Friday, March 29, 2024

Circularity

Having the ability to reflect back on 35 years of considering the long term care conundrum should afford me some level of comfort that progress has been made. That we have systematically learned from our mistakes. That we have with purpose and growing experience influenced the normally progressive course of history. The vision in my mind that will not leave me alone however is my dog chasing its tail. According to Google, dogs chase their tails for several reasons: Something bit them and spiked their curiosity; they are young and simply exploring their own physical limitations; or, they are really bored. Albert Einstein famous quote concerning the definition of insanity rushes to mind but I like this one better: “We cannot solve our problems with the same thinking we used when we created them.”

Just for fun let’s meander through the big concepts which appear to repeatedly coalesce through our public thinking.

  • There is a consistent chorus from all quarters that we need to focus on the middle class. That those with and without the ability to fend for themselves will proceed to fall into solutions based on their circumstance. Our focus must again be on those with the most at risk. Once upon a time, before we understood the true nature of long term care claims, this was our purpose and frankly our greatest historical sales success. As underwriting restricted and premiums rose we simply abandoned our original quest and have satisfied ourselves with picking up the low hanging fruit—those with sufficient wealth to leverage the risk. It is the original crusade that haunts our purpose and brings us back again and again to acknowledge and attack the real need.
  • There seems to be a growing acceptance that Custer’s 7th Cavalry is riding hard to our rescue, yet we also privately suspect that he will find the same overwhelming circumstances waiting just over that rise. The problem, as we know, is that the intended solution speaks with a forked tongue. Medicaid and Medicare are already bursting at the administration and financial seams. Adding the administration cost and homogenized managed claim bureaucracy of yet another national social insurance plan would not be built on previous government success stories. We will again come to realize that there are more Indigenous Americans than we thought. Yet the mounted cavalry with sabers extended presses forward. Recent consumer research by the NORC-Center for Public Affairs Research claims 88 percent of Americans wish to receive care at home and 60 percent want the government to pay for that care. Washington State is now collecting employee payroll premium. California has now basically removed the means tested restrictions of access to Medicaid. A number of states are keeping their eye on this cavalry charge. Ultimately those who become enamored with the bugles blowing will suffer the same fate. Underwriting liberties will fester, bureaucracies will bloat, public trust funds will be depleted and the quality of care can only suffer.
  • The market reality of all current pricing assumptions is that institutional care is more expensive than home care. There is an almost religious belief that building on home care saves money. In my view it is the same gaslighting that proclaims that electric cars save money. It is the same Utopian fantasy future currently being espoused that AI robotics are at the core of future home care scenarios. According to the Nationwide Retirement Institute: “One third of Americans and over half of millennials believe AI robotics will provide their future in home long term care.” The survey further explained that they would talk to their robots if they were lonely, depend on them to help provide physical safety and trust them with their medical history. You do not have to read Issac Azimov or Ray Bradbury to get a funny feeling in your gut about weaponized self-aware AI.

Honestly, I am tired of worn out excuses. Exhausted by more of the same formula thinking. Frustrated by the continuing lack of a united and industry coordinated education crusade. I am therefore specifically weary of the recurrence of perceived easy answers and utterly dismayed by the continued lack of consumer awareness. I cannot shake the vison of the circular motion of that dog intent on some form of personal gratification when all that will be actually accomplished was perpetual redundant motion and the continued illusion of potential success.

Other than that I have no opinion on the subject.

The New Era Of BGA Commission Accounting

For decades BGAs have adhered to a traditional approach when it comes to commission accounting. They have relied on their Agency Management Systems to manage commissions, sourcing commission data feeds from certain carriers and manually visiting carrier websites for additional commission statements. Despite potential outsourcing of some tasks, the technological method has remained largely unchanged—until now. Within this article, you will be introduced to two solution providers who have crafted technologies designed to automate many of the current manual processes involved in commission processing for insurance distributors. By the conclusion of the article, you will also gain insight into an upcoming innovation poised to disrupt and revolutionize BGA commission accounting practices.

Processing your Commissions Outside of your AMS
In the ever-evolving world of insurance, commission accounting is a cornerstone of success for agencies and financial advisors. Embracing innovation is no longer a choice, it’s a necessity for staying ahead in a competitive landscape. At the forefront of this transformation are InsurTech companies like GreenWave, that redefines commission accounting with its forward-thinking approach.

Breaking free from traditional Agency Management Systems (AMS), GreenWave liberates insurance professionals from dependencies and associated risks. Commissions are safeguarded in a separate, secure system, empowering advisors to operate with confidence knowing their
earnings are protected. Relying solely on AMS can introduce risks associated with commission tracking. Discrepancies, manual errors, and lack of real-time data can lead to financial inconsistencies and trust issues between BGAs and their partners.

Leveraging the power of automation, GreenWave unlocks a new era of data collection. Gone are the days of manual struggles. Through advanced technology, agents access real-time data from manual sources effortlessly. This data-driven approach empowers them with comprehensive insights for informed decision making, driving success for their clients and themselves.

One of the key advantages lies in its seamless outsourcing services. Commission reconciliation becomes a breeze, freeing up valuable time that can be used to focus on nurturing client relationships and growing their businesses. When choosing an outsourced partner it is always vital to understand the capabilities of people, process and technology. By partnering with companies like GreenWave who have enterprise software, dedicated commission experts and world class technology the decision becomes simple.

Complementing their innovative services is the industry’s leading book by CEO Slava Isayev—Commissions Management Secrets. A valuable resource for industry professionals seeking to optimize their commission strategies, Slava’s insights provide invaluable knowledge for navigating the dynamic landscape of commission accounting helping clients achieve their goals. However, GreenWave’s vision extends beyond the present. It pioneers the future with its embrace of blockchain technology. By leveraging this decentralized ledger system, GreenWave and others will enhance commission transparency, trust, and speed of processing in the insurance industry. Such forward-thinking ensures that their clients are prepared for the digital transformation of tomorrow. GreenWave is committed to revolutionizing commission accounting. As they lead the charge into a new era, GreenWave’s services transcend the ordinary and set them apart as pioneers in the field.

With a dedication to a future-oriented mindset and a focus on client success, GreenWave pioneers the path for commission accounting’s evolution. As the insurance industry navigates unprecedented changes GreenWave is the guiding force, propelling their clients towards a secure and prosperous future. By embracing innovation, automating data collection, and empowering advisors, GreenWave leaves an indelible mark on the commission accounting landscape. Clients, partners, and industry professionals alike are eager to explore the possibilities that GreenWave’s vision offers.

With the dynamic insurance landscape and InsurTech constantly evolving, GreenWave’s commitment to staying at the forefront of technology and industry trends ensures their clients always receive the best service possible. In embracing the new era of commission accounting, GreenWave sets a benchmark for the industry. Their vision for a more efficient, secure, and prosperous future for insurance professionals is truly transformative. With each innovative step they take, GreenWave reinforces their position as leaders, trailblazers, and partners in their clients’ success.

To get a copy of Commission Management Secrets or learn more about how you can benefit from a new approach to commission accounting, visit https://greenwavecommisions.com or purchase the book on Amazon.

New Method of Getting your Commission Data
PaperClip this year launched Mojo for Commissions. Known for their document management and document exchange technology used by life BGAs, PaperClip has made significant traction in the industry with their Mojo product. Mojo is an innovative platform that turns documents into data using machine learning and crowdsourcing.

For years, the consolidation of commission reports across product companies has been a laborious process lending itself to human error. Commission statements are unstructured reports, variable in nature, with different presentations and nomenclatures across manufacturers and products. Populating commission databases is labor intensive, requires training personnel for data entry, is subject to human errors, and lacks scalability requiring higher human capital costs. This results in delayed reporting and payout of commissions.

Example: An organization processes on average 725 commission statements per month for 45,000 transactions. Each commission statement is manually downloaded from their respective sources. Using three FTEs, the entire process takes 104 days to achieve reporting and pay out. Estimate $40K ($16/hr.) cost in labor.

PaperClip’s Mojo takes their proven “straight-through process” model to a new level of automation and accuracy for unstructured documents. With Mojo you can onboard commission statements seamlessly, eliminating the need for facilities, human resources, security, training, and more. Estimate—$8K Mojo cost for the same volume. Mojo offers an 80 percent cost saving and a 95 percent reduction in time to process (minutes not days), and near real time flow of commission data ready to report and pay out.

The Result

  • Mojo saves valuable resources by capturing data across disparate commission statements and normalizing it into a single format for ingestion.
  • Organizations avoid typing, indexing, and human errors in favor of having Mojo automatically file both data and images into the Paperclip Virtual Client Folder document management system.
  • Mojo processes commission statements near real-time giving a higher level of service to your producers.
  • Mojo’s machine learning technology digitizes, transcribes, and interprets data fields supported by human verification to achieve true accuracy.
  • Mojo offers the Zero Trust Architecture highest level of data security with SAFE, beyond encryption.

Agencies who have used Mojo for commissions have had great success in saving time and money. An example of what an agency said (summarized): “The biggest benefit for us is that this process cuts some of the time we spend manipulating the csv/pdf that is provided to us by the carrier. All statements from the carriers need to be in a similar format so we can import it into our AMS so this is a big help.” Visit PaperClip.com for more information on Mojo for Commissions.

The Future of Commission Accounting Creating a New Ecosystem
The biggest issue with commission accounting for insurance carriers, distributors and advisors today is that the ecosystem is broken specifically in the independent brokerage space. Let’s start at the beginning of the process which is to contract agencies and agents. This is mostly a paper process with no workflow or rules. Building hierarchies and assigning commission levels has no approval or validation process today. If you walk back a step further, both carriers and distributors need to build these commission schedules into their commission systems. Carriers need commission schedules to pay commissions and distributors need commission schedules for commission reconciliation to verify they got paid correctly. If the average life BGA works with 30 carriers, and an average of 10 products per carrier, working with about four hierarchy levels per carrier equates to a lot of data that needs to be input and maintained to keep these commission schedules up-to-date. If the carriers and the BGAs both need to create these schedules into their respective systems, that looks like a lot of redundancy.

The second problem is validating the commission data. A carrier sends commission statements in multiple formats either directly to the AMS vendors (in multiple formats like an ACORD 1206 transaction or CSV), to their websites or in a PDF document. It’s like the Wild West, there are no controls or validation processes. This results in mistrust between the carrier and their distributors.

The solution is building an ecosystem that uses Blockchain technology and SmartContracts: For reduced cost and speed-to-market a private Blockchain should be built on existing technology such as IBM. Executing SmartContracts, commission statements, commission detailed transactions, and payment information will be the workflow on the Blockchain. The Blockchain nodes would be modeled in groups such as carriers, distributors, and groups of advisors. SmartContracts with commission schedules for carriers to run micro services to validate commission payments, and distributors to do commission reconciliation. The SmartContracts which is programming code that has rules for hierarchies, onboarding agents, will have an approval process. These SmartContracts will be reusable templates. The process will have the ability to attach and send contract documents. A Blockchain Viewer will include features such as viewing agency/agent contracts, commission schedules, hierarchies, commission statements, commission transactions, reporting, and accounting functionality. Commission data will be validated before it is put on the Blockchain. The data is very secure with specific permissions of what data the user can access.

All vendors, carriers, distributors, and advisors will benefit and participate on the Insurance Commission Blockchain. This has been a pet peeve of mine for many years. This is why I have designed this solution at InsurTech Express calling it the “IE Commission Blockchain for Insurance.” We are seeking funding to build out this new ecosystem for commission accounting. Learn more by visiting InsurTechExpress.com.

An Interview With Eugene Cohen—Disability Insurance: Tips On How To Create Interest With Current Clients And Prospect For New Ones

2009 Honoree International DI Society
W. Harold Petersen Lifetime Achievement Award

2015 Honoree of NAILBA’s
Douglas Mooers Award for Excellence

With the help of Victor Cohen, this is part of our ongoing series with Eugene Cohen, founder of the Eugene Cohen Insurance Agency, Inc., 2009 Honoree of the International DI Society’s W. Harold Petersen Lifetime Achievement Award and 2015 Honoree of NAILBA’s Douglas Mooers Award for Excellence.

From time to time we will feature an interview with Eugene, who has dedicated almost 60 years of his life to learning, teaching, and supporting brokers in the agency’s quest to help consumers protect their income from the tragic effects of a disability.

Disability insurance (DI) is one of those products that can change the trajectory of an individual and a family’s life and is crucial for every financial planner and insurance professional to learn about and offer to clients.

Victor: Eugene, I know that producers often ask you for suggestions on how they can increase their disability insurance (DI) business through prospecting. So, that’s what we’re going to focus on in our discussion today.

Eugene: One of my favorite topics.

Victor: Let’s first start with the producer who has been in the industry a long time but hasn’t really focused on DI. What do you recommend?

Eugene: I say, look at your book of business. You have so many clients who don’t know they should insure their income which, in most cases, is their greatest asset. It’s not unusual to find that no one has talked to them. Income planning, whether post-retirement planning or while working, will peak a client’s interest.

Victor: Are there certain types of clients that the long-time producer should perhaps first reach out to in their book of business?

Eugene: Higher income earning professionals often make great DI clients because they have so much to protect. Physicians, attorneys, small business owners, real estate professionals, CPAs, engineers, consultants, the list is endless.

Victor: What about clients with more blue-collar jobs, like plumbers, electricians, mechanics?

Eugene: They can also be excellent DI clients—especially if they own their own business. Business owners in general make great DI clients because they understand how hard it was to build the business and how easily it can come undone due to an extended disability
In addition, if the advisor has funded a buy-sell agreement with life insurance, there is often the need for the client to have a disability buyout policy. There’s also a DI policy to cover business expenses.

Victor: Let’s now look at the new producer. When you started your career, you focused on DI. I’m curious, what made you want to specialize in disability insurance when others in the business chose other areas of focus?

Eugene: I chose to focus on individual disability income protection rather than other products because everyone has an income they need to protect. Once you meet someone who became disabled and needs to use a policy, then it sticks in one’s head. Then the more we talked about it, the more we realized that very few individuals are ever approached about DI. It’s really surprising!

You know what’s amazing? I don’t think the need for our product has changed since I started offering it decades ago. Our job is still to make sure that the client is aware of all these wonderful disability insurance products that have been designed to protect the individual and their family from financial ruin.

Victor: What do you suggest new producers do first? They don’t, of course, have the luxury of looking for DI clients through their book of business—because they don’t have a book of business.

Eugene: I suggest new producers and any producer new to DI—first learn the DI products. There are agencies like ours and others that offer training.

Then choose an occupation to target. For example, any of the occupations I already mentioned are fantastic. But you could also focus on car dealership managers, even florist shop owners, or restaurant owners. There are so many individuals who need DI.

Victor: Where do new producers find clients to meet with?

Eugene: When I started in this business I had no choice but to use the phone—make cold calls. My manager told me to first talk to my friends and family about DI. But they were not very good prospects. So, I had to use the phone.

Fortunately, I learned from an early age in this business that talking to people is the secret. If a producer calls and talks to enough people they will pick up appointments. Things will happen.

Victor: Do you remember what you would say on the phone when making cold calls?

Eugene: It’s burned into my brain like it was just yesterday. I’d get the business owner on the phone and say, “Hi, my name is Eugene Cohen and I specialize in offering disability income protection, which is a policy designed to provide an income if you were to ever get sick or hurt and your earning stopped. Let me ask you a question, do you have something like that?” They’re going to answer either yes or no.

If they answer no, I merely would say, “I would like to stop by and introduce you to this concept of insuring your income from sickness or accident. Is Wednesday at 3:00pm or Thursday at 4:00pm good for you?”

I may have to talk to five or six or seven people before someone says, “Fine, come on out.” The more people I would talk to, the more appointments I would pick up.

Victor: What if the person on the phone says they think they have something like you are describing?

Eugene: Then I would say, “Is it group disability insurance or individual?” If they answered, “Group,” I would congratulate them on having disability income protection and I would ask if I could review their group policy because they may need additional coverage.

Victor: What if they say they have individual disability insurance?

Eugene: Then I would ask them when they last had it reviewed. Because, over time, as a DI policyholder’s income increases, often the client doesn’t increase their monthly benefit—eventually making them under insured.

Victor: What if they say they have a DI policy that was recently reviewed?

Eugene: Then I would thank them for their time and call the next person on my list.

Victor: And where did you get the numbers to call?

Eugene: When I first started I would go to the Cleveland Public Library and go through business directories with business phone numbers, focusing on professional people and business owners. I’d write down the names and numbers of individuals to call in surrounding small towns I was planning to soon visit.

But producers have it so much easier now. All you have to do is Google an occupation you want to focus on calling, type in the city where you’ll be working, and there’s your list of numbers to call.

Victor: Why do you think some producers have a hard time making cold calls?

Eugene: Two reasons. They don’t like rejection and they think it’s too hard. I feel rejection is just part of it. You’re not going to have everyone say yes. But you are definitely not going to have anyone say yes if you don’t call.

If every producer says they don’t make cold calls, that’s great…for the producer who is making them.

Victor: What do you think about sending out email blasts as a way of connecting with prospective clients?

Eugene: I never read emails from people I don’t know. Do you? You have to talk to people. There is no way around it. You have to help them see the need. Need motivates action. And how do you help individuals see the need? You ask questions.

Victor: What are some of the questions you suggest asking?

Eugene: I would ask, “How important is your income to you?” While the answer may seem obvious, the question often helps the client see how much of their life depends upon income. It’s hard to do anything without income.

You can also ask, “What’s the longest vacation you’ve ever taken?” The client will often answer, “One, two or three weeks.” Then, ask them, “Why not longer?” Naturally, they will almost always answer, “I have to work.” Then you can say, “Well, what would you do if you had a disability and you couldn’t work for five years, ten years, maybe until age 65? What would you do? There are policies that will pay a portion of your income for a period of time.”

Another question to ask: “How long has it taken for you to accumulate the assets you have?” They may say, “Ten or fifteen years.” Then ask, “If you were disabled and your income stopped, how long would it take for your assets to disappear?” A disability income protection policy can help protect a portion of your assets if you’re ever disabled due to an illness or accident.

Victor: Unfortunately, we are going to have to wrap things up here. Any final thoughts before we talk again?

Eugene: Referrals can also be very helpful, of course. And a great way for any producer to learn about DI is to ensure that their own income is protected with a DI policy.

Victor: Eugene, as always, thank you for this opportunity to once again talk DI with you. You have so many invaluable insights from all your years of success in the business, I could literally go on talking with you forever. Thank you, again.

Eugene: Thank you, Victor. Always great talking with you.

RILAs: How Do Insurance Companies Do It?

One of the most popular whitepapers that I have created for financial professionals is titled Indexed Products: How the Watch Is Built. This whitepaper speaks to how insurance companies price fixed indexed products (annuities and life). In this whitepaper, I effectively create an indexed annuity based on today’s interest rates and options prices. I show how the options are bought and sold to create a “cap” of X percent. If you would like that whitepaper, email me and I will get it to you. That whitepaper is a great segue into this conversation on RILAs. However, with or without that whitepaper, this article will still be digestible.

I will not necessarily explain in detail “How the RILA Watch Is Built.” However, I will give you some level of technical details on how it is possible for insurance companies to create a RILA, especially without assessing any additional fees to the client. Afterall, the “there has to be additional fees” response comes up a lot with RILAs.

So, let’s take just one product example. Let’s say we have a RILA that has a floor of 10 percent and a cap of 15 percent. This means that the highest downside is that the client can lose 10 percent and the highest upside is 15 percent. That 15 percent is a great cap in today’s marketplace! When you compare that to one of the top fixed indexed annuities that has a cap of 11.5 percent, 15 percent looks very good! So again, how do the companies do it?

The actuarial logic of RILAs is similar to indexed annuities; bonds support the product guarantees and options provide the upside potential. However, in this RILA product example, we aren’t just talking about call options we are also talking about put options. Let me explain with 100 percent hypothetical numbers while using the S&P 500 as our index…

Let’s start with fixed indexed annuities. With a fixed indexed annuity, following is how they are created. This is a very abbreviated version of the aforementioned whitepaper. Based on the bonds the carrier invests in, we may have a “call option budget” of four percent for our call options. That four percent (of the entire premium) is what we have to purchase the call options. However, the carrier generally doesn’t just purchase call options with indexed annuities, they also sell call options.

With the four percent in the carrier’s pocket, the carrier will buy an “at the money” S&P 500 call option that will give them 100 percent of the upside potential in the S&P 500 over the next year. However, that “at the money” call option may cost seven percent versus the four percent that the carrier had as a call option budget! So, what does the carrier need to do to get their net cost down to four percent? The carrier needs to come up with an extra three percent obviously. That is where the carrier will sell an “out of the money” call option that gives the upside beyond the “out of moneyness” to somebody else. In our very hypothetical example, a call option that is “out of the money” by 11.5 percent is what the carrier will sell, because that is where they can sell the option for around three percent of the “notional value.” (Note: Again, these numbers are not accurate based on today’s options pricing, but it is the concept that matters.)

So, what the carrier has just done was buy one call option that gives them the growth on the S&P 500 up to infinity from today’s S&P 500 value. However, because buying this one option was too expensive, they also had to sell an option that gives somebody else the upside potential beyond 11.5 percent. This is how an indexed annuity is made that has an 11.5 percent cap. The more “out of the money” the option is that the carrier sells, the higher the cap will be to the client. However, the more “out of the money” the option is that is sold, the less the option premium will be that the carrier will get back. So, in this example, the carrier finds that the amount “out of the money” to get three percent back is indeed 11.5 percent. Our cap of 11.5 percent is created.

For the options folks, what I just explained above was a “Call Option Debit Spread” where the net cost/debit was four percent of the notional value/client’s premium. For the folks that are not options-savvy, that last sentence never happened!

Now, with my RILA example that has a very large cap of 15 percent, how can this be done without additional fees? First, they would do almost exactly as I discussed with the indexed annuity, where they bought and sold call options to net out to a certain call option budget. However, they would have a call option budget higher than four percent, perhaps six percent! Thus, by having a six percent call option budget, they are able to buy a cap that is 15 percent, instead of 11.5 percent.

Where did that extra two percent budget for our call options come from, especially since the insurance company is not applying an extra fee to the client? With RILAs, the carriers are able to supplement their call option budget by selling “Put Options.” Put options—when bought—give somebody money when the market falls. If you bought a put option on the S&P 500 and the market lost 20 percent, you are likely going to get paid—especially if you bought an “at the money” put! A put option is the opposite of a call option. But you can also sell put options so that when the market tanks, you have to be the one paying the counterparty the amount the market has dropped (below the strike price). Why on Earth would you sell a put option? For the option premium. Like selling anything else, you get money in exchange for it. With options, this money is called the “premium.”

So, what the company did with our hypothetical product that has a -10 percent floor and 15 percent cap was, they sold an “at the money” put option on the S&P 500. By just doing this, the insurance company got a great “premium” for selling this to somebody else (investment bank for example). However, by the carrier just selling this “at the money” put option, this means that the insurance company/consumer would now be 100 percent exposed to the market should it fall. We don’t want the client to be 100 percent exposed; only 10 percent exposed. So, the carrier will then purchase a put option that is 10 percent “out of the money.” This means that somebody else participates in the market’s loss beyond 10 percent. This is how the floor of -10 percent is created.

The put option that the carrier sold was two percent more expensive than the option the carrier purchased. This is because they sold an option that was “at the money” and they purchased an option that was “out of the money.” So, by doing the above selling and buying of put options, the carrier garnered an additional two percent that then gets added to the call option budget that allows them to buy a very high cap of 15 percent. All at the cost of exposing the client to the downside of -10 percent.

In short, by the client being exposed to the 10 percent downside, the insurance carrier is able to afford options that give that same consumer 15 percent to the upside. The carrier did all of this without adding an additional fee to the client.

For the options folks, with RILAs the “Call Option Debit Spread” is supplemented by a credit that the carrier has created via a “Put Option Credit Spread.” Again, for folks that are not familiar with options strategies, move that last sentence to the trash bin of your memory.

Eliminate The Impossible

Sitting across from me on a veranda at an African College was a young woman in her second year at the university. She has a warm smile and a slightly shy aura. Her English is good, and her accent is understandable. (A plus because my hearing is not great.) I will call her “Missy.” Missy has a hard story to relate and only after I ask several strategic questions are we finally getting to truly important matters.

Missy has two older sisters. They are seven and five years older than her respectively. Both are married and live in different villages. Early in their marriages both invited her to stay with them. On different occasions, and when her sisters were out of the houses, both of her brothers-in-law individually raped Missy. Horrific experiences. Blood boilingly awful. To add insult to injury, Missy’s sisters deny that these incidents ever even happened. “My husband would never…”

All of this is told through tears, but with strength that inspires.

Missy’s underlying question is, “How can I move forward in life?”

My answer: “First, identify what is impossible.”

Arthur Conan Doyle’s character, Sherlock Holmes, said, “Once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth.”

This approach is invaluable to solving mysteries, but also has application in many directions, including dysfunction within families (and as we will see, in financial services).

Missy faces a dilemma:

  • Either she can grow bitter, bear resentments, and nurture hate toward her attackers and her sisters; or,
  • She can forgive her attackers to their faces and forgive her sisters to their faces for denying what happened.

I ask, “Missy, we cannot change the past, so what do you want in your future?”

“I desire to have my family around me and do not want to see it all broken apart.”

I tell her that choice number one—sitting in bitterness, unforgiveness, and hate—will make her dream impossible. Alternatively, extending grace (unmerited) and forgiveness (undeserved) is the path forward to achieve her desires. (This option is unnatural and may require God’s help.)

Point: When faced with hard issues, challenges, and difficulties, the way forward begins with discovering, then eliminating, the impossible.

Financially Impossible
The United States is $34 trillion in debt. Getting out of debt seems to me to be undeniably impossible. But I digress.

As an independent financial professional (IFP), you meet innumerable people whose financial situations appear extremely bleak. In order to give them practical, executable action steps, you must first eliminate the impossible.

Case Study #1:
You get introduced to Darrin, age 45. He is an extroverted guy with a nervous demeanor. His wife Susan, age 46, is the friend of one of your clients and, having heard of the good work you did for her friend, contacted you requesting your assistance with her own family’s finances.

You look around. Nice four-bedroom house on a broad wooded property. Two late model cars on the circular driveway. “Must be doing pretty well,” you think to yourself.

You ask an opening question: “Who has been your financial advisor?”

“We have never used one,” says Susan. “Neither wanted nor needed one,” says Darrin. (Yellow caution flag.)

“Of the financial institutions you have worked with, which has been your favorite?”

Susan looks at Darrin, who says, “I really don’t trust any of them.”

“Exactly how have they disappointed you?”

“Too many restrictions,” says Darrin. (Yellow caution flag.)

You decide to switch tactics. “Tell me about your financial goals.”

Susan: “We want to retire while we are still young to a state with a warmer climate and near beautiful water where we can attract visits from our grandchildren!”

Darrin: “Retirement. That will be the day.” (Big red flag.)

After asking Darrin a series of questions designed to peel back the layers, you and Susan are simultaneously introduced to three pieces of bleak news:

  • Darrin has nothing saved for retirement.
  • Darrin has been a compulsive gambler. In fact, he cashed in their CDs before the end of their terms and gambled away those monies. He borrowed funds from his 401k by finagling his answers to the questions as to the use he intended to make of them.
  • He took lines of credit against the house over and above the mortgage.

The Impossible: Retiring at a younger age and purchasing a beachfront condo.

The probable: While most IFPs recommend that young people save 10 percent to 15 percent of their incomes toward retirement, they also know that people in their 40s earn 60 percent more than they did in their 20s. People in their 40s and even 50s who are not on track can often catch up by saving a larger percentage of their income. Because Darrin earns a strong income, and the combined total loan payments are less than 30 percent of his income, there is a strong possibility that Darrin and Susan can get on track to retire in Darrin’s mid-to-late sixties and be able to afford a place, while maybe not on the beach, perhaps four blocks from the beach. Regaining financial footing will require the following:

  • Counseling for Darrin’s gambling addiction.
  • Great accountability.
  • Transparency.
  • Susan acting as a co-signer on all accounts.
  • Significantly increasing the savings from each month’s income.

Unsurprisingly, forgiveness and grace will also be required!

Case Study #2:
You were recently introduced to Pickleball. You had no idea how popular the game had become until you heard so many people talking about it. At the invitation of a neighbor, you tried it out. And loved it! Your enthusiasm led you to join a kind of league. Now you meet innumerable people who are like-minded and have equivalent skills.

One such pickleball fanatic is Robert. At age 42 he seems no older than…age 62. He is not in Olympic shape, let’s leave it at that. As a successful IFP you know when to begin asking probing questions.

“Tell me about your family,” you say.

“Well, which one?” he responds. Letting you absorb this in a moment of awkward silence, Robert says, “You see, Debbie and I raised two children, and they are on their own, married, and beginning their families. They are fully fledged!”

You mean it when you say it, “That is great news! Congratulations!”

Robert continues. “Then, the unexpected happened. We met a young woman desiring to end the pregnancy in which she was carrying twins. We urged her not to go through with the abortion she was contemplating. She agreed upon one condition. Debbie and I would have to adopt, and raise, her twins.”

“Ufda,” you say. (Your deceased Norwegian parent still impacts your life!)

“Well, we are delighted, actually, and we feel like we have brand new purpose,” says Robert.

“If you don’t mind me asking,” you hesitantly begin, “How has this impacted your financial lives, like retirement goals?”

“Most of it went out the window!” Robert does not look unhappy. “I will be 60 when the twins graduate from high school and start college.”

“Well, I already used up my Ufda.” Then you venture into the wild unknown, the land of no return. “Do you still own life insurance?”

Now Robert looks serious. “You know, I don’t. We had buckets of term life insurance that we let lapse when our kids were launched. I guess I should consider this. Do you sell life insurance?”

“Sorry, no,” you lie. “I mean, I secure life insurance for clients that need/want it, but I am not a salesman per se.”

“Gotcha,” replies Robert.

You and Robert meet again later, this time not on the Pickleball court. You discover that in addition to carrying a few extra pounds, Robert has Type 2 Diabetes. And, he has a family history of heart disease.

You secure some quotes for 20-year term from a few leading carriers. The rates are something like ten times what he paid prior to dropping his long-held policies.

“These premiums are a bit off-putting,” you observe. “Tell me. Would you have agreed to adopt the twins if you didn’t think you could provide for them?”

Robert looks intrigued. “Of course not.”

Taking a deep breath you ask, “Then you are committed to doing so, even if you die prematurely?”

Robert nods. “It would be impossible to do so unless I owned sufficient life insurance, wouldn’t it?”

“Yes,” you say, and then, “It’s the impossible we want to eliminate first. Now that we have done away with the impossible, we can investigate what’s possible.”

Point: Most family and individual financial crises are partial failures, not complete; financial stress usually involves temporary setbacks and not permanent. This is the basis of something being probable, and not impossible.

Financial A Fortiori
In philosophy, there is something called an a fortiori argument. It is defined like this: “If something less likely is true, then something more likely will probably be true as well.”1

Example: “Jesus used an a fortiori argument when He said, ‘If you, then, though you are evil, know how to give good gifts to your children, how much more will your Father in heaven give good gifts to those who ask Him!” (Matthew 7:11) Jesus’ point hinges on the phrase how much more.”2

As an IFP you encounter potential clients who cling to an idea even if it is indubitably false. One such idea is the amount of life insurance that someone should own in order to be a prudent provider for his or her family.

Case Study #3:
A successful female executive says, “I think about $500,000 is the right amount of life insurance given our circumstances.”

Facts:

  • She makes $112,000 per year.
  • She has a husband who is on disability from the Police Department. He gets a minor monthly stipend. He is on a prescription for a neurological treatment that costs in excess of $1,200 per month out of pocket.
  • There are two children aged 13 and 10. They are each in the “Fast Track” program at their schools. They expect to go to college.
  • The kids’ combined private school tuition (partially subsidized by the school in honor of her husband) is still $1,200 per month.
  • The monthly mortgage payment is $1,150 and the outstanding loan balance is $395,000.
  • Total household monthly budget for basic expenses is slightly less than $6,000.
  • They have $28,000 in their savings.

As an IFP you could make an a fortiori argument along these lines:

“If you died without life insurance your family’s savings of $28,000 would be used up in less than six months. Where would that leave them? On the other hand, if you died owning $500,000 of life insurance, your family’s expenses would be covered for less than seven years. If leaving them destitute after five months is unacceptable, how much more acceptable is leaving them destitute after seven years?”

The a fortiori argument in this case is, “If it places your family in an impossible situation in only five months without life insurance, is delaying an impossible financial situation by seven years more acceptable?”

There is a stronger use of a fortiori argument. “If you believe that $500,000 is ample, and your family could struggle by, then how much better would it be for them if they had $1,000,000?”

Point: In financial services we benefit our clients when we first identify, and eliminate, what is impossible, and second, by using a fortiori arguments, helping them see what can be possible, even probable, and in fact, preferable.

Summary
An IFP’s responsibility is to root out the impossible and to make plain the probable. In essence, as an IFP, to best help your potential clients who are currently in financial crisis, “Identify what is impossible.” Then eliminate that.

Next, employ the very useful skill called a fortiori argument in order to persuade clients regarding what is truly possible.

“The ancient Romans utilized argumentum a fortiori, ‘argument from strength.’ Its logic goes like this: If something works the hard way, it’s more likely to work the easy way. Advertisers favor the argument from strength. Years ago, Life cereal ran an ad with little Mikey the fussy eater. His two older brothers tested the cereal on him, figuring that if Mikey liked it, anybody would. And he liked it! An argumentum a fortiori cereal ad.”3

Much of the procrastination that occurs in families putting off financial planning decisions stems from the fact that the waters are murky. There are currents of impossibility flowing just below the surface.

Financial issues are usually not completely beyond solving, and rarely final.

Sherlock Holmes: “It may be that you are not yourself luminous, but that you are a conductor of light. Some people without possessing genius have a remarkable power of stimulating it.”4

I say, regardless of what your clients believe about their circumstances, shine a light on the possibilities, and that will have inestimable consequences in their lives and yours.

Footnotes:

  1. https://www.thoughtco.com/what-is-a-fortiori 1689072#:~:text=Examples%20and%20Observations,probably%20be%20true%20as%20well.%22.
  2. https://www.gotquestions.org/a-priori-posteriori-fortiori.html.
  3. “Thank You for Arguing: What Aristotle, Lincoln, and Homer Simpson Can Teach Us About the Art of Persuasion,” by Jay Heinrichs, 432 pages, Kindle Edition, First published February 27, 2007.
  4. “The Return of Sherlock Holmes,” by Arthur Conan Doyle, Sherlock Holmes Series, Publisher: Book-of-the-Month-Club, Release Date: January 1994, ISBN: B000B11TGC.

A New Era Of Cancer Screening And Life Insurance

At the Insuretech Connect conference (ITC) in Las Vegas last year, I had the opportunity to meet with one of my clients, Munich Re. During our discussion they informed me about their partnership with GRAIL, a healthcare company whose mission is to detect cancer when it can be cured. This collaboration aims to introduce GRAIL’s groundbreaking Galleri® test, which is a multi-cancer early detection test, to the life insurance industry in the United States.

“As a leading life reinsurer, we believe we have a responsibility to society to help advance early detection and treatments that produce better outcomes for cancer patients. At Munich Re, we are incredibly proud to embark on this journey with GRAIL to bring its pioneering Galleri test to the life insurance industry.” Marc Giguere, president and CEO, Munich Re Life US.

The Galleri test, through a simple blood draw, has the capability to detect a signal shared by more than 50 cancer1 types and predict the tissue type or organ associated with the signal to help healthcare providers determine next steps. Galleri can do this by checking for more than 100,000 DNA regions and over a million specific DNA sites to screen for a signal shared by cancers that could be hiding.2 The test looks for cell-free DNA and identifies whether it comes from healthy or cancer cells. DNA from cancer cells has specific methylation patterns that identify it as a cancer signal. Methylation patterns also contain information about the tissue type or organ associated with the cancer signal to guide next steps.3

To be eligible for the test, individuals must meet certain criteria based on age or family history of cancer. Fortunately, I qualified on both counts and was also fortunate enough to get a prescription and receive a complimentary test. Last year my test results came back negative, which was a relief, but I plan to take the Galleri test annually.

Now, a year later, the progress that GRAIL and Munich Re have made is impressive. They have a number of partnerships underway, with M Financial and John Hancock being the most public. In February, John Hancock announced expanded access to customers participating in their Vitality PLUS program. The key takeaway here for me is that Munich Re, GRAIL, and its carrier partners are making headway in adopting Galleri into the life insurance industry. Meaning achieving milestones such as the cost-benefit of detecting cancer early, securing approval from state regulators and ultimately getting Galleri tests in the hands of policyholders. As an advocate of innovation, I’m thrilled to see this convergence of financial services and biotechnology resonate in our industry and with our clients.

“The initial pilot exceeded our expectations in terms of the number of tests requested, validating our hypothesis that our customers want access to this level of insight into their health. It was always our intention to expand beyond the pilot phase and we are thrilled to see this version come to life.” Brooks Tingle, president and CEO, John Hancock.

So, what drove this unique collaboration between GRAIL and Munich Re? In my view, the goal of anyone in the life insurance industry should be to help their clients live a long and healthy life. And here is the key point—the Galleri test represents an opportunity to impact the status quo of cancer and potentially the life of the insured. Today, there are five recommended cancer screening tests4 and around 70 percent of cancer deaths are caused by cancers without recommended screenings.5 Adding Galleri can help screen for more cancers, including cancers that do not have recommended screening.1,6

This gap in recommended screenings relative to cancer deaths is the key opportunity for the life insurance industry. Also consider that over 600,000 American lives are lost to cancer each year,7 which was exacerbated by the COVID-19 pandemic when 9.4 million people missed their cancer screenings in the U.S. according to American Cancer Society. That was just in 2020.

This backdrop of cancer gives way to the strategy of Munich Re and GRAIL for life insurance. In a Munich Re published article titled Changing the future of cancer mortality, they state that, “By drastically increasing the number of cancers that can be detected through screening, Galleri® has the potential to transform the future of cancer detection leading to early intervention and higher rates of survival. Partnering with GRAIL, the life insurance industry has an opportunity to improve mortality by bringing early cancer detection testing to a large population of life insurance policyholders.” Munich Re also includes the following benefits in offering Galleri: Mortality reduction for in-force populations, sales growth in competitive channels, stronger policyholder engagement and enhanced brand positioning.

This breakthrough ability to screen for more cancers has not gone unnoticed. TIME included the Galleri test in its annual list of the Best Inventions, which features 200 extraordinary innovations changing our lives. TIME’s editors wrote: “The result is a list of 200 groundbreaking inventions (and 50 special mention inventions)—including life-mapping artificial intelligence, diamonds made from excess carbon in the air, and the most powerful telescope ever—that are changing how we live, work, play, and think about what’s possible.”

Another aspect of Galleri that’s worth noting is the user experience, as obviously not everyone is getting a comped test at ITC like me. Patients can request Galleri online through an independent telemedicine provider from PWNHealth. If prescribed, a Galleri kit is shipped and then a blood draw needs to be completed through one of GRAIL’s laboratory partners or they can request a phlebotomist to come to their home. The test results then are available in about two weeks after the sample is received at the GRAIL lab. This means with Galleri you can get screened for a cancer signal shared by over 50 cancers without leaving your home. To me this is such a win from a consumer experience perspective.

How are the results delivered? There are two possible test results: No Cancer Signal Detected or Cancer Signal Detected. If Galleri detects a cancer signal, the result will include one or two Cancer Signal Origins which predict the tissue type or organ associated with the cancer signal. Results are communicated electronically or from the healthcare provider that prescribed the test.

GRAIL will be showcasing their advancements at the upcoming NAILBA Annual Conference in November, where they will also be delivering a presentation. I had the opportunity to meet with the GRAIL team, who provided me with additional information about this first-of-its-kind multi-cancer early detection (MCED) test and its integration into the life insurance industry. If you want to learn more or hear from some industry leaders about Galleri and life insurance, go check out https://www.Galleri.com/LifeInsurance.

More to come, stay tuned!

References:

  1. Klein EA, Richards D, Cohn A, et al. Clinical validation of a targeted methylation-based multi-cancer early detection test using an independent validation set.Ann Oncol. 2021;32(9):1167-77. DOI:https://doi.org/10.1016/j.annonc.2021.05.806.
  2. Liu MC, Oxnard GR, Klein EA; et al. for CCGA Consortium. Sensitive and specific multi-cancer detection and localization using methylation signatures in cell-free DNA. Ann Oncol. 2020;31(6):745-759. DOI: https://doi.org/10.1016/j.annonc.2020.02.011.
  3. Thierry A, El Messaoudi S, Gahan P, et al. Origins, structures, and functions of circulating DNA in oncology. Cancer Metastasis Rev. 2016;35:347–76. DOI: https://doi.org/10.1007/s10555-016-9629-x.
  4. US Preventive Services Task Force. Recommendations Cancer. Accessed 7Mar2023. https://www.uspreventiveservicestaskforce.org/uspstf/topic_search_results.
  5. American Cancer Society. Cancer Facts & Figures 2022. Atlanta: American Cancer Society; 2022 https://www.cancer.org/research/cancer-facts-statistics/all-cancer-facts-figures/cancer-facts-figures-2022.html. Data on file GA-2021-0065.
  6. Schrag D, McDonnall CH, Naduld L, et al. PATHFINDER: A Prospective Study of a Multi-Cancer Early Detection Blood Test. Presentation at European Society of Medical Oncology (ESMO) Congress September 9-13, 2022; Paris, France.
  7. Centers for Disease Control and Prevention. Health and Economic Costs of Chronic Diseases. https://www.cdc.gov/chronicdisease/about/costs/index.htm.

Free Stock photos by Vecteezy

What Did Superman Do The Day Before He Became A Paraplegic? What Would You Do?

It’s not often that we have such an iconic symbol who so overtly shows the need for our insurance products than the story of Christopher Reeve. For those who don’t know this story, Christopher Reeve starred as the main character in the Superman movies that came out in 1978, 1980, 1983, and 1987. Standing at 6’4”, his frame fit the part perfectly. Many don’t realize that he went on an intense upper body, power workout program to make his physique even more like Superman. He was 26 when the 1978 movie, Superman, ended up being nominated for three Academy Awards. The movie, and this 26-year-old heart throb, were the talk of Hollywood and the country at the time.

As his stardom grew so did his love of horses and competitive riding, which led to that fateful afternoon in Virginia when, on May 27, 1995, Christopher suffered a tragic equestrian accident leaving him paralyzed from the neck down. He went on to become a great advocate for the disabled until his death in October 2004. The contrasting story of his life, from stardom to disabled advocate, reminds us every day of the importance of what we all do for our clients. From disability insurance, life insurance, and long term care insurance, important lessons can be learned from this man of steel.

We hear stories all the time of those who have become totally disabled due to accidents, illnesses, viruses, etc., that in many cases were no fault of the individual—they just happened. We’ve all had incidents happen to us that make us go back in time and self-analyze what we could have done differently to have prevented the situation.

If we could just go back and do it over again, what would we have done differently? We are sure that Christopher Reeve played back that fateful day over and over again in his mind of what he could have done differently. On March 27, 1995, he walked on stage of the 67th Academy Awards with Susan Sarandon to present the best supporting actress award. This was exactly two months before his life would change forever. If only an audition came up two months later, or a speaking engagement, or charity event that would have stopped him from competing in that fateful competition, he could have been with us today.

This brings us back to our clients and what we do every day. If you knew that your client was going to become totally disabled in two months, what would you do differently as a planner? Our clients are the superheroes of their families and communities. They are revered as mothers, fathers, spouses, and leaders in their community. Many of them carry the weight of the world on their shoulders by being the main source of income for their families and/or businesses. Many of these businesses contribute to the community by not only being of service, but also by being an employer as well. How have we planned for their families and businesses that are so reliant on our own superheroes being able to work every day and create the incomes that are so important to so many?

We all know someone who has been in an accident or who has had an illness that may have affected them for a few days, maybe a few weeks, and maybe even worse. We just don’t know what tomorrow is going to bring. We can’t go back in time and apply for disability insurance. Your clients need your assistance, they need your wisdom, they need your skills in planning and your knowledge of why disability insurance is needed.

You don’t even need to sell the product yourself, as there are plenty of MGAs like ours that know producers who specialize in disability insurance. You need to recognize that the planning conversation needs to occur. Of course, if you hold the proper state license, we encourage you to work with the client yourself and understand the sale process. An MGA like ours may have someone that only works on disability insurance every day and can be of assistance in guiding you through the process.

Let’s not have any regrets in how we assist our clients every day. It’s important to bring awareness and make sure you’ve talked to your clients about individual disability insurance. For your business owners, it’s also important to discuss business overhead expense (BOE) and disability buyout coverage (DBO). Let’s not have the “I should have talked to my client two months earlier” type of guilt. Our industry provides some of the greatest support mechanisms available in the country, as long as they are properly used. Review your client list today to make sure that your clients have been made aware of disability insurance.

Free Stock photos by Vecteezy

A Simple Way To Analyze Volatility Controls

In the obfuscated land of volatility control strategies, it is hard to determine which are sizzle and which are steak. Now, it is no coincidence that almost any volatility control strategy within a given product is going to “back-test” better than that specific product’s S&P 500 annual point a point strategy. This statement is especially true immediately after the carrier launches that volatility control strategy! This is no coincidence because that is the very reason that a given volatility control strategy is in the indexed annuity or IUL in the first place.

To back up a little bit, the later part of the last decade is largely when these volatility control strategies were created because of the low interest rate environment. The low interest rate environment generating only four percent caps on indexed annuities caused many carriers and index providers to get creative. So, volatility control strategies that were cheaper to hedge–because low volatility equals lower options costs–proliferated. So, the index providers created these “index” offerings, then they flew to Des Moines (the insurance capital) to pitch the indexed annuity carriers on their new index. Some index providers worked hand in hand with the carriers on the development of certain indices that would later be housed in the carriers’ indexed annuities and IULs.

Now it is not like the index providers and the carriers put together a structure of an index and then just happened to look at the back-testing and say, “That actually looks pretty good.” No, the volatility control strategies were actually created because of the back-testing. I had previously used the analogy that the A-10 warthog jet was not a jet that was built and then they put a gun into it. Rather, the gun was built first and then the jet was designed around it. That is analogous to how volatility control strategies were created. Fabulous back testing was the beginning point. The low volatility asset classes and/or low volatility methodologies that performed the best in hindsight is what informed the makeup of the volatility control strategy and thus the makeup of the indexed annuity or IUL. So, after these creations, although indexed annuity caps were three to five percent, voilà! You can now illustrate an indexed annuity with double digit returns!

My problem with this is, as my old friend Jack Marrion used to believe, I believe that, over the long run, if options markets are efficient all strategies within a respective product will perform somewhat the same. That is because all of the strategies within the respective product generally have the same call option budget. (Exceptions to this may be the strategies within IUL and indexed annuities that have multipliers, bonuses, enhancers, etc.) Therefore, I do not do a ton of mental gymnastics when it comes to picking index strategies within one particular product.

The challenge comes when you are comparing indexed strategies from one product to another product. One volatility control strategy within one product may have a participation rate of 300 percent, but when you look at the other product, it may have a volatility control strategy with a 100 percent participation rate. I always get calls from agents asking about how carrier XYZ is able to have such awesome 250 or 300 percent participation rates. I then emphasize to him/her that the higher participation rate is not always the best and can be easily priced if the volatility in the underlying index was basically zero! Afterall, “volatility” to the upside is what can generate the growth on an indexed product! In fact, that higher participation rate volatility control strategy may have less “call option horsepower” that the carrier has applied to it.

So how can you determine how much call option horsepower the carrier has put into that volatility control strategy? Check out the level of the interest rate on the fixed account. This is a very good measurement tool.

Example: Let’s say you have two indexed annuity products where you are reviewing their volatility control strategies in order to pick one for the best accumulation going forward. You would like to get a cursory feel for which annuity product has the best potential for accumulation. How can you get a feel for this? (Hint: The answer is not to just look at the back-casting, for reasons we discussed! You can look at the back-casting, but back-casting suffers from “hindsight bias.”)

  • Product A: A product with a volatility control strategy with a 200 percent participation rate and also has a fixed rate of two percent in the fixed account.
  • Product B: A product with a volatility control strategy with a 100 percent participation rate and also has a fixed rate of four percent in the fixed account.

Assuming all other parts of the two products above are the same (no premium bonuses, etc.), I would likely choose Product B. I would estimate that Product B’s volatility control strategy has twice the call option horsepower applied to it versus Product A. Of course, I would only make my decision after I familiarize myself with the various indices. I would not make my decision solely off what I lay out above, but I would weigh the above very heavily in my decision.\

This method is not perfect. It’s not perfect because some carriers may give teaser rates and caps in the early years and then taper off the call option budget in later years. One carrier may have a premium bonus whereas the other carrier does not. One carrier may have less surrender charges than the other, etc.

Although it may not seem like it, I do like volatility control strategies. I especially liked them when interest rates were so low that the S&P 500 strategies left a lot to be desired. Like anything else, there are good ones and there are not-so-good ones. It is important that you–the agent–know how to analyze them and also that you work with an IMO that knows how to analyze them. I hope this gives you an additional avenue for your analysis.

Free Stock photos by Vecteezy

Living In“If, Then” Sentences

In the last five years I have become quite involved with the Ukrainian people. I have traveled to Ukraine numerous times and spoken to a few dozen audiences of university students in many cities. In March 2023, shortly after the one-year anniversary of the Russian invasion, my team and I conducted an online seminar (for some seventy students) entitled, “Prepare Yourself for Victory.”

The simple outline for our presentation was as follows:

  1. You must proactively prepare yourself for victory.
  2. You must somehow continue living productively during war.
  3. You need to take steps that will help you move forward.
  4. You are needed by others to find hope and comfort in these dark times.

The purpose behind this seminar was to break the stranglehold of inertia. Many university students in Ukraine are understandably neutralized. How can they imagine moving ahead in these dark days?

I have never lived in a country under military siege. But, in 2010 I was diagnosed with cancer. Bladder cancer. It was life-threatening. I had two years’ worth of treatments. At the time I read author/speaker John Piper’s booklet entitled Don’t Waste Your Cancer. He wrote it when battling prostate cancer. The message: Make the most of your cancer. Redeem it. Turn it for good. Because of that booklet, I began engaging with other patients in the hospital waiting rooms and doctor’s offices. Many of these dear people were wringing their hands in anxiety and hopelessness. It was easy to sit beside them, place a hand on their shoulder, and offer some words of hope and encouragement. I was in the presence of people I would never otherwise meet because of my cancer. I was committed to not waste the opportunity that my cancer gave me.

Moral of the story: Rather than wait until I was cancer-free, I began working right away on improving my life and helping others.

If, Then
Like the Ukrainian students I have spoken to, and many people I met who were dealing with cancer, it is easy for any of us to get stuck, and to put progress on hold until peace or healing happens. It is tempting to wait until the dust settles. The idea is to simply postpone growth and the extension of ourselves. “If” we return to normalcy, “then” we will move upward and onward.

Point: People living in negative circumstances can fall prey to “If, Then” thinking. They live in an “If, Then” sentence.

On the other hand, human beings can act exactly the same way in positive circumstances. Something great is happening or will soon. Is it best to wait until afterward before investing more time and energy into anything now?

Examples:

  • You have a much-needed beach vacation coming in two weeks. At the same time, just today, your manager finally gave you approval to launch the initiative you proposed. Do you wait until you come back from vacation, refreshed, before starting it?
  • You propose marriage, the proposal is accepted, and a wedding date is set. Do you stop dating?
  • In a year you and your spouse will be empty nesters. You think maybe you will downsize afterwards and perhaps relocate to a warmer climate. Should you fix the dripping faucet, repair the cracked ceiling, and start now getting the house ready for sale?

Point: The easiest thing for a human being is to put off doing things until tomorrow. The easiest thing to believe is that everything is, or will be, fine.

Financial Services Is All about If, Then
When I first got into the life insurance industry, my friends found me a bit morose. I was incorporating the notions of death, disability, and chronic illness into my conversations. Who else but independent financial professionals (IFPs) major in the miseries? “What will you do when the market suddenly crashes?” “What if you were to be hit by a truck coming home tomorrow?” “What if your husband had a stroke and was unable to return to work?”

Many financial services products address things like crisis, tragedy, illness, disability, and death.

“You should consider owning life insurance. If you die… then…”

“Your family will be grateful if you purchased long term care coverage. If you get chronically ill… then…”

“Your biggest asset is your ability to earn an income. If you get disabled… then…”

Point: Financial services is an industry based on helping people survive the unforeseen and unexpected. The “If.” We urge people to prepare now to have funds available “Then.”

What about the in between?
Say an IFP successfully places a sizable life insurance policy, and the family is protected from financial ruin should the insured die. Everyone feels better. Nothing else needs to concern us until “Then.” Right?

Perhaps an IFP assists a couple with their retirement strategies. Accounts are established, automatic monies are allocated, and selected investments are begun. Easy peasy, lemon squeezy. Nothing to do but watch and wait. Right?

What about the “Now?” IFPs offer more than the “Then.”

Financial Planning Is Like an International Flight
In my work with Global Leadership Partners, I take international flights every Fall and Spring. After all the hassle and commotion of Security, Passport Control, queuing to board, finding a place for the carry-ons, and meeting and greeting seatmates, I am ready to sit back and relax until we land ten hours from now.

Not so fast. There are the required announcements. I need someone to tell me again about seatbelts, oxygen masks, exits, emergency landings, and floor lighting.

Finally, we are in the air. Ahh. Suddenly, around 10,000 feet, more announcements. I am offered inducements to acquire another credit card. I learn what I am missing by not having linked to in-air Wi-Fi.

“Overhead lights will be dimmed. If you need a reading light use the lamp above your seat.” Finally!

Not so fast. Here they come with water. Again, a round of drinks and snacks. Lights on, and a meal is served.

A long span of time passes in darkness without disturbance. Then the pilot comes on, “I am turning on the ‘Fasten Seatbelt’ lights because turbulent air is reported to be ahead.” This is repeated by the flight attendant.

Sometimes, a request is made for anyone with medical training to attend to an ill passenger.

Someone uses the wrong bathroom, and we are all reminded to use those provided in our own cabins.

Lo and behold! Another water service followed by a final meal and a plethora of announcements.

Point: The “If” in my head was a successful take-off. The “Then” is the anticipated safe landing. I think that is all there is to it. Not so fast.

No Such Thing as Autopilot in Financial Services
Aaron Vickar and C. Brant Steck, CFP, wrote: “Many who own permanent life insurance think of their policy as operating on autopilot, and they assume it will automatically take them to their desired destination. Unfortunately, unlike airplanes, there is no such thing as autopilot for life insurance, and permanent life insurance policies (whole life, universal life, variable universal, indexed universal, etc.) require regular monitoring to ensure that they are doing what you intended them to do.”1

This is true. The principle applies to term life insurance too. And disability income protection. And LTCI. And retirement plans.

As annoying as all the interruptions are on long flights, they are essential, or at least beneficial. I know IFPs who resist contacting existing clients because they sense that any contact with them is seen by the clients as an interruption. (They can imagine their clients, window shades drawn, sitting back with eye shades and noise-canceling headphones.) Why should they disturb their clients? After all, the policies are in place. Investments are growing nicely.

My advice? Get over it. Stay in touch! Keep everyone current on what they own, the track they are on, and keep an eye on the destination. Will it be reached? Give assurance. Thank them for the trust they placed in you. Let them know of new opportunities. Better options. Offer enhancements.

Point: Like a long flight, financial planning is for a great stretch of life. Checking in is respectful. Essential. (Too much checking in may be a little annoying.)

Summary:
Consider the wisdom calling to us from the First Century:

“Come now, you who say, ‘Today or tomorrow we will go into such and such a town and spend a year there and trade and make a profit’—yet you do not know what tomorrow will bring. What is your life? For you are a mist that appears for a little time and then vanishes.”2

It is foolish to count exclusively on expectations we entertain for all our tomorrows.

Lesya Ukrainka, one of Ukraine’s best-known poets and playwrights, once wrote: “He who has not lived through a storm does not know the price of strength.” (Her face is on the 200 Ukrainian hryvnia paper currency.)

People generally plan for storms but many have not yet faced them.

We are in an industry that anticipates storms coming at uncertain times in unpredictable ways. Storms have happened on my flights.

  • I have experienced fellow passengers dying on board.
  • I have been on planes forced to land due to equipment failure.
  • I have experienced nausea aboard the flight and needed assistance.
  • I have trembled and been vexed regarding tight connections and sought reassurance from the flight attendants.

As an experienced IFP you have seen the “Then.” Clients have died. Death claims have been paid. People you served are living on income from the DI policies you sold. You have seen the price of strength because you were there when others suffered.

Point: Clients rely on you to use the experiences of other clients you have helped in times of crisis. They count on you to make sure they are really going to be okay—“Then.”
That is, “If” you are willing.

Footnotes:

  1. “Autopilot: Great for Airplanes, Not So Great for Your Permanent Life Insurance Policy,” by Aaron Vickar and C. Brant Steck, CFP, https://www.thestreet.com/retirement-daily/your-money/autopilot-great-for-airplanes-not-so-great-for-your-permanent-life-insurance-policy.
  2. James 4:13-14, The English Standard Version (ESV), published in 2001.

Free Stock photos by Vecteezy

For Posterity

Even the veteran voices of our sales struggles past and present have died down concerning a fantasy return to the “good old days.” There is nothing standing in front of us that will resurrect surging individual sales and meaningful penetration of the middle market that would resemble our successes of 20 years ago. It is past time for new beginnings, new directions, new goals and rejuvenated primary stakeholders willing to support what the readers of this column would call the “Cause.” Meaning substantial sales that strike directly at those most at risk (my estimate—incomes of $50,000 to $150,000). I would strongly recommend that you review a recent publication from the New York State Department of Financial Services Long Term Care Insurance—Looking Back and Thinking Ahead—June 7, 2023. It is an exceptional historical summary of exactly how we got here. It is a well documented admission of past Department of Insurance culpability in not recognizing the necessity of allowing sufficient and timely rate increases. It includes a detailed summary of the past events that fueled market forces. In my mind it provides an accurate backdrop for understanding what must happen to once again move forward.

Here are the Highlights:

  • In 2018 alone Americans paid out $55 billion for long term care expenses and Medicaid paid out triple that amount—$59 billion.
  • By 2050 long term care expenses are expected to climb to three percent of gross domestic expense.
  • The long term care market has struggled since it began 35 years ago. Recent experience in New York (probably true across all 50 states) reveals policy ownership has fallen from a high of 754,000 insured in 2002 to 394,000 in 2020.
  • Our struggles can be largely attributed to “pricing errors made from its inception.” Premiums were initially severely underpriced. Insurers lost money, maintaining adequate reserves became systemic. Departments facing consumer backlash took a very conservative approach to needed rate increases throwing gas on carrier retreat from the market. A retreat that became an exodus.
  • Long term care expenses are very expensive. Current per person nursing home expense is $108,000, home care is $61,000.
  • New York has been a leader in providing managed long term care services for Medicare Advantage, PACE and Medicaid participants. About half of the states have growing MLTSS programs.
  • Reliance on Medicaid “may prove infeasible.” Consumer private pay would have to rise. Private insurance has simply not been the answer with only two percent of Americans owning a policy. This sentence screams off the page: “Private long term care insurance is underutilized relative to potential demand.”
  • In New York’s view they have tried to help consumers with cost offering one of the first Partnership initiatives and relief with state income taxes. They even added a 10 percent tax credit in 2020. Ownership continued to fall. NY speculates that the still high cost, the possibility that they may not ever use benefits and prevalent Medicaid planning strategies have contributed to poor sales. Yet they acknowledge that ”consumer reliance on Medicaid in its current form is untenable.”
  • The NY department has presented an extensive “Mea Culpa.” Like others they approved rates based on projected lapse rates, mortality rates, morbidity rates and interest rates. Insurers and regulators now freely admit they relied on “erroneous assumptions.” We simply got it all wrong. Projections utilized by carriers and regulators relied on “inaccurate projections.” Current financial losses projected down the road accelerated company retreat from the battlefield and a strong and immediate cry for more ammunition in the form of higher rates. It was acknowledged that the reluctance to grant timely and sufficient rate increases lies at the root of our current predicament. History must record that the approval rate across most jurisdictions can only be described as too little too late. The truth is that further rate increases will be needed; “increases are burdensome to consumers but they are necessary to safeguard policy holder benefits over the long term.”
  • It was acknowledged that rate actions can be mitigated by the use of “landing zones” and tiered increases that can exclude the oldest policy owners.
  • NY is clearly and painfully aware of the subsequent financial stress on our sparse product market both on insurers and consumers. They have liberalized their acceptance of different forms of insurance designed to reduce cost. They have installed a new Health Insurer Guaranty Fund. They are currently working on a new NY State Master Plan for Aging and they are keeping a close eye on developments in Washington State.

I think the initial and most important ingredient of behavior modification is open acceptance of personal guilt and core responsibility in the creation of the dysfunction. NY has faced its own culpability and established a platform for meaningful reform. I believe all stakeholders now recognize there are absolute certainties that are required if a sales renaissance has any chance of success. There must be a problem solving partnership between the insurers’ necessity to offer profitable policies and the States desire to soften the strain of Medicaid dependence. Innovation and reality must be shaken up in the same cocktail. We must stop only paying lip service to our desire to provide risk sharing options to the mass middle market, recognizing that the dimension of that risk may be our industry’s greatest doughnut hole. Posterity has loudly provided Google maps with the shortest distance between two points. We cannot “return to the route” but we don’t have to go exploring directions to find our destination.

Other than that I have no opinion on the subject.

Free Stock photos by Vecteezy

WordPress › Error

There has been a critical error on this website.

Learn more about troubleshooting WordPress.