Consider All Viable Solutions

Flammable and inflammable mean the same thing. So do regardless and irregardless, though some (including my retired, English teacher mom) would tell you irregardless is not a word. In our industry, viable and marketable used to have similar meanings. A viable solution was one that addressed a client’s need, met a reasonable expectation and, in doing so, was considered by an agent among a number of solutions. A marketable solution was one that was designed to address a client’s need, set a reasonable expectation and, in doing so, was promoted by a carrier to be considered by an agent among a number of solutions. Unfortunately, viable and marketable mean very different things now because we have elevated two more words to the same definition: Probable and possible. If this word salad that I served is confusing please bear with me as there is a salient point.

Participating whole life has always been a viable solution for a client looking for additional money for retirement. Guaranteed cash values and guaranteed cash value growth give the client a baseline of what will be accessible at any point in time. The only variable? The client needs to pay the premium. The dividend in participating whole life provided a non-guaranteed aspect to the growth in the policy, an additional benefit that increases the cash value. The only variables? The company must perform well and declare the dividend that was illustrated. Was the policy going to perform exactly as illustrated each and every year? No, because of the variables. The client may not pay their premium. The company may declare a dividend that was higher or lower than what was originally illustrated. But, as a solution, it addressed the client’s need and set a reasonable expectation for what a client could expect because there were only a couple of variables to consider. The client’s result was probably going to be close to what was originally illustrated, so it was viable and it was marketable.

Then something changed. Our view of what was probable expanded. We traded guarantees for more upside. Instead of basing policy performance on company performance, we based it indirectly on the performance of a market index. The market goes up and the policy participates in a portion of that gain. The market goes down and the policy earns nothing, but at least it doesn’t lose anything. But what about the variables? The client needs to pay the exact premium, the market needs to increase by the exact same rate every year and the company needs to maintain caps and participation rates at the same level as when the policy was issued. Like participating whole life, the policy will not perform exactly as illustrated because of the variables. But what are those variables?

  • The client may pay the specified premium, or they may pay more or less.
  • The markets may do better than originally assumed or they may do worse. For the purposes of this article we are going to assume that they do not have the exact same return each and every year, because they never have.
  • The company may keep caps or participation rates at the exact same levels as originally illustrated or they may increase or decrease them.

As a solution, it addresses the client’s need and sets a reasonable expectation, but there are many more variables to consider. As we layer on each of those variables, the client’s result moves a little further away from probable and more towards possible. We’re ok with that because possible tends to illustrate better, so it is now the bar for viable and marketable.

So, what’s the problem? Products are supposed to improve over time. Companies are supposed to find new ways to help clients. The new is supposed to supplant the old. Things are supposed to get better. If we assume that all is equal, that could be what is happening here. But is it? All we are doing is trading guaranteed growth and some non-guaranteed upside for very little guaranteed growth, more non-guaranteed upside and a promise that zero is your hero. For some clients, that is an acceptable trade-off, but many still prefer what is probable over what is possible. Either will work for the right client. The problem arises when we go back to the question of what is viable and what is marketable. If we only present what we think is a marketable solution rather than multiple viable solutions, we run the risk of clients and products being mismatched, or even worse, not being matched at all.

One step we can take to address this is to consider all viable solutions, not just the ones that we hear about most. Participating whole life has a place in the retirement supplement universe, because it still gives a client a probable solution. Indexed universal life has a place in the retirement supplement universe, because it still allows the client to take advantage of what’s possible. Even better, what if we gave them both? Participating whole life for guaranteed growth, even when markets are down, and indexed universal life for potentially greater growth when markets are up. That’s a plan that’s both viable and marketable.

Luke Cosme is senior vice president, chief sales and marketing officer at Mutual Trust Insurance Company, A Pan-American Life Insurance Group Stock Company, where he manages the company's distribution and sales development and support efforts. Cosme joined Mutual Trust in February 2014 after serving for a decade as sales vice president at North American Company for Life and Health, where he was responsible for the recruitment and development of MGA relationships, sales strategies and case placement.

Cosme started his career at North American in 1997 after graduating from the University of Illinois at Urbana-Champaign, where he majored in economics. At North American, he held positions as sales director, financial institutions, and worked in client services before being promoted to sales vice president in 2004.

Cosme can be reached at Mutual Trust Insurance Company, 1200 Jorie Boulevard, Oak Brook, IL 60523. Telephone: 800-323-7320, ext. 5300. Email: cosmel@mutualtrust.com.