles regarding what assets count and don’t count based on current FAFSA guidelines have often been misinterpreted. The promotion of “alternative funding strategies”—often unregulated investments—that not only add more risk but could jeopardize the entire plan, or worse, devastate the client’s financial position, have been used in the past by unknowing or unscrupulous advisors. Having a full service, holistic and proven college planning system providing the marketing, the messaging, the follow through, the funding and case design, the underwriting and the constant update all on a scalable level, is what will keep this incredible solution viable now and into the future without unnecessary regulation and oversight. Most importantly it will protect the students, their families, the respectable agents, and ultimately our college planning industry.

Generational Transition: Are You Ready For It?

How Financial Professionals Need To Adapt To The Evolving Marketplace

Supporting clients’ planning now so they can secure their future. In a nutshell, that’s what we financial professionals do. But whom we do it for continues to evolve. Are we keeping up with how the marketplace is changing?

A Generational Transition
Numbers don’t lie. Industry data shows that Gen Xers’ net worth is set to triple to $37 trillion by 2030. And as for the next generation, $30 trillion will be transferred from baby boomers to millennials in the next few decades. Thanks to census data we can predict that millennials will make up 75 percent of the workforce by 2025. There currently is and will continue to be investment power in those generations. But who is servicing them?
Studies show less than half of next-generation investors currently work with financial professionals. Surveys found only 30 percent of Gen X investors and only 22 percent of millennials are reliant on financial professionals. Experts argue that more than two in every five next-generation clients want to work with someone who is within 10 years of their age. It’s pivotal for us brokers to learn what the next generational needs are to be able to get ahead of the curve and respond to them quickly. Here are some considerations for brokers to ponder as they build strategies to tap into the younger markets.

Diversity, Equity and Inclusion
Recent national events have brought the equity conversation to the top of business priorities. Making workplaces more diverse and inclusive is an important mission for the upcoming workforce. Millennials are the most diverse generation in U.S. history, with 44 percent of them identifying as a minority. This is the generation that will take over three-fourths of the workforce in just a few years!

We all want to connect with others who think and behave the way we do, who value what we value, and with whom we can easily identify. Representation matters for this generation. Beyond race, diversity expressed in gender, culture, stage of life, thought and even hobbies can help brokers find common ground with millennials. Having a diverse mentality, backed by resources that reflect the diversity of the marketplace, will help brokers connect with this generation.

COVID-19 and Technology
A virtual sales process is important for long term success. This trend we have seen over the past two decades was rapidly accelerated by COVID-19. But even before the global push to the remote work environment, and despite a global pandemic keeping us all inside, we live in a world where you can go online, buy what you want in seconds, and have it delivered to your door the very next day, or even hours later! LIMRA data shows more than half of millennials are looking for financial professionals, and 46 percent will turn to social media to find one. What does your social media presence look like? Do you have an online strategy? Getting to a place where brokers can confidently provide positive answers to this question is important now more than ever.

A few small practices to get started can include sharing thought leadership content on social media, adding in your caption your own perspective and asking a question for engagement. Tagging peers to encourage a response can also help with that. Use hashtags that can tie your content to similar ideas, so that your posts may pop up when someone searches for those keywords. Build a library of content made available online for free and use it strategically to drive conversations that are timely and thorough through serial or topical posting. These are just a few ideas. Resourcing a social media strategy consultant can also be highly beneficial.

Millennials and Gen Z clients have grown up with these technologies. They expect to have a relaxed and convenient customer experience from the get-go. They are wired to adapt to the newest next thing, and they do this with ease constantly. The more comfortable brokers are with having an online presence and providing services virtually, the more likely we are to succeed in adding younger generations to our books of business.

Education and Misinformation
Within a decade, millennials are likely to represent half of any broker’s client purse and Gen Xers will comprise one-fourth. These generations have access to more information than they need at their fingertips. They have options, and they will study them online. This easy access to information can, in turn, become quite overwhelming and lead to misinformation. Brokers can easily bring value to these groups with our industry knowledge and experience.

According to a 2020 survey by LIMRA, 40 percent of people who own life insurance wish they had purchased policies at a younger age. Yet, more than half of millennials (52 percent) believe they wouldn’t qualify for life insurance. The same survey found half of millennials believe the estimated yearly cost for a $250,000 level-term life insurance policy for a healthy 30-year-old is $1,000 or more. The investment is closer to $160 per year. This generation presents brokers with the opportunity to become trusted resources of industry knowledge that can speak the truth to any financial misconception.

Intentionality
Beyond social media and online meeting capabilities, the next generation of clients are looking for financial professionals who understand the bottom line. No matter how or where you meet prospects, relationships with them can’t be merely transactional; they must be intentional.

The next generations value providers who make them feel seen, heard and understood. Younger clients will see more value in how well you respond to their concerns and needs than in the quality or quantity of the products you are offering.

Authenticity and intentionality can’t be fabricated. When brokers pretend to be something they’re not, millennials can see right through it. Younger investors expect brokers to show up as their authentic selves and be transparent about who they are, where they come from, and why they want to help clients. Even if that means admitting to technological or generational challenges. The key to our success as financial professionals is in letting prospective clients see our deeply rooted desire to build a relationship with them, whether we can help them achieve their financial goals through our products and services or not.

A Relationship Strategy
The next generation of investors wants to be in relationships with professionals in a similar path as they are. They want to work with someone who understands how quickly their lives change, what’s important to them through every change and how their goals evolve over time. The younger generations are calling out for someone who can genuinely relate to them.

What we’re selling is not a one-and-done deal. Brokers need to commit to a relationship, to support clients through their financial ups and downs for years to come. From checking in on them consistently through digital media to sometimes calling them to just chat about life for a bit, these will be their expectations. We need to commit to becoming their trusted friend, the one they come to for guidance on anything financial. We need to be the one they recommend to others when financial needs come up in a conversation, verbally or on social media. Accessibility, relatability and authenticity need to become priorities in your business strategy.

The Bottom Line
Adapting to the next generation of investors may come easier to some than others. Taking a hard look at our practice and being honest about our challenges is a good place to start. Brokers need to be intentional in keeping up with generational data and studying the new marketplace. The flexibility and adaptability the younger investors demand are skills we can develop. The more we practice them, the easier it will become to stay nimble.

To build authenticity in our approach, brokers need to surround themselves with a multigenerational team. If we hire support staff, we need to consider candidates who look, think, buy and behave differently than us. We must deliberately learn from them. Build relationships with brokers from younger generations who can help us stay on top of the technology and whatever is making a buzz in the marketplace. An important consideration could be investing in our social media strategy, whether that’s consulting with an influential firm to build our presence, or learning to manage our online branding and accessibility through training and professional development.

My advice to you is this: Be willing and ready to meet clients where they are, whether that’s at the coffee shop or in the latest social media webinar. Build trust with younger prospects by being vulnerable and transparent in your relationship-building. And whether prospects decide to invest with you or not, always give a stellar customer experience. Refer them to other services they might need. Feed them with industry knowledge to inform their decisions. Nurture your millennial and Gen-Z book of business now, so that you may become the trusted financial professional they come to when they’re ready to invest. And who knows? Maybe you will slowly become the next best thing your younger clients can’t stop talking about online.

Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice.

VUL Opportunities For Any Generation

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I was recently approached by an “insurtech” startup firm from California with a desire to offer variable universal life insurance on their direct-to-consumer app. I was intrigued and held the all-too-familiar Zoom call with them. They are further along than I would have imagined, with some real experience in the life insurance space, current production, and an impressive knowledge of the MGA distribution model. Variable life is a different animal, and they wanted to better understand how this could potentially work. We have held similar calls regarding the need to integrate suitability review for VUL while simultaneously offering a fully integrated, digital platform for consumers. There is no doubt this is where things are going with a real potential for disruption, especially with the mega-tech names that have shown interest in the space. These groups are getting their feet wet with the tech-savvy, younger generations who are less of an underwriting concern and fit nicely into the vastly expanding accelerated underwriting programs offered by the carriers. They are jumping over the point-of-sale wholesalers, hurdling over the traditional financial professional, and going direct to consumer with a focus on ease-of-issue. With technology increasing at such an astounding rate, it will be interesting to see where we go with it as an industry. For now, let us look at the applications of VUL for the various generations as it stands now, and less-so a decade from now.

The oldest millennials will soon be entering their prime earning years with the current age span of 23 to 38. Couple that with an all-but-guaranteed income tax increase on the horizon, it bodes well for tax avoidance strategies and accumulation focused opportunities. They have plenty of life runway remaining, and they are generally healthy. This is perfect for max-funded, managed to 7702 type of permanent policies. AG-49a threw a wrench into the IUL market and the low-interest rate environment is thinning the herd for traditional, fixed insurance. The carriers have begun to migrate their more popular IUL options within the variable chassis as sub-account options as an alternative. This creates an enhanced VUL offering that can showcase more flexibility for growth as well as downside protection. The beauty and genius of the product is that it can be tailored to either accumulation, protection, or somewhere in between depending on the client need. All these aspects are good for millennials, but it does not mean they can all afford it. I think an overlooked opportunity for Gen Xers or baby boomers is assisting their children, who likely fit the millennial or Gen Z category, in the purchase of permanent life insurance. For instance, the annual gift tax exemption sits at $15,000 per year which could be gifted to fund a nice annual VUL premium. Say a client has $150,000 they could gift annually for 10 years for their child and spouse to purchase a survivorship VUL policy with the beneficiary being a grandchild or grandchildren if applicable. Just a simple idea, but for a financial professional looking to create stickiness with their existing client and associated family assets, it’s an idea worth considering because we all know the dreary statistics regarding spouses and/or children leaving the financial professional at the time of the primary client’s death. As my old economics professor would say, it is important for any developing economy to build backward and forward linkages. Same concept, only with generations.

Generation X sits somewhere in between this accumulation and protection need, with a current age range of 41 to 56. This is where a death benefit is of substantial concern along with perhaps creating a bucket for long term care if needed or, perhaps to a lesser extent, tax-advantaged supplemental income. Pairing a permanent life insurance solution with a long term care rider provides a pool of available funds for that “what if I get sick” scenario. Any human being that has come face to face with the very real and very expensive long term care need for a loved one will know all about the challenge it poses. For many Gen Xers, they face this with their baby boomer parents, and it should provide them with the emotional motivation to find a long term care solution for themselves. Nationwide has found success in the space with their popular indemnity long term care rider on their VUL policies, along with Equitable and John Hancock with their reimbursement long term care riders. Lincoln also offers a long term care rider, and Prudential has additionally been successful with their BAR or benefit access rider on their policies. Apart from this, most of the VUL policies today come standard with a chronic illness rider. I believe you will find Generation X customers to be very open to this combination solution as a component of their financial plan.

Now let us talk about those baby boomers between the ages of 57 and 75. I was talking to a long-standing Leaders Group BGA recently who said, “Ten years ago if you told me I’d be selling VUL for a guaranteed protection solution I’d call you crazy.” Lo and behold, here we are. AG-38 made this somewhat more viable back in 2013, where it mandated an increase in reserve requirements for traditional GUL products and thus negatively impacted pricing. VUL was not affected. Lincoln was first to that game with their immensely popular VUL ONE product. Guaranteeing the death benefit to client age 121 regardless of market performance and creating a bucket for cash value potential, all while being more competitively priced compared to GUL, created an easy choice for many agents and BGAs. I credit Lincoln for creating a massive need for BGAs to become FINRA registered with that single product alone. As a broker-dealer for BGAs, this accelerated our growth substantially as you might imagine. Prudential was next in the space with their Protector VUL, along with Securian’s Defender VUL, which is also very competitive. Baby boomers and those who are older generally fit into this protection-oriented bucket where the death benefit is the primary focus for wealth transfer, estate taxes, and numerous uses. Other carriers have moved into this space to some degree as well. John Hancock has made recent enhancements to their Protection VUL offering, which we will continue to see from other carriers as well. This market is ripe for BGAs and traditional life agents because this generation is older, wealthier, requires advanced expertise around estate planning and, due to various health issues, relies on underwriting guidance. This generation also likes face-to-face interaction and values the in-person relationship which is perfect for the point-of-sale model. Many of them also have a financial advisor they work with regularly.

The generations are unique in their own way and so are their needs as it pertains to life insurance. Life insurance is unfortunately associated with death, and we all struggle with the idea of our own mortality. In that regard it is generally a fear-driven sale. The reality is that life insurance can be utilized to improve the lives of millions while they are alive, as well as when they eventually depart this world. This shifts the client discussion dynamics to both a greed as well as a fear sale, which opens far more applications. Life insurance is also, by its nature, one of the few products that links generations together for economic benefit. Between the owner, the insured, and the beneficiary, it opens a multitude of different combinations to enable one generation to support another just as long as there is an insurable interest. From a practical standpoint, it provides a shield against what is going to be a very uncertain tax environment in the coming years. Variable life insurance is a product line that has come a long way, and due to a multitude of economic and regulatory factors, has become far more appealing and flexible than a decade ago, regardless of generation.

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