Friday, March 29, 2024

Buckle Up! We Are Going To Create An Indexed Annuity!

Get out your financial calculators, spectacles, and your pocket protectors because we are going to have some fun with this column. We are going to create a product. Of course I am being somewhat facetious because there’s much more that goes into “creating a product” than just the numbers, such as: Non-forfeiture requirements, state filing, illustration parameters, surrender charges, MVAs, utilization rates, etc. I do not pretend to be an actuary, but I am about as “actuarial” as a sales guy can be. My wife tells me that’s like being the tallest elf.

Regardless, this elf is going to show you the not-so-basics of creating an indexed annuity with a “cap” based on today’s (October 7, 2022) interest rates and options prices. The purpose of this is to not make everybody into actuaries but rather to enable you to easily answer many questions about these products by having a deep understanding of how they are created.

Here is the product we—the insurance company—are going to create. This will be a 10-year indexed annuity that utilizes an annual reset S&P 500 strategy. This strategy has a “cap” that we will need to figure out based on today’s interest rates and options costs. This product will have a seven percent commission to the agent. Furthermore, we—the carrier—have shareholders that require a “return” on the company’s capital to the tune of eight percent (more on this later).

Agenda:

  1. Determine how much we, the insurance company, can get in yield when we invest that client’s money.
  2. Based on our IRR requirements from the shareholders, how much of a “spread” do we shave off the top of the yield that we are getting in bullet point number one above.
  3. We then take what is left of the difference of number one and number two above and that determines our call option budget.
  4. We take our call option budget, and we buy and also sell call options based on today’s option prices. Based on the pricing of call options, you and I will be able to identify what cap rate a person can get in today’s environment. Sounds pretty cool huh?

1: How Much Yield Do We Get?

First off, when a carrier takes a client’s $100k (example), that carrier will invest almost all of that money in the bond market. Although a lot of folks use the 10-year treasury as “the benchmark” for the yield rate, a better benchmark is the Moody’s Baa bond yield. This is because carriers generally invest more in corporate bonds than they do in Treasury bonds. Why? Because corporate bonds provide a higher yield. For instance, an index of “investment grade” corporate bonds might represent a 5.99 percent yield. This is much better than the 10-year Treasury bond that is currently yielding 3.88 percent. Thus, the reason corporates are favored over Treasuries.

Now that the insurance company knows that it can invest their money and earn approximately six percent on this money that is going into their “general account,” the carrier needs to allocate that money between the bonds and the call options. The bonds will be purchased to guarantee the money grows back to $100,000 every single year, regardless of what the S&P 500 does. This is how the carrier is able to support the policy guarantees. The call option chunk will give the indexed annuity the “link” to the stock market in the up years. Again, Bonds=Guarantees and Options=Upside.

2: The Carrier’s Cut

Before we calculate how much money goes to bonds and how much money goes to the call options, the carrier takes their cut… This is where the “carrier spread” comes in. That is, the carrier shaves a little off the top of that six percent (technically 5.99 percent in our example). That “spread” is how the carrier makes money. How much spread does the carrier require? It depends…

Our carrier has shareholders that require them to make a certain amount of money on the carrier’s capital. And make no mistake that putting a case on the books costs a carrier capital. Afterall, the carrier has to pay for the administration, paperwork, and the big one, agent commission. This is why if you have ever seen a carrier grow “too fast” they will shut off new sales.

There are various measurements on the amount of money the carrier makes off their investment, such as Return on Investment (ROI) and Internal Rate of Return (IRR).

To simplify this, let’s say that we, the carrier, pay $7,000 to put our $100,000 on the books, or seven percent. This is simplified because our agent commission is seven percent and there are technically more expenses than that but bear with me! If the carrier shareholders demanded an eight percent internal rate of return over the 10-year life of our product, what annual income would be required for the carrier to achieve that? If you put this in your financial calculator, it would require $1,043 per year to the carrier (PV=-7,000, N=10, %=8, FV=0, solve for PMT). In other words, by the carrier “investing” $7,000 of their own money, in order to get an eight percent return over the 10-year life of the product, that carrier would need 1.043 percent ($1,043) off the top of our six percent. Hence, a spread of 1.043 percent. (Note: In corporate finance you learn that if the IRR is greater than the carrier’s “cost of capital,” it is a project that is worthwhile. Hence, if a carrier borrows money at six percent and gets an IRR on that money/capital at eight percent, that is a product that has a positive “Net Present Value” and is good!)

For our example, let’s simplify the above and say that the carrier’s yield is six percent and the carrier spread that is required to keep the shareholders happy is simply one percent. No need to get crazy here with the decimals.

3. Calculating the Call Option Budget

After the carrier takes its one percent off the top, we have five percent to play with for our client and their $100,000. This is where we need to divide the money between the bonds and the call options. The bonds need to guarantee $100,000 at the end of every year to—again—support the policy guarantees. So, what dollar amount needs to go into the bonds—earning five percent—so that those bonds in the general account grow back to $100,000 at the end of the year? Hint: The correct answer is not $95,000! The correct answer is $95,238. Thus, if you add five percent to $95,238, you will get $100,000. So, if the insurance carrier is investing $95,238 in bonds, what are they doing with the other $4,762? Call options. We have arrived at our call option budget.

Review:
What have we done so far? So far, we have designed the commission level on the product at seven percent. We also calculated how much the carrier needs in spread to make the shareholders happy, and we have also arrived at our call option budget of 4.76 percent that will soon determine the cap. (Note: All of these calculations revolve around the interest rate of six percent—technically 5.99 percent. This is why indexed annuity pricing has gotten better over the past year.)

4. Buying and Selling Call Options to Arrive at Our “Cap”

So, we have $4,762 to buy call options that link our client’s $100,000 to the S&P500. That is a call option budget of 4.76 percent of our $100,000. So, the first thing we want to do is look at the prices of call options on the S&P 500 (SPX). We want this call option to give us all of the upside of the S&P 500 between now and 12 months from now, because our product is an “annual reset.” (Note: My discussion is going to be largely about percentages. The exact dollar amounts to link the client’s $100,000 would be just a function of buying multiples of what we are talking about below. The exact dollar amounts are not important. The call option budget percentages are important.)

Table 1 represents five rows—out of hundreds of rows—that represent today’s (10/8/22) option prices for an S&P 500 option that expires approximately one year from now. Because we want this option to give us growth on our client’s money from where the market is today (3,639), we need to find the “strike price” that is close to that number. In other words, we want to buy an “at the money” call option. So, we need to see what options sellers are “asking” for these options. It appears that we can buy an option for $432.10 on a S&P 500 value of 3,625. This call option represents a whopping 11.92 percent (432.10 divided by 3,625) of the “Notional Value” that is linked to the market! We have a problem here because our options budget is only 4.76 percent.

No fear, there is a solution here. That solution is that we can buy this option but then immediately sell another option that will give us back approximately 7.16 percent. This will ensure that our net options cost is only 4.76 percent. In other words, by us buying an option for 11.92 percent and selling one for 7.16 percent, our total net cost will be our options budget of 4.76 percent (11.92 percent-7.16 percent=4.76 percent).

So above, let’s buy the “at the money” option for 11.92 percent of the “notional value.”

Selling a Call Option
As you can see in the options pricing tables, the higher the “strike price” on call options, the cheaper they are. It is because the “strike price” represents the point in time where the option purchaser actually starts making money. Hence, “in the money.” So, if we are selling a call option, we want to go as far down the “strike price” as we can. This is because when the market increases to that number, that is the point that we will be giving the upside to somebody else! Ideally, we would just purchase the option that we already did above and not have to sell a call option. However, we don’t have the large call option budget to do that, therefore we must sacrifice some upside. So, let’s go down the list and see what we need to sell. We need to produce about $259.55 (7.16 percent of 3,625) so that we net out to our 4.76 percent budget.

We found something close! We can sell an option for $257.20 at a strike price of 3,950. What does this mean?

  • We netted out to a cost of $174.90 (Paid $432.10—Sold $257.20). This represents something very close to our call option budget—4.82 percent (174.90 divided by 3,625)
  • We just created a product with an approximate “cap” of nine percent. This is because we are participating in the upside of the market starting at 3,625 and handing off the upside “participation” in the market once it crosses over 3,950. 3,950 is approximately nine percent (8.97 percent technically) higher than 3,625.

What we have just done is created an indexed annuity that:

  1. Guarantees the client’s money will never be lost. This is because the carrier has the bonds that grow back the money to $100,000 every year, assuming rates stay the same.
  2. Gives the shareholders their IRR, assuming rates stay the same.
  3. Gives the carrier a 4.76 percent call option budget to buy the call options after they expire every year, assuming rates stay the same.
  4. Gives the carrier upside potential of nine percent that they can pass through to the client in the form of a “cap.”
  5. Pays the agent a seven percent commission.

Although my calculations are my own calculations and not specific to a carrier, the product I just explained with those caps, commission rates, etc, really does exist today. So, those calculations are not pie in the sky.

Technically, one of my favorite products is the same as what I laid out here, except the A-rated carrier just announced a cap increase to 10.5 percent for premiums over $100k! How can they do that? Numerous ways. Maybe the carrier is demanding less spread for themselves. Or maybe the carrier is able to get investments at higher yields than my six percent. Both of these would mean more call option budget.

I am fully cognizant that this was a three-coffee article for you to read, but I promise you, if you are serious about indexed products, this article will help you in the future when it comes to answering questions about “How do the carriers do it?.”

Is Your Net Working?

“Pretend you are driving a car in the middle of a thunderstorm, and you happen upon three people on the side of the road. One of them is a frail old woman, who looks on the verge of collapse. Another is a friend who once saved your life. The other is the romantic interest of your dreams, and this is a once-in-a-lifetime opportunity to meet him or her. You have only one other seat in the car. Who do you pick up? There’s a good reason to choose any of the three. The old woman needs help. The friend deserves your payback. And clearly, a happy future with the man or woman of your dreams will have an enormous long-term impact on your life. So, who should you pick? The old woman, of course. Then, give the car keys to your friend, and stay behind with the romantic interest to wait for the bus!”1

We are all individually surrounded by people we can help, people who can help us specifically, or people who we know could benefit from meeting someone else we know. Our success in life depends on how well we build relationships, and the extent to which we establish reputations for making other peoples’ lives better.

In this article I am simply attempting to expand our appreciation for the art of networking.

Networking, defined: “Networking is the exchange of information and ideas among people with a common profession or special interest, usually in an informal social setting.”2

Throughout my career I have regularly attended networking events. Initially, I viewed this as my best way to let people know that I existed and what it was I did for a living. (Notice the ridiculous hero of that sentence: I, my, I, I.) As I matured, the idea of networking transformed into more of a means of meeting influential people. Later on, the approach I took in networking was to discover who in my relationship circles could prove helpful to people pursuing their dreams.

My ultimate networking goal: To make connections between people who had needs and those who could meet those needs.

Frail Old Woman
In the story above, told by Shane Snow, there is a category of person who we can help, who, in return, can literally do nothing to further our own success. We all have a natural human tendency to act mainly out of self-interest. Those of us who lead organizations (for-profit, or non-profit) generally seek to build relationships with people who can help our organizations in some way.

Someone once said, “When you give a luncheon or a dinner, do not invite your friends or your brothers or your relatives or rich neighbors, in case they may invite you in return and you would be repaid. But when you give a banquet, invite the poor, the crippled, the lame, and the blind. And you will be blessed, because they cannot repay you.”3 Imagine seeking to serve people and extend hospitality to them, not because of what’s in it for us, but because of what’s in it for them.

Personal Illustration #1
I had an appointment in downtown Cincinnati. Traffic was slower and heavier than usual because of a downpour of rain. The interstate had three lanes of traffic moving toward town. I was in the middle lane about to merge into the right lane in order to exit. That is when I spotted a car parked ahead on the right berm, and the woman standing and looking at her car’s flat tire. Standing in pouring rain.

I had a decision to make. I was running late to an appointment with a highly influential and wealthy prospect. This was before I carried a cell phone. It was not possible for me to alert the prospect concerning the delay. Yet, here was someone in dire need. What to do. I pulled off the highway, stopped my car, and walked back to the woman. I urged her to get into her car and out of the rain. I wore a white dress shirt, tie, suit pants and good shoes. It took me about 15-20 minutes to jack up her car, replace the tire, and load the damaged tire into her trunk. Off she went. I walked back to my car.

I drove into the city, valet parked my car at a hotel near the offices of my prospect, found a public bathroom, cleaned the black tire smudges off my arms and hands, straightened my wet tie, dried my shoes, donned my dry jacket, and took the elevator up to the offices where I was now thirty minutes late. My only thought: “I blew this one. No chance he is ever going to meet with me, a life insurance agent, after being thirty minutes late without notification.”

The elevator arrived at his floor and the doors opened into an open reception area. The man’s name was there on the wood paneled wall in large letters above a wide desk where a woman sat ready to receive guests. The woman sitting there was–guess who–the same woman I had helped.

Yes! The appointment could not have gone better!

Point: When we serve someone who cannot benefit us in any way, we are providing the highest level of service we can. Maybe, just maybe, we might be blessed precisely because they cannot repay us.

A Friend Who Once Saved Your Life
All of us have achieved our success, in part, due to the actions and influences of other people. Rarely has the other person actually saved our life. They most certainly helped us move up, advance forward, expand our reach, or achieve the next level.

In an article for “Investopedia” written by Julia Kagan and published in June 2022, Ms. Kagan wrote:

“Once you join a networking group, it’s important to become a contributing member. Rather than just using the association to further their own goals, people who use networking effectively look to offer something of value to other group members.”4

How can we benefit others or add value?

Consider these examples:

  • Help others to widen their circles of acquaintances.
  • Help people discover fresh opportunities.
  • Help people increase their awareness of news and trends in their fields.

Point: What we have we did not create except through the combined efforts of many other people. What we have is intended to be shared.

Once-in-a-Lifetime Opportunity
In the mid 1990’s, American television host, Jimmy Fallon, was a Computer Science major at the College of Saint Rose in Albany, New York. While a student there he obsessed about the comedy industry and occasionally performed comedy at small clubs. Fallon sent an audition tape to a former boss named Peter Iselin. Mr. Iselin passed on Fallon’s tape to an entertainment agent named Randi Siegel working in Los Angeles. Ms. Siegel had connections to “Saturday Night Live” and worked with clients like David Spade and Adam Sandler.

Although she found Fallon’s tape to be charmingly amateur, Ms. Siegel called him. To her amazement, Fallon knew who she was. (He was a student of the comedic industry.)
“He was so dead-set on joining SNL that he dropped out of school one semester shy of graduating.”5

Fallon bombed his first audition at SNL. He was able to eventually get a second audition. He was hired as a cast member in 1998.

Randi Siegel handed Jimmy Fallon a once-in-a-lifetime opportunity.

Point: We may be the one who can offer someone else a once-in-a-lifetime opportunity. Just as possible, someone we meet just may be able to introduce us to a once-in-a-lifetime opportunity. If we are willing to be generous and open handed with our relationships many of us can end up being the person in the middle and simply connect one person with a dream to another person who can help bring the dream closer. (Like Peter Iselin in Fallon’s story.)

Personal Illustration #2
I have two friends who like the same kinds of experiences and adventures that I do. Recently we discovered that a coming Friday was wide open on each of our calendars. We met mid-morning and headed to downtown Hamilton, Ohio.

Our first stop was at a women’s health facility called “Pathway to Hope.” We knew people who volunteered there and wanted to see firsthand what it was like and gain an understanding of the services they offered. The director gave us a personal tour. We made two networking accomplishments there:

  1. The hallway walls were barren of artwork. One of the three of us is an artist/photographer. He volunteered to donate several framed pieces of his work as gifts to be hung on the blank walls.
  2. The facility shared the space with another organization that was moving to new headquarters. They were leaving behind bulky wood furniture that must be removed. We three have a friend that takes unused, unwanted old wood furniture and turns it into new, highly utilitarian pieces. We took photos and texted them to our friend who expressed interest in taking the pieces off their hands. For free.

Our second visit was to a one-room museum dedicated to honoring the children’s book writer and illustrator, Robert McCloskey. Mr. McCloskey was born and raised in Hamilton. He was famous for his book Make Way for Ducklings, published in 1941. He received two Caldecott Medals from the American Library Association, and the U.S. Library of Congress named McCloskey a “Living Legend” in 2000.

The curator of the museum is an older man named Jim Schwartz, and he was very generous with his time and answered our questions. We came to find out that Mr. Schwartz had other interests. He wrote three books about an important Ohio manufacturing company named Cincinnati Milacron, and biographies of its founder (Frederick A. Geier) and the founder’s heir and successor.

The three of us jumped into networking gear! We happen to know a man who built and sold a highly successful machine tool company and who has a personal museum of historic Cincinnati Milacron machines. He is a fanatic about the industry and Milacron’s important place in it.

We connected our friend with Jim Schwartz and came to discover that our friend owned and has read all three of the latter’s books! Both men were delighted to make one another’s acquaintance and they look forward to sharing their knowledge with one another.

Point: We run into people every day, inside and outside of our work, related or sometimes unrelated to our normal lives, and yet, in a small world, we can often make connections between new friends and those we know well.

Summary
In life and in business we cast out our nets in order to find new opportunities, to meet new people, and to increase our influence in the world. In the process we can help those who cannot return the favor, begin to repay people who have blessed us, and find ways to connect ourselves and others with once-in-a-lifetime opportunities.

In particular, through networking, we can:

  1. Gain insights that only come from viewing a situation with fresh eyes.
  2. Develop and nurture not only professional relationships, but also strong and long-standing friendships.
  3. Build invaluable social skills and self-confidence.
  4. Open the door to new perspectives, suggestions and guidance.
  5. Create access to new and valuable information sources.
  6. Help other people to receive introductions to potentially relevant people.
  7. Improve our own reputations as being knowledgeable, reliable, and supportive.
  8. Sow the seeds for reciprocal assistance.

After reading the above, and as an independent financial professional, how would you answer this question:

How well is your net working?

Footnotes:

  1. Smartcuts: How Hackers, Innovators, and Icons Accelerate Success, by Shane Snow, Harper Business, September 2016, ISBN: 0062560751.
  2. https://www.investopedia.com/terms/n/networking.asp.
  3. Luke 14:12-14 (NRSV), Oxford University Press, August 15, 1991, ISBN-10:0195283805.
  4. https://www.investopedia.com/terms/n/networking.asp.
  5. https://www.businessinsider.com/jimmy-fallon-networking-key-to-success-2014-11.

Image by Paul C Lee from Pixabay

Que Sera’ Sera’

Whatever will be will be
The future’s not ours to see
Que sera’ sera’

My gift of a legendary earwig delivered sweetly by a freckle faced Doris Day. Recently, I had the privilege to reminisce and retroactively reflect on the historical trajectory arch of the LTCI struggle. I shared the dais with other grizzled veterans of the insurance conundrum of our lifetime. Although the primary conversation was about how we might return to past successes, it was our re-telling of historical context that caused the most animation in the assembled crowd. I began to take better mental note of those assembled before us. There was a smattering of older faces mostly near the front of the room. They had lived or should I say survived the war stories we were telling. Their faces were eager to share the truth of how we got to here. Their heads were nodding in agreement as we tried to make light of our mutual long-standing frustrations. And then it hit me. This was a big room, all the other seats were full of young home office stakeholders and actuaries with their careers stretching out before their front windows not their nostalgic rear view mirrors . Based on a multitude of raised hands and intense questioning, the inescapable fact was they knew the “problem” persists but they did not know how we got here—wherever here is. The immensity of that personal revelation represents the very sharp double-edged sword that continues to hang precariously over all our heads. On one side of that blade we simply must have learned something from our past mistakes, yet it is the magic of that alternate blade of fresh optimism that holds out our only hope to help more Americans preserve control of their claim destiny. It is the intrinsic courage to try again to contain and blunt a known risk that gave us all our careers. What I am certain of is we have left behind a rich legacy of teachers. Perhaps the most frequent statement I hear from producers is: “I used to sell long term care insurance.” Yes, you did, and I might add once upon a time very successfully.

Even those onerous lessons that may have curbed or diffused your enthusiasm have value as we move forward. As usual I would prefer to over generalize those proverbial sinkholes in our experience and potential speed bumps present in our future as we struggle to control a risk that continues to grow every time I send in a draft of this column:

  • Underwriting remains a curse. Truthfully the pain of most insurance applications would deter even the most valiant. Yet it is not merely the sometimes-indeterminate depth of the administration process itself. It is the radioactive hot potato of how best to handle pre-existing conditions that continues to plague product futures. This seems to be the first cliff that proposed government solutions seems to favor diving off of and where companies initially throw up the most impenetrable fortress walls. This must not be a world of absolutes; it can however rest comfortably in a pool of moderation.
  • Forgive my frankness but it is not bravery that attracts a production drift to easy answers. If you know to include a conversation about the extended cost of custodial care please be willing to collect a premium to guarantee adequate and timely claim payments.
  • Price matters! As the predicted reality of this risk continues to manifest itself we can hopefully choose to slice and dice the solutions to adhere to answers that contribute to providing control of each individual’s claim journey. The goal of all sales should be universal to provide primary or supplemental assistance guaranteeing personal management of your potential need for care. In this regard all premium levels work.
  • Politics matters. Although the now slow but steady progression of state mandated trust programs designed to offset Medicaid liabilities may be viewed as a blessing or tragedy. Regardless of your faith or lack thereof concerning government imposed attempts to ameliorate risk, I must fervently hope that those wonderful younger insurance warriors with bright shiny faces of hope and faith in our own actions can replant those progressive insurance production flags on higher and higher hills.

Other than that I have no opinion on the subject. Que Sera’ Sera’.

The Relationship Between Life eApp And The Carrier Policy Admin System

When we talk about sending life applications electronically in-good-order, it’s not just transmitting a data file to the carrier. There needs to be a deeper understanding of the life carrier’s policy administration system and that carrier’s fulfillment process. The eApp data could first be sent to a call center or paramedical provider as interim steps before arriving to the carrier. There are multiple models for the fulfillment process of life apps. In these models, underwriting can be accelerated or automated. Today there are always one or more data calls for automating underwriting like Rx scripts, MIB, identity verification, and now EHR. Below we will take a look at two eApp vendors that have deep relationships with policy admin system and underwriting engines. Also, of the many policy admin systems out there, one is very focused on APIs to easily exchange information with eApp solution providers.

eApp and New Business Underwriting
iGO®, iPipeline’s market leading eApp, leveraged by the industry to submit in-good-order applications has been the eApp of choice for the life insurance market for over a decade.

With more than 11 million eApp transactions completed over the last three years, iGO is an omni-channel eApp used in captive, brokerage and consumer-focused channels and is used by over 300,000 agents and advisors per year, representing over 55 carriers and 300 distributors. These agents and advisors use iGO to sell products ranging from life, LTCI, disability, and final expense to Medicare supplement and annuities to help secure their customers’ financial futures. When agents and advisors use iGO with iPipeline’s LifePipe Term Quote engine, iSolve® Permanent Quote engine, or Illustrations, they receive access to iPipeline’s full suite of tools for optimizing the sales process. iGO is vital in reducing cycle time and increasing placement ratios through the use of easy and intuitive reflexive-based questions and rules to ensure all needed information is captured up-front—ensuring a 100 percent in-good-order application and enabling straight through processing.

iGO comes with many out-of-the-box integrations to ensure accurate and clean data is captured during the application process. The eApp validates mailing and email addresses, as well as bank account information used for premium payment. It also comes with third-party integrations such as LexisNexis, HIPAASpace, Milliman, and others to help supplement the data captured in iGO, and allow carriers to jump-start the underwriting process.

iGO can be seamlessly integrated with iPipeline’s Resonant® new business and underwriting platform for unlocking point-of-sale decisioning and workbench capabilities that can significantly streamline the new business process. iGO can also be integrated with numerous other new business underwriting systems, as well as reinsurance engines from MunichRe, SwissRe, RGA, and more, for point-of-sale decisioning and automated underwriting. iGO data can also seamlessly flow through to carriers’ policy administration systems such as LifePro, ALIP, Faustin, DXC, or CyberLife—through direct integrations, or through Resonant. iGO’s integrations with these policy administration systems can also provide in-force policy data for supplementing the eApp process. For agencies using iPipeline’s Agency Integrator solutions, iGO cases can be integrated into Agency Integrator to allow for out-of-the-box case approval.

iPipeline’s iGO e-App provides a market-leading, comprehensive solution for digitizing, and simplifying, the life insurance application and underwriting process—and optimizing business operations. To learn more, please visit https://www.ipipeline.com/products/igo/.

Straight Through Processing Through Low Code
Equisoft/apply is an end-to-digital point of sale solution for all buying channels—carriers, BGAs, advisors, D2C—even paper if you want. It’s an easy-to-use eApplication for any device that asks questions defined by the carrier, quickly captures data, creates an instant application and submits for real-time decisions. Equisoft/apply has the latest, most responsive UI-UX and low code-no code applications. These features make it possible to easily configure a unique insurance buying journey. That makes these next-gen solutions ready to power your D2C initiatives and grow digital sales. This flexible eApplication solution means you don’t have to settle for old-fashioned question flows and clunky user interfaces, instead you can create superior sales experiences for your advisors and clients.

There are three policy admin system (PAS) integrations: At the end of the app it submits the signed app which is taken into the carrier’s PAS for new business processing–through underwriting, suitability checks, etc. When completing the app it generates real time quotes by integrating with Oracle’s Insurance Policy Administration system (OIPA) to send data like age, state, and gender so premium can be calculated and the quote returned to /apply.

Equisoft/apply has instant decision integrations. Between Part 1 and Part 2 processing /apply can get an underwriting decision. It integrates with the PAS to get an instant decision and send it in real time to the advisor so that they can proceed with the application if the buyer likes the quote.

Low-Code Configuration of Your Insurance Buying Journey

  • Low-code supports greater control than no-code tools while keeping speed to market.
  • Quickly and easily design the digital application form to match your insurance products and facilitate straight-through-processing.

Optimize your buying journeys: Equisoft/apply gives you the flexibility to easily optimize your application processes across all channels. These eApps are low code optimized for insurance buying journeys, giving you ultimate control over building engaging sales flows. This means you can easily create apps that are unique to your company and products. This results in better customer experience, fewer dropouts and faster policy decisions.

There is customization to a carrier’s particular product and buying journey. The objective is to create one common experience for buying, replacements, upsell, and inforce policy changes. It makes instant decisions and issue in seconds on any device, which facilitates straight-through processing, in-good-order validation for instant issue, and eSignature reduces drop-offs. Straight through processing is the new standard for eApplications so that they should integrate seamlessly with your existing internal and external systems, enabling you to get the validations needed to reduce the number of not-in-good-order (NIGO) apps and make policy decisions in real time. Analytics track completion rates, and diagnose and address issues in the buying process. Progress tracking, clear UI for the user and analytics for the IT teams is made available.

Another feature is to support direct-to-consumer (D2C). Being able to easily and quickly create eApps tailored to your buying journeys means that you can create one common customer and advisor experience for buying, replacements, upsell, and policy changes. These eApps can become the front-end of your D2C offerings, providing modern UI/UX that is consistent across the board. And the built-in configuration tools are all you will need to maintain your applications without having to write any code.

APIs Are Fundamental to Creating Insurance Ecosystems
From a broker’s perspective, there are several things to know about application programming interfaces (APIs). First is that they are engineered to facilitate integrations between systems and data sources, and this includes everything from the big backend insurance core systems down to data from IoT devices, mobile, usage-based insurance apps, fitness trackers, and the like.

Even more important though is how brokers benefit from API-first enterprise insurance systems. Those systems are much more likely to offer pre-fill, accessing high-quality data to speed the completion of digitalized applications and decrease or eliminate errors and fraud. APIs also enable digital communications options that didn’t exist even a few years ago. As a result, API-first systems can be used to create dramatically better workflows, leading to faster underwriting cycles, shorter sales cycles, and much less paper.

This may be the most important bit: APIs can help dramatically reduce the administrative load for agents and brokers, giving them more time to do the important work of managing relationships with both insurers and the insureds. APIs are what enable agents and brokers to access and update customer and prospect information–ideally in real time–and offer similar self-service options to insureds.

At a higher level, APIs are foundational to creating insurance ecosystems. The most ready examples of ecosystems are Amazon and eBay. Shoppers go there for an opportunity to consider many products, review their attributes, as well as add-ons from partners and service providers. Ecosystems recognize customers, collect their histories and make informed suggestions appropriate to their interests, demographics, and more. Purchases are accelerated by virtue of being timely, personalized, and digital. Here is great three-minute video overview of insurance ecosystems.

“Ecosystems help brokers by offering a seamless customer experience and fostering relationships in a moment of need. Ecosystems also help brokers expand capacity for revenue-generating activities because they spend less time on administrative tasks,” says Karen Valdez, head of life and annuity product marketing at EIS. “Insureds benefit from better customer experiences and personalized offerings, which leads to increased customer retention, referrals, and satisfaction. APIs help ambitious insurers bring it all together and offer real customer centricity without complexity.”

Image by Gerd Altmann from Pixabay

An Interview With Eugene Cohen—Disability Insurance And Matching Up Three Types Of Clients!

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.

From time to time we will feature an interview with Eugene Cohen, who has dedicated over 59 years of his life to learning, teaching, and supporting brokers in the agency’s quest to help consumers protect their incomes from the tragic effects of a disability.

Disability insurance 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.

The Eugene Cohen Insurance Agency, Inc., started as a disability insurance brokerage MGA and has grown to over 32 team members who are all focused on the wholesale service needs of financial professionals for disability, life, long term care and annuities.

Victor: Over your years working in the DI world you’ve identified three different types of income protection clients that producers are most likely to encounter. Please, tell us about them.

Eugene: Well Victor, Client Number One is the individual that has no income protection coverage at all.

Client Number Two is the individual who has group long term disability, also known as Group LTD, through their employer and has no other DI coverage.

And Client Number Three is the individual who does not have Group LTD but does have individual disability insurance.

Victor: So, let’s talk about Client Number One—the individual who has no DI coverage.

Eugene: With this client, the most frequent objection we have found that a financial planner will likely need to overcome is what we call “the no need objection.” This is when the client may not believe they actually need individual disability insurance.

Victor: So, how does a financial planner overcome this objection?

Eugene: The advisor wants to ask the client questions to help them uncover the need.

For example, ask your client to think about how their life would be affected if they could not work to earn an income due to sickness or accident. How would expenses be met?

It’s important for the client to recognize that our incomes are also our financial stability. One’s income is the foundation of any financial plan.

Also, it will likely be helpful if the financial planner connects income protection insurance to other insurance products. For example, many life insurance products are designed to provide income to dependents in the event of a premature death.

Home insurance obviously protects your investment in your home. Among many things, car insurance protects your investment in your car. Well, income protection protects your most valuable asset.

Victor: Your ability to earn an income.

Eugene: Exactly. The need for this product is not a “want,” it is something you have to have. It is a “need.” It is a very important part of financial planning. You may never use this DI policy. But as I always say, “It’s better to have it and not need it, than to need it and not have it.”

I want to stress that when used, this policy would help provide the client with financial stability during an unexpected crisis. Once your client agrees that they need income protection insurance, then you can proceed with your presentation.

Victor: So, what about Client Number Two, the one who has Group LTD through their employer, but does not have individual income protection insurance?

Eugene: Unlike our first individual, this prospect may already understand the need for income protection insurance.

So, I would say to this client “Your Group LTD is an excellent start. Let’s review your Group LTD plan’s benefits.” Often, we find that with high-income earners their Group LTD does not provide enough monthly benefit.

Typically, a Group LTD plan pays a monthly benefit based on a percent of the employee’s monthly income up to a monthly maximum dollar cap.

Victor: And some Group LTD plans do not count annual bonuses as income.

Eugene: So, let’s say your client is an executive with an annual income of $300,000 and their Group LTD happens to pay 60 percent of their income up to a maximum monthly cap of $10,000.

Because this client earns $25,000 per month, that $10,000 Group LTD monthly benefit just may not be enough to cover the client’s monthly financial obligations.

Victor: Like a monthly mortgage payment, car payments, insurance, food…?

Eugene: Clothes, your monthly electric bill, there’s a long list of those financial obligations that are needed to maintain one’s lifestyle. And that $10,000 monthly benefit—actually may not technically really be $10,000.

Victor: What do you mean?

Eugene: Let’s say your client’s employer is paying the Group LTD premium. That means the benefit may be taxable. If your client is in a 30 percent tax bracket, that would reduce their Group LTD benefit to $7,000 per month.

There may also be other shortcomings you discover when reviewing the Group LTD policy with your client. For example, it’s very important to look at the client’s Group LTD definition of “total disability.” The definition of “total disability”—what has to happen for a person to be considered disabled—is the heart of any disability policy. Some Group LTD plans do not always have the best definition for “total disability” compared to what is often available in individual disability insurance policies.

Also, with some Group LTD plans, when the employee leaves their company the Group LTD typically may not travel with them.

Getting back to our client with approximately a $7,000 monthly benefit through their Group LTD, I would ask them, “Could you manage on $7000 per month?”

In many cases there could be an income gap here. I would say to this client, “What we want to do is supplement your Group LTD with an individual disability insurance policy. And we will make this individual policy self-pay, where you will pay the premium with after tax dollars, making the benefit typically tax-free.

Victor: Let’s talk about Client Number Three—the individual who already has an individual income protection policy.

Eugene: This client very likely understands the need for disability income protection, but their agent may not have visited them for many years. It’s important for a financial planner to revisit a client on a regular basis to make sure their client understands their policy and to see if the client’s needs have changed.

Victor: Can you give us an example of how a client’s needs may change?

Eugene: Let me tell you a true story. We were at a party and talking to one of the guests. We started to talk about work and he asked me what we do for a living. I explained to him that we provide support to advisors offering disability income protection to their clients. He told me his story, and he said I could share it with everyone.

Early in his career, when he was a practicing doctor of dentistry at 32 years old, earning a nice income, he said an agent came to talk to him about disability income protection insurance. With no coverage at all, the dentist purchased a DI policy with a benefit period to age 65, with a $5,000 monthly benefit, insuring him in his regular occupation as a doctor of dentistry. And he paid the premium with after tax dollars.

The dentist then said, “It took 19 years for another agent to visit me and go over my policy. I was 51 at the time. Over those 19 years my income had obviously gone up. The agent pointed out I had a gap, with my expenses greatly out pacing my current policy and I really needed more coverage. So, I purchased an additional $5,000 per month benefit with all of the same benefits on my original policy.

“Then, at 53 years old, just two years after purchasing that additional monthly benefit, I had a stroke in my right eye. I lost my vision in that eye, making it impossible for me to practice dentistry. I was knocked out of my occupation. So, I began teaching. I now receive income from teaching plus my $10,000 monthly DI benefit because I cannot practice dentistry.”

Victor: That’s a really powerful story.

Eugene: How many dentists, surgeons, attorneys, executives, and others have not had their DI coverage reviewed in years?

Victor: Too many, I am sure. Eugene, thank you for another great conversation. Before we wrap things up, do you have any final thoughts you’d like to share?

Eugene: Many DI policies have what some DI companies call a “benefit update rider” or a “benefit increase rider” or a “future purchase option” rider, where the client has the ability to increase their monthly benefit without medical underwriting—typically there’s financial underwriting only. Producers should check to see if that rider is on a client’s existing DI policy.

Victor: Thank you, again, Eugene. It’s always very special getting to talk DI with you.

Eugene: Thank you, Victor.

Barrett’s Esophagus

Barrett’s esophagus is a relatively common condition in which normal esophageal tissue (which is squamous cell epithelium) is replaced by columnar metaplasia. Up to five percent of people here in the United States will develop this condition but most alarmingly, another five percent may go on to develop esophageal adenocarcinoma. Since cancer of the esophagus has a very poor prognosis, recognition of this condition and early treatment is of paramount importance.

The commonest predisposition to Barrett’s esophagus is GERD—gastrointestinal reflux disease. As time with GERD goes on, the character of the cells change from benign to pre-malignant. Most people who are diagnosed with Barrett’s are looked at for epigastric discomfort, or persistent heartburn. The reflux esophagitis may either be ignored or treated with antacids or proton pump inhibitors. It isn’t until endoscopy is performed that the diagnosis is made—small biopsies of the tissue during this procedure expose the abnormal cells. The difficult part of Barrett’s is that endoscopies aren’t done until the GERD symptoms have been present for a long time or are not responsive to empirical treatment. It makes it so that diagnosis of this condition (or even esophageal cancer) is made late in the course of the disease, when intervention may be too late.

There are many factors that are associated with a higher incidence of Barrett’s. It is more common in males than in females. Generally the affected are over the age of 50, and a family history may be present. It is preceded by a long history of reflux disease, and is more common in smokers. Ulceration or stricture of the esophagus and previous chemotherapy also present an increased risk. It is also common in those who are overweight or have any previous insult or toxicity to the esophagus.

When an endoscope is passed, small biopsies taken during the course of the procedure are examined under the microscope and the diagnosis is made. The risk of cancer is higher when longer portions of the esophagus is involved, and longer time with symptoms is also an increased risk for Barrett’s. Generally the cell transformation is characterized as either low grade or high grade. High grade disease has the highest chance of malignant potential. The diagnosis in any phase is always an indication to have periodic endoscopies to monitor the course of the disease.

Treatment of Barrett’s involves the vigorous use of acid suppressive medications such as proton pump inhibitors or H2 antagonists. If medication does not work, surgery may be indicated to decrease the amount of esophageal reflux. Treatment in these cases is not curative once the changes in tissue have occurred but it does help reduce or eliminate any further change.

Underwriters look to see the biopsy results and the degree of cell changes, how severe these changes are, any complications that might exist, and how long the disease has been present. A small segment of Barrett’s that is being treated may not be ratable. Longer involved segments and longer time that the disease has been present also factor into a rating. Once there is evidence of cancer, Barrett’s generally becomes uninsurable and much more aggressive treatment is involved.

Dominoes

Whether you are envisioning the current collapse of Black Sea ports, the former crash of SE Asian colonial empires or the stampede of carriers to escape out the door of individual LTCI the mental image of falling dominoes takes no prisoners. I would again apologize in advance for my fixation on the “Cares Fund” social experiment underway in Washington State. After 18 years of writing this column my optimism for good intentions should have long ago floated to the surface, as well as my virulent disdain for bad math or attempts at didactic political program execution. Just so there is no room for any misunderstanding or ambiguity in my humble world view: the WA Cares Fund has managed to reassemble every past false structural concept, dusting off every originally innocent actuarial faux pas and will knowingly (maybe intentionally) create a perpetual inflationary taxpayer supported (some would say cursed) political bureaucracy.

Comparing this contagious political manifestation to a virus lab leak is just too easy. The plague as predicted has now successfully escaped to Pennsylvania and New York State. The quest for easy answers fueled by budgetary priorities and the siren song of new fresh taxpayer coerced social experiment trust fund accounting is apparently as urgent as any other drug addiction. Please bear in mind that all future booster shots for these programs will require rate increases with no possibility of ever leaving these questionable and experimental political institutions for alternate risk options.

Random thoughts for your kind consideration:

  • Combo life sales still leads our sales efforts. Recent production history has been very self explanatory. Prior to the pandemic three of four years showed dramatic growth. The pandemic particularly in 2020 drove the combo sales down 23 percent according to LIMRA. This was primarily fueled by declines in single premium and extension of benefit sales on universal life. CI acceleration riders still constitute two thirds of all sales. I remain skeptical that if you did not charge a current premium that you actually sold anything.
  • As reported last year on a post COVID LIMRA survey, interest in LTCI grew dramatically with an over 50 percent increase in those willing to shop for coverage. Consumer caregiving stress also grew as a result of COVID experience.
  • Beginning in the third quarter 2021 combo sales caught fire with the greatest spiked increase since 2007. Accross all distribution channels and product lines 2021 was a banner year. Apparently this was specifically true as it regards single premium LTCI.
  • Before you get too excited however, this fantastic increase in buying (mostly from the more affluent) is a direct result of the fire sale in Washington State as over 225,000 scrambled to find individual insurance alternatives to the new pending state tax. Another 250,000 looked under the bed to dust off and prove any LTCI coverage citizenship already in place.
  • In the meantime, back at the Virus Farm, Washington Cares Fund is already anticipating rate increases before the program begins as the newly categorically excluded state residents decrease participation expectations in a program already projected to lose money.
  • The WA Cares Fund Workgroup has become fixated on any supplemental private long term care insurance that will inevitably emerge as a result of the mandatory coverage. This, dear readers, is the whole enchilada—if you do not participate in the inclusion of these future ingredients there will never again be an abundance of choice at your favorite Mexican restaurant. Extra refried beans will never again be substituted for the unpopular Chicken Chalupa.

Truthfully, I am never pleased when my paranoia proves to be accurate. However, both New York and Pennsylvania have now joined the WA Cares Fund mandatory program parade. HB 2779 is now the law of the land in the great state of Pennsylvania with NY on the launch pad. Before you get too excited it appears there will not be any allowed anticipatory fire sale. It appears no one will be allowed to escape the new tax. Please begin to organize an image in your mind of a growing list of state Insurance Commissioners gleefully joining a regularly scheduled Zoom meeting to facilitate cloning this—at best flawed—attempt to offset Medicaid budget deficits. And then knowing that any taxpayer imposed structure would, could and should be helped with additional supplemental coverage (in this case an inadequate pool of benefits with a 10 year vesting schedule) moving to police any and all attempts to enhance individual protection around the edges.

I would be the first to recognize I may be wasting my breath, but it must be said loudly and frequently: “Freedom of choice for consumers and insurance professionals is in real jeopardy.” Now fueled by a burning sensation in my subterranean regions that the infamous predator of “taxation without representation” haunts our streets at night. I would ask that you take no pleasure in the fact that this foolishness will only see the light of day in Blue States—an untreated virus remains a self-fulfilling prophecy.

Other than that I have no opinion on the subject.

Be The Bridge

Disability Insurance Is A Great Way To Round Out Life Insurance Awareness Month (LIAM)

We hope that you were able to take advantage of Life Insurance Awareness Month in September. Life insurance is an essential tool that is used by most financial planners. When building out a formal or informal back of the napkin type planning, understanding how much income a client needs is essential. There are many different formulas for calculating the amount of death benefit that is most appropriate for clients. Life insurance planning and disability insurance planning share some common elements.

Most likely we can agree that for your clients who work and still haven’t met their retirement savings goals, their earned income is essential. Some could argue that the need for disability insurance can be as great or even greater than the need for life insurance for some of these clients.

Many of your working single clients with no children have a tremendous need for disability insurance. The last thing a single, independently functioning adult wants is to suddenly become reliant on others in order to continue with their current lifestyle. Many of these clients are strong and fiercely independent individuals who, if they experienced an injury or sickness that limited their ability to work, would still need an income to stay independent.

Individuals with children and/or a non-working spouse not only need life insurance planning, but disability insurance planning is crucial as well. Life insurance can provide a much-needed source of income to the beneficiaries when the primary income owner passes away. The death benefit proceeds can be managed to provide an annual income until the money runs out. While some life insurance policies may have a type of chronic illness rider available, many of these provisions require that some type of actuarial discount be applied at the time of claim. In addition, a few life policies may have disability insurance riders also available, but these tend to be for very short benefit periods with most being no greater than two years.

Situations where both spouses make significant income can sometimes be more challenging for clients to envision the need for disability insurance on one or both of the spouses. In these scenarios, it’s important for a client to envision that current household division of duties. Now what would occur if one of the spouses had a significant disability where their ability to work was severely reduced or the disability made them completely incapable to work at all? What type of responsibilities would the working spouse need to take over from the spouse who no longer has the physical or mental capacity to work? If they have children, most likely, the spouse who can still work now has to shoulder some or all of the daily responsibilities that the disabled spouse once had the ability to regularly take on. Also, what happens to the family if the working spouse suffers a disability that prevents them from also working? In addition, if the spouse who can still work needs to take on more non-working responsibilities, in theory, their ability to work as much or as hard as before may become diminished. Disability insurance can provide insureds a monthly income and this cash flow can provide additional options to these couples, allowing them to not only take care of themselves but also their families.

The other factor that most planners and individuals overlook is that it’s not unusual for the disabled individual’s other expenses to increase while disabled. There are myriad unthinkable expenses someone who is disabled may need to plan for that wouldn’t normally be even thought about.

Expenses such as home modifications in order to make the home more accommodating. Also, there may be costs associated with special types of transportation or accessories needed in order to allow the disabled person to engage in daily life. Not to mention medications not covered by insurance and even the deductible for insurance. The examples are very plentiful once you start really taking a hard look at the cost of care for someone who is disabled.

The good news is that for many of your clients who just bought life insurance, it’s possible that some or all the underwriting that was done for the life insurance case may be used for the disability insurance as well. Of course, depending on the company, age of the client, amount of coverage, and many other factors, the underwriting may overlap ever so slightly or completely in full. Don’t let all your efforts for LIAM be limited to just life insurance, as there’s another extremely important product just around the corner that your client very likely needs.

Suggested Commission Split Structures For Agents

My dad, who was the wittiest and toughest person I ever knew, owned a construction business (underground utilities and concrete) for 40-years. As somebody who “dug ditches” since his early teens all the way up to his death, he had a way with words that I usually don’t repeat but I will here. He once told me jokingly, “How do you know when the deal was negotiated fairly for both sides? When both sides of the agreement feel that they have been screwed.” Now, that’s not something that you learn in business school, nor do I condone that method of thinking. He tended to say things for the effect.

Rather, I prefer the thought of both sides feeling that they received a fair deal. That is how you make for happy business partners and a sustainable and reputable business. I do believe that when agents partner with other agents and “split commissions” that there is a structure that—based on my experience—does exactly that. It makes both sides feel the deal is fair.

Oftentimes a “junior agent” might seek to partner with a veteran agent. The reasons for this partnership are obvious. If the junior agent cannot get the sale without the help of a veteran agent, it would be silly to not utilize a veteran (assuming one is available) even if it means that the junior agent would get less than 100 percent of the total compensation. As they say, 100 percent of $0 is zero compensation. By the way, if you are a junior agent and don’t have access to a “veteran agent,” partner with an IMO that will help you with the sale. In many cases—as with my IMO—there would generally not be a commission split unless I am hopping on an airplane.

A second scenario might be the inverse of the above. This is where a veteran agent will seek to partner with a junior agent. Why would a “rainmaker” want to partner with somebody junior? For the veteran agent to free up time to do what he/she does best—rainmaking. Thus the veteran agent may seek to offload some of the time-consuming legwork to a junior agent.

A third example may have nothing to do with junior versus veteran. It may be a scenario where an insurance agent is partnering with a CPA or an attorney. Many times the CPA has a captive audience and they just need an “insurance expert” to do the case design and also close the case for them.

These three scenarios are great business scenarios and very smart! They allow each individual to do what they do best while not trying to do a task that neither person is optimal at, while at the same time the junior advisor (or the CPA/Attorney) is learning from the veteran agent. The three scenarios are efficiency at its finest and what makes our industry’s compensation flexibility such a great thing. However, you must know what a fair “split” arrangement looks like so that neither party feels ripped-off.

So, what is a fair split arrangement? This is the main topic of this article.

The Million Dollar Round Table (MDRT) was the first—that I know of—to really prescribe a breakdown of what commission splits should look like. These commission split percentages that they recommended were generally based on the types of services that each agent would provide. The below breakdown is very similar to what the MDRT first came up with except for some slight verbiage changes that we applied. This is merely a guide, but I believe a very good guide.

  • 20 percent—Prospect Delivery: This is where the agent has brought the client to the table, whether through past relationships, a referral, or marketing activities.
  • 20 percent—Data Collection and Delivery: This is where the agent collects all the data needed for the sale (health information, financial information, fact finding) and also delivers material to the client that is needed prior to the sale.
  • 20 percent—Case Design: This is where the agent designs the strategy, which includes: running illustrations, modeling scenarios, seeking the right prices, organizing the end plan that is to be presented, etc.
  • 20 percent—Closing The Deal: This is where the veteran agent comes in many times to “make it rain.” This is where the final presentation/conversation occurs with the clients. This is the inflection point—the case/plan either gets implemented here or dies here!
  • 20 percent—Ongoing Service: This is the delivery of the policy, annual reviews, continuous updates for the clients, etc.

With the above being said, a common approach would be that the veteran helps close the sale. That would mean that the veteran could easily justify getting 20 percent and the junior agent getting 80 percent. If the veteran also did case design, then he/she might ask for 40 percent.

As an IMO, I work with scores of agents per week and they often ask me how they should get compensated on cases they “split” with other agents. I have never had an agency balk at the above MDRT method.

Enhancing The Digital Life Insurance Sales Experience Technology Is Revealed

The digital life insurance sales experience is continuously improving in both agent facing or consumer facing software applications. So what are some of the technologies responsible for these enhancements and why should you know? Look, I don’t want to scare you from reading the rest of this article with technical terms like Electronic Health Records, No-Code software solutions, and APIs. When addressing the digital point of sales solutions to carriers, distributors, or advisors, you need to understand the business problem these technologies solve without having to dive deep into the technology. With this basic understanding, you are better informed and feel more confident in investing in the software solutions that will help sell more life insurance.

Transforming Consumer Experience with the Power of Digital Health Data
So, what could the new customer experience look like for buying life insurance? First, a potential customer meets with an agent to discuss their situation and financial needs in the event of their untimely death, recommending the best life insurance product for their situation and providing a quote. The individual then makes a decision to move forward and, with their agent, they get started on the application and add their health info to the part two. The agent sends the application to the carrier and it goes to the underwriting department. Then, the customer is almost done. An electronic medical record is searched for and comes back within a day. The underwriting team makes a decision and the policy is sent to the customer to officially purchase, just a few days after submitting their application. And, now, one more family has peace of mind that they’re financially covered.

Human API is dedicated to being a key player in this customer experience. I have written several articles about Electronic Health Data (EHR) and Human API has always been a critical player in the discussion, but there’s much more. Human API is not only consumer-forward, not just an EHR provider, not just helpful in replacing APSs, not just sharing better underwriting data, not just tech-agile and API-driven—Human API is a critical partner for carriers seeking to showcase the best in consumer experience and to accomplish their most strategic transformation goals.

  • Defining the future of consumer experiences and interactions—across all touch points.
  • Expanding and accelerating transformation to better support distribution partners and reinsurers.
  • Seamlessly turning data into intelligence by possessing a flexible and scalable data infrastructure for modern, fast and efficient processes.

Here is a quote from a top carrier about leading the changes and best of breed experience, “Human API’s platform further expands our ability to provide our members the best experience buying life insurance. We were the first company to use digital health data and are continually looking for ways to improve our processes—including increasing the percentage of medical records we can receive digitally which cuts down on the time that it takes to get life insurance coverage.”—Christopher Flint, senior vice president and GM, Life Insurance, at USAA. For more information about Human API, visit www.humanapi.co.

How No-Code eApp and EHR Saves Time
Technology that allows for rapid decision-making, the functionality of a no-code platform, and a customer-service driven approach to integration is what Management Research Services (MRS) has created as an industry innovator. Many underwriting decisions are easy ones. The issue is that it requires analysis of massive data sets to arrive at the decision. Technology improvements offered in the MRS no-code platform will never eliminate the need for underwriters; they just eliminate the need for underwriters to spend hours upon hours of reading and scanning the intel provided for each client.

Consider the recent history and changes in record-keeping across the medical industry. Generations of paper records yielded to the first-generation Electronic Medical Record (EMR). EMRs are not standardized across providers, they are really an in-house chart—something of a relic from the days before cloud computing. The lack of standardization means there is a lot to manually unpack and interpret.

The process today has now been turned upside down: Most underwriting decisions are already made. The applications become about seeing how and where each applicant qualifies, according to each client’s pre-programmed rules and decisions. The result is rapid underwriting decisions made at the point of sale; over 95 percent of applicants are processed within just minutes.

The example of the rise of EMRs provides a behind-the-scenes way technology began saving time in application processing. It is notable that where MRS is truly going to save time for insurance carriers or third-party vendors is with the sleek functionality of the no-code platform. Their system bypasses an expensive and time-consuming step in the process by removing the need to work with developers or IT. They have already taken care of that step for you; no programming or coding experience is required in the process. This results in their clients becoming empowered.

MRS has a customer service driven approach which means rapid integration times for systems customized from the ground-up and with minimal maintenance costs. They want to collaborate with you to build the platform or E-App that best serves your organizational and client needs. Click here to learn more or request a demo.

APIs Bridge Together Systems for a Better Life Insurance Sales Experience
As I continue educating the industry on APIs, I reached out to Paperless Solutions Group. Bill Walasek, VP of Sales at Paperless Solutions Group recently spoke with an industry veteran who asked about APIs. Bill asked him to talk about how he did business a few years ago. He recounted the days when, meeting with a prospect, he would scribble down some notes during the meeting and bring those notes back to the office. He would hand those notes over to his staff with some direction on how to proceed in regards to coverage. At that point, like any good businessman, he would move on to the next prospect. He was really not involved with the case unless something unusual came up like a rating or decline. Bottom line, a month or two out, he looked at his commission statement to see if the case was placed. Sound a bit familiar?

After this handoff, a lot goes on behind the scenes. This includes storing the data he collected (likely in a file cabinet or maybe a spreadsheet), getting a quote, filling out an application, submitting it to a carrier, waiting for a response, and if placed, finally receiving a policy and the commission. Take a second, think about how much data has moved through this process and how many different and disparate systems that the data must be ingested into.

The likelihood of information being lost or improperly entered is great and the time to move this data around is even greater. What was and is needed is a way to bridge all this information to systems that can accept it without keystrokes, resources, and wasted time. This is why APIs are so critical for our industry.

We, as an industry, have just begun to see the power of the use of APIs. Other industries have been doing this for years. APIs pull the appropriate data needed, at the time that it is needed, and then move it to the correct place in the next step of the process. So we are now getting to a place where you can take prospect information and feed it into a CRM where it can then be sent to a quoting system. Once the appropriate quote has been agreed upon, that information can then be delivered into an e-application which is sent to the carrier and stored in the CRM. The carrier can then ingest that information into their systems and send the agent status updates that can be stored and displayed wherever they wish. If there are outstanding requirements, those pieces of information or forms can be collected quickly so the case does not go stale. Finally, once the case is placed, policies can be delivered electronically and, yes, the commission almost instantaneously. Aren’t APIs great?

“At Paperless Solutions Group (PSG), we embrace APIs. In fact, we utilized APIs before APIs were cool. All our solutions are API driven from eApplication, to quoting with underwriting (eValuate), to requirements gathering (eRequirement), to eSignature. While these solutions provide a seamless experience, we understand that there are other solutions that you have invested much time, resources, and dollars implementing. What APIs provide is the ability to play nice in the sandbox with other solution providers. And this brings up what should be considered when implementing any solutions: How does it affect what I do today and how will it work with our vision moving forward?” To learn more about PSG solutions visit www.paperlesssolutions.net.

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