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September 2018






September 2018


INSIDE COVER: Discover how ALIRT’s groundbreaking. .due diligence is helping advisors keep. .clients safe from unpleasant surprises. .

Are the Carriers You’re Promoting

STRONG ENOUGH AT THEIR CORE? Since 2013, the life and annuity industry has seen more than 25 shake-ups — times when core divisions of major carriers have been bought, sold, rebranded, absorbed and otherwise eliminated.

So how do buyers ensure they’re getting their piece of the pie if the future of their investment is uncertain? Over the past 20 years, ALIRT Research has developed an analytical philosophy that reliably guides agents through selecting the strongest insurance company partner for their clients through a 3-step process.

SEE FOR YOURSELF! Get your hands on white papers and research that dive deep into the current financial stability of the industry’s carriers for free! Proudly written by independent analysts at ALIRT, these are something every agent should read.

Turn to PAGE 2 to read more about The ALIRT Way! Visit to download your copy today to protect your clients’ legacy and their assets tomorrow!

The real story behind our business 3,605 families and businesses across the United States were the beneficiaries of nearly $840 million in claims last year. Helping people when they need it most is why we’re here. Legal & General America is committed to helping you reach and serve the uninsured market. As a trusted term provider, we offer highly-competitive rates that help make insurance more affordable. Our end-to-end digital processes make doing business easier and faster for agents and the buying process better for their clients. We’re always looking for new ways to partner with you through our dedicated sales team at

Get instant access to our marketing materials at Legal & General America life insurance products are underwritten and issued by Banner Life Insurance Company, Urbana, MD and William Penn Life Insurance Company of New York, Valley Stream, NY. Banner is licensed to do business in 49 states and District of Columbia. William Penn does business exclusively in New York; Banner does not solicit business there. The Legal & General America companies are part of the worldwide Legal & General Group. Claims paid based on unaudited statutory/GAAP financial statements; all other statistics based on 2017 year-end results. For broker use only. 18-192



Promises, Promises Life insurance and annuities are unique in that they represent an intangible promise made by an insurance company to meet some potential financial obligation often long in the future — a promise predicated on an insurance company’s financial ability and willingness to make good on that obligation. Every day, insurance producers sell this intangible promise to individuals and businesses. These producers depend, in part, on public ratings, the assurances of insurance company representatives and the branding prowess of these insurers to help determine which companies are a “safe bet.” But does anyone really know if an insurance company will be able to make good on its promises 10, 20 or even 30 years in the future? The answer is no. Still, insurance producers must sell — and insureds must buy — if insureds are to gain the critical financial protections that only life insurance industry products can provide. So how does an insurance buyer ultimately choose an insurer if the future is, by its very nature, unknowable?

out — although the parent company has no obligation to do so. And maybe it will, if only to preserve the group’s reputation. But what if the parent company itself is under financial duress or, as is more common, what if the insurance company in question is no longer owned by the parent company? Despite its reputation as a staid industry, the U.S. life insurance industry has experienced consistent ownership change over the years. In fact, over the past decade we have witnessed an acceleration of

choice, have not been immune to this phenomenon of shifting ownership structures. During a brief period in the late 1990s, more than 20 mutual insurers either fully demutualized or shifted to a mutual holding company structure. Of these, more than half experienced a subsequent ownership change. In summary, because ratings depend so centrally on parent company backing and because the traditional support of large, well-branded financial institutions is weakening, focusing exclusively on ratings is problematic.

Over the past decade, we have witnessed an acceleration of ownership changes, and we can no longer assume — as we once did — that insurers with well-branded, large company parents are “safe bets.”

The Problem With Ratings/Comdex In our experience, most insurance salespeople default to ratings or Comdex scores, which are driven entirely by the ratings, to provide some sense of an insurance company’s financial position at the point of sale. But there is a significant problem here: rating agencies evaluate an insurance company based mainly on the implicit support of a large, often publicly traded, parent. The rationale for this is that if the insurance company legally responsible to pay an insurance claim gets into financial trouble, the parent company will bail it

ownership changes, and we can no longer assume — as we once did — that insurers with well-branded, large company parents are “safe bets.” In the past six years alone, the U.S. life insurance industry has seen prominent groups such as Sun Life, Hartford, ING/ Voya, Allstate, Aviva, MetLife and AXA spin off retail life insurance and annuity operations. As would be expected in such cases, the ratings of these insurance units and, hence, the Comdex scores, declined immediately after the announcement of these divestitures, given that the companies lost the implicit backing of these parent organizations. This was in spite of the fact that nothing really changed with the underlying financial profile of the insurers themselves. Other insurers have been sold to private equity or foreign insurance groups, with Japanese firms especially active over the past decade. Even mutual insurers, once considered among the most conservative consumer

A Solution: The ALIRT Way

In its more than 20 years of analyzing life insurance company financial performance for distributors, insurers and asset managers, ALIRT has developed an analytical philosophy that seeks to untangle the riddle of how best to select a partner insurance company — and then track its financial well-being. This philosophy, The ALIRT Way, rests on three basic tenets: [1] Concentrate on the financial results of the legal entity underwriting the policy. Every company listed on the declarations page of an insurance policy must issue financial statements to the regulator of its state domicile. These statements outline the financial well-being of the insurer backing the policy, so the insureds know exactly where their insurer “counterparty” stands. [2] Oversight must be regular and ongoing. Because no one can predict the future, the financial health of an insurer must be regularly tracked. In this way, if an insurance carrier begins to exhibit financial deterioration, necessary steps may be taken to best protect the policyholder. [3] Analysis should be quantifiable and measurable. It is ALIRT’s opinion that ratings are too vague. We believe in presenting quantifiable metrics, embedded within

a scoring system that includes relative and absolute benchmarks for easy and accurate measurement.

Good Due Diligence = More Sales This approach, especially the requirement that it be continuous, may go against the grain of traditional point-of-sale practices, but it can reap huge rewards. In ALIRT’s experience, insurance producers who make the effort to implement a more professional approach to insurance carrier oversight garner the attention of trusted advisors

(estate lawyers, CPAs, trust officers, etc.) and their wealthy clients, which can result in more business activity, sales and referrals. This is especially true in this era of growing merger and acquisition activity with the headline risk and ratings dislocations that often ensue. In addition, at a time when the issue of fiduciary duty has seeped into the collective consciousness of buyers — regardless of the ultimate legal requirements — the ability of individual producers and financial institutions alike to show that they are

taking a more disciplined approach to monitoring insurer solvency helps mark them as best-in-class among their peers. In the end, it’s a question of being reactive versus proactive. You can either wait for the next inevitable divestiture/acquisition and react when clients wring their hands over a subsequent ratings downgrade, or you can adopt a disciplined approach to insurance carrier oversight that will make your clients more comfortable, build your reputation among trusted advisors and ultimately put you in the driver’s seat.

U.S. Life Insurance Industry M&A: 2013-2018 Company/Group Name Hartford Financial ING US Sun Life US Aviva U.S. Forethought Financial Group Aviva U.S. Life business Fidelity & Guaranty Life Lincoln Benefit Life Wilton Re Holdings Ltd. SBLI USA Mutual Southland Life Ins. Co. Protective Life Corp. Philadelphia Financial Grp. Colorado Bankers Life Ins. Co. Symetra Financial StanCorp Financial Group Phoenix Cos. Inc. Bankers Life Insurance Co. Guaranty Income Life Ins. Co. Vantis Life Insurance Co. Jefferson National Life Ins. Co. MetLife Inc.’s Retail Life & Annuity Operations Lincoln Benefit Life Fidelity & Guaranty Life Liberty Life Assurance Co. of Boston Liberty Life of Boston’s life insurance and annuity business United Life Insurance Co. AXA’s U.S. operations (including AXA Equitable Life) Hartford Financial ‘s run-off annuity business Voya Financial Inc.’s retail annuity business

Year 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2016 2016 2016 2016 2016 2017 2017

Disposition of Company Sold its VA production/individual life/retirement businesses to Forethought Life/Prudential/Mass Mutual U.S. life insurance business was spun off from ING Group via an IPO and renamed Voya Financial, Inc. Sold to Delaware Life Holdings (renamed Group One Thousand One, LLC (GOTO) in 2017) Sold to Athene Holding Ltd. – Company name changed to Athene Annuity & Life Assurance Acquired by Global Atlantic Financial Acquired via reinsurance by Accordia Life & Annuity Co. (a subsidiary of Global Atlantic Financial) Partially spun off (via an IPO) by parent Harbinger Group Sold to Resolution Life Holdings, Inc. by former parent Allstate Life Ins. Co. Sold to Canada Pension Plan Investment Board Acquired by Prosperity Life Ins. Group, LLC Acquired by privately held Global Bankers Ins. Group Sold to Japanese insurer Dai-Ichi Life Ins. Co. Ltd. Acquired by The Blackstone Group Acquired by privately held Global Bankers Ins. Group Acquired by Japanese insurer Sumitomo Life Ins. Co. Acquired by Japanese insurer Meiji Yasuda Life Ins. Co. Sold to Cayman Island based Nassau Re Acquired by privately held Global Bankers Ins. Group Acquired by privately held Kuvare Holdings Acquired by Penn Mutual Life Acquired (along with its parent, Jefferson National Financial Corp.) by Nationwide Life Ins. Co.


Spun off into separate company Brighthouse Financial (via an IPO)

2017 2017 2018

Sold to privately held Global Bankers Ins. Group. by Resolution Life Holdings, Inc. Acquired by CF Corporation (with backing from Blackstone Group L.P.) after company’s 2013 IPO Acquired by Lincoln National Corp. (LNC)


Acquired (via reinsurance) by Protective Life Ins. Co.


Acquired by privately held Kuvare Holdings


Operations spun off in an IPO

2018 2018

Business (including two insurer subsidiaries) sold to a group of private investors Business (including one insurer subsidiary) sold to a group of private investors

To get our most recent life insurance industry review, which evaluates the current state of the life insurance industry and provides detailed financial data for the ALIRT Life Composite, call 833.266.3393 or visit


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Tear Down This Wall By Steven A. Morelli

The cold war between fees and commissions stunts life insurance growth.


52 S electing The Most Suitable Income Rider For Your Client

By John Hilton and Cassie Miller Regulators see the need for new standards. But what those standards look like is the subject of ongoing, and at times contentious, debate with many sides.

By Jim Pedigo The complexity of a lifetime income benefit rider benefit crediting can create the illusion of a better fixed indexed annuity income product.

IN The Field

22 Adjust, Achieve, Repeat

By John Hilton Reginald Rabjohns was the youngest Million Dollar Round Table qualifier at age 22, and he is still going strong 50 years later. He looks back on what motivated him to adapt and succeed in an industry that continues to change.


14 The Fast Lane To Trust


Respected minds share their leading thoughts on trending products, cuttingedge technology and unique sales techniques.


10 In Whose ‘Best Interest’?

An interview with Stephen M.R. Covey Trust is the one thing that changes everything in business, says Stephen M.R. Covey. But trust isn’t built overnight. In this interview with Publisher Paul Feldman, Covey describes the value of trust in relationships and lays out the path for creating behaviors that build trustbased interactions.

33 Life Insurance Thought Leadership Section


46 How IUL Helps The Asian-American Business Succession Market

InsuranceNewsNet Magazine » September 2018

By Jeff Marsh The Asian-American entrepreneurial community is thriving, but these small-business owners need help in achieving their business succession goals.

54 Index-Linked Annuity Segment Getting Crowded By Cyril Tuohy It’s getting crowded in the index-linked annuity market, and that presents a good news/bad news situation.


58 It Is Time To Acknowledge Standard LTCi Alternatives By Roxanne Anderson A look at the growth of nontraditional long-term care coverage.

What if the market drops just as we retire?

What if we face a serious illness?

What if one of us outlives our savings?


Only life insurance can provide a death benefit while also building cash value your clients can access, generally income tax-free.* It’s money that can help make retirement more predictable, if they face unexpected challenges. And it can help ensure their other retirement assets are used the way they want. See more reasons to Add More Life to the conversation. Explore helpful content you can share with your clients, including articles, videos and podcasts.

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IRC §72.

Cash values are accessed via loans and withdrawals. Outstanding loans and withdrawals will reduce policy cash values and the death benefit and may have tax consequences. Life insurance is issued by The Prudential Insurance Company of America, Pruco Life Insurance Company (except in NY and/or NJ) and Pruco Life Insurance Company of New Jersey (in NY and/or NJ). All are Prudential Financial companies located in Newark, NJ and each is solely responsible for its own financial condition and contractual obligations. Neither Prudential Financial, its affiliates, nor its financial professionals give legal or tax advice. Your clients should consult with an attorney, accountant, and/ or tax advisor concerning their particular circumstances. © 2017 Prudential Financial, Inc. and its related entities. FOR THE EDUCATION OF PRODUCERS/BROKERS ONLY. NOT INTENDED FOR USE WITH THE PUBLIC. 0305439-00001-00


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70 M  DRT: The Changing Role Of Life Insurance In A Financial Plan

62 The Medicare Conversation Leads To A Financial Touchdown

By Brenton Harrison If we listen intently to our clients’ concerns and stay abreast of changes in our industry, we might find a host of new uses for life insurance that suits our clients’ needs.

By Joanne Giardini-Russell Advisors who take on the challenge of learning a bit about Medicare and deciding to broach the subject are reaping the rewards.

64 How To Boost Retirement Readiness In An Automated World By Ken Waineo Managed services can provide a balance between technology and tailored support for better retirement outcomes for workers and better retirement plans for employers.


66 Is Your Client List More Like A New BMW Or An Old Pontiac?

72 LIMRA: Protecting Loved Ones Isn’t Cliché

By James Cowan A number of demographic trends will affect the financial services industry.


By Gina Birchall Misconceptions about life insurance are creating barriers for consumers to purchase it.

68 NAIFA: How To Gain Traction In The Growing Hispanic Market By Evelyn Gellar The Hispanic market is multifaceted and can present a challenge for advisors who take a one-size-fits-all approach.

EVERY ISSUE 8 Editor’s Letter 20 NewsWires


44 LifeWires 50 AnnuityWires

56 Health/Benefits Wires 60 AdvisorNews Wires

71 Advertiser Index 71 Marketplace



Sharon Brtalik Joaquin Tuazon Ashley McHugh Tim Mader Samantha Winters David Shanks Steven Haines Elizabeth Nady

Copyright 2018 All rights reserved. Reproduction or use without permission of editorial or graphic content in any manner is strictly prohibited. How to Reach Us: You may e-mail, send your letter to 275 Grandview Ave., Suite 100, Camp Hill, PA 17011, fax 866.381.8630 or call 717.441.9357. Reprints: Copyright permission can be obtained through InsuranceNewsNet at 717.441.9357, Ext. 115, or Editorial Inquiries: You may e-mail or call 717.441.9357, ext. 117. Advertising Inquiries: To access InsuranceNewsNet Magazine’s online media kit, go to or call 717.441.9357, Ext. 115, for a sales representative. Postmaster: Send address changes to InsuranceNewsNet Magazine, 275 Grandview Ave., Suite 100, Camp Hill, PA 17011. Please allow four weeks for completion of changes. Legal Disclaimer: This publication contains general financial information. It should not be relied upon as a substitute for professional financial or legal advice. We make every effort to offer accurate information, but errors may occur due to the nature of the subject matter and our interpretation of any laws and regulations involved. We provide this information as is, without warranties of any kind, either express or implied. InsuranceNewsNet shall not be liable regardless of the cause or duration for any errors, inaccuracies, omissions or other defects in, or untimeliness or inauthenticity of, the information published herein.


InsuranceNewsNet Magazine » September 2018

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But This Time …


don’t know whether it was a Ford, Dodge or Chevy, but I remember the truck was ridiculous. All I recall is the pickup was designed to resemble a blood-red fist on wheels that could churn forests into mulch. It looked like firefighting equipment that forgot the firefighting apparatus at the station in its haste to arrive at my uncle’s house. Uncle Bruce and I wondered whether my cousin Wayne’s new truck had enough diesel torque to pull Bruce’s small house off its foundation. “Easy,” Wayne said as we gazed at the monster, sipping our beer, nodding our approval. “Do you want to buy it?” Wayne added. Why would Wayne want to sell his beautiful testosterone-fueled, shame-belching, ego-inflating toy? This was early 2007 and the price of diesel was climbing. I hadn’t seen the rise in gas prices yet because apparently diesel reacts quicker to crude-oil prices. Wayne didn’t need the truck-beast to take him to his physical therapy office. And even though his business was doing well, he felt the pinch at the pump. Fuel had been cheap, and trucks were becoming popular again. I had an old Chevy pickup as a second vehicle to haul a horse trailer. So, I confess a twinge of truck envy as I contemplated my cousin’s offer, even though he meant it as a joke.

Gas Shock

As gas prices rose, I thought about people I had met several years earlier in the Poconos. I was a newspaper reporter covering the days after 9/11. I found a large population of people from New York City who had moved to the Poconos to give their families a house of their own and their kids the hope of an idyllic suburban/country upbringing. But they kept their NYC jobs, fighting two and a half hours of traffic each way. On a good day. A few people never returned from Manhattan after that dreadful Tuesday. That was the first story. But the real story was how these people had been manipulated by local real estate brokers into buying houses they couldn’t afford. The real estate market in the Poconos 8

was not strong in the era when the resorts were closing. Houses went unsold and prices were dropping. Then people started expanding their commuting radius from New York City. Housing costs were so cheap in the Poconos that prices could double or triple and still be considered inexpensive compared with the metro area. Some real estate brokers, builders and appraisers did just that. They priced properties far above market value and worked with mortgage brokers to get them financed. The gas price shock shook that region like many others across America in 2007 into ’08. Overextended homeowners looked to sell simultaneously. The blue-collar workers in the Poconos were stuck more than most because their house prices plummeted even further below their already inflated values. This pain radiated from the Poconos, Las Vegas, South Florida and other overheated markets. The price of gas was not the only factor, but it was a significant one in pushing families into default.

Enter 2008

I had started at InsuranceNewsNet in June 2008 and felt like I had another front-row seat to an unfolding disaster. Once Lehman Brothers collapsed and AIG buckled in a weekend that September, a cascade of shocks followed. In just a few days, markets were bleeding so badly that the money market “broke the buck,” a phrase I learned meant that the safest dollar was now worth 97 cents. The difference was more than three pennies — the cost was the confidence that everything was fundamentally OK. That is all history now. Many of us looking back at those days can remember that sinking sense of anxiety that nothing was ever going to be the same. Eventually the phrase The New Normal confirmed that we were in different territory. But 10 years later, where are we? Trucks and SUVs are popular again. So much so that Ford is going to stop making cars except for the Mustang. The real estate market has been blazing for years. But prices are now outside the reach of first-time homebuyers. Sales of new and existing homes have been dropping since March. When the bottom of the

InsuranceNewsNet Magazine » September 2018

market freezes, it locks sellers all the way up the chain. Those who have to sell will slash prices. Those who cannot sell will default. Will that happen? In the old normal, maybe it would. The conditions are there. Leverage on Wall Street, margin debt, equals 3 percent of the gross national product — 1929 levels. Consumer debt hit an all-time high in the first quarter of this year. Mortgage debt is reaching the precrisis peak.

But It’s Different …

The economy and the various markets within it have confounded predictions and expectations for a decade. Eventually, reality catches up to all markets. Economics writers rediscover sage comments from previous crises whenever things look dicey. This one from Business Week commenting on Nov. 2, 1929, on the run-up to the crash, is often cited, although I have not seen the original: “The psychological illusion upon which it is based, though not essentially new, has been stronger and more widespread than has ever been the case in this country in the past. This illusion is summed up in the phrase ‘the new era.’ The phrase itself is not new. Every period of speculation rediscovers it.” How are your clients doing? Can they withstand a shock, whatever its source? I learned pretty quickly in 2008 the value of insurance products. I did not trade up my trusty Subaru but kept maintaining it. When I took the car in for routine maintenance in late 2008, I got a ride with the dealership’s shuttle. I asked the driver how things were going in his world. He was retired and working part time because he liked to keep busy. Even though his friends at the diner saw their 401(k)s become 201(k)s (first time I heard that joke), he was not worried. He said he slept easy because he had annuities that were paying him what he needed every month. I sipped my coffee and nodded my approval at the impressive vehicle of his choice.

Steven A. Morelli Editor-in-Chief

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In Whose ‘Best Interest’? Regulators see the need for new standards. But what those standards look like is the subject of ongoing, and at times contentious, debate with many sides. By John Hilton and Cassie Miller


est interest” is the new “fiduciary rule” on the minds of regulators, consumer groups and industry professionals. State and Securities and Exchange Commission regulators are scrambling to finalize best-interest standards after a lategame appeals court decision tossed out the Department of Labor fiduciary rule. While the Obama-era DOL rule ultimately failed, it left a legacy of change in its wake. Many insurers and distributors tightened up processes, with most saying they will not go back. For their part, regulators see the need for new standards. What those standards look like is the subject of ongoing, and at times contentious, debate with many sides. “We’re looking for very clear and objective rules,” Wesley Bissett, senior counsel for government affairs for the Independent Insurance Agents and Brokers of America, told state insurance commissioners. “Whatever it is that you want agents to do, we wish you would just spell it out.”

State On State

New York regulators represent the hardline, best-interest camp. Superintendent of Financial Services Maria Vullo broke with her peers and pushed through rules that apply to life insurance as well as annuities. Those rules take effect August 2019. Meanwhile, the National Association of Insurance Commissioners is working on a model law it hopes to send to the states for adoption by the end of the year. Its best-interest version applies only to annuities — for now. During the NAIC Summer Meeting in Boston, Vullo indicated she will challenge 10

the organization on that point. “Certainly this committee should keep active in this and not just accept the working group’s report and move on,” she told colleagues on the NAIC Life Insurance and Annuities Committee. “There’s no reason that the suitability should not apply to both, annuities as well as life insurance.” It is a challenge New York won in the past. In particular, it jumped out ahead of the NAIC on a cybersecurity standard that the organization later largely duplicated as its model law. Still, many in the industry do not see that situation repeating. “I think we would be surprised if we saw the same playbook this time around,” said John Matovina, CEO of American Equity. “I don’t think there’s any momentum for the NAIC to pick up on what New York has already adopted.” The New York rules are “our worst fears come true,” said Kim O’Brien, CEO of AssessBEST, a compliance software company. “It’s going to result in this very uneven patchwork of regulation that is very difficult for regulators to enforce and difficult for consumers to understand,” explained O’Brien, who met with several state officials. [Disclosure: INN Publisher Paul Feldman is part owner of AssessBEST.]

InsuranceNewsNet Magazine » September 2018

The Details

The New York rules come with an effective date of Aug. 1, 2019, for annuity contracts, and six months afterward for life insurance contracts. The New York rules would: » Require disclosure of all suitability considerations and product information that form the basis of any recommendation. » Permit agents or brokers to make a recommendation only if they have a “reasonable basis to believe that the consumer can meet the financial obligations under the policy.” » Prohibit an agent or broker from telling a consumer that a recommendation is part of financial planning, investment advice or related services (unless the agent or broker is a certified professional in that area). Additionally, the proposed regulation would require insurers to “establish and maintain procedures to prevent financial exploitation and abuse.” Insurers will likely have to make a decision whether to pay higher compliance costs to do business in New York, said William T. Mandia, a partner at Stradley Ronon, a Philadelphia law firm.


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“It’s such a large market that I can’t imagine that life insurers on the whole will avoid it,” he said. “So I think the question is going to become: Who stays in and what impact does it have on the way things are priced?”

NAIC Standards

As of press deadline, an NAIC working group was still debating the details of its best-interest regulation. The first of a series of nonbinding “straw poll” votes saw the group agree on best-interest principles, but under a different name. Going with the best-interest standard “would raise significant challenges when we bring the regs to our legislature,” said TDCI Assistant Commissioner Michael Humphreys of Tennessee. The liberal faction gained a concession with language requiring the producer to disclose the basis for any new recommendation to the consumer. Likewise, the group voted to extend the suitability requirements for in-force recommendations as well as for new clients. That could be significant, industry sources say. In addition to extra work and increased liability exposure, tweaking existing policies generally does not pay an agent nearly as much as servicing a new client, an industry representative said following the meeting. So some clients are likely to lose out on those necessary retirement-planning adjustments. Working group Chair Dean Cameron was unmoved by the arguments during the NAIC Summer Meeting. “Any time an agent is in front of a consumer, they have a responsibility to review the information ... and determine whether their decisions are suitable, especially if [the clients] are investing additional money,” the Idaho insurance commissioner said.

SEC On Twin Track

The period to comment on the SEC’s proposed rulemaking package that includes Regulation Best Interest closed in early August. The SEC proposal will hold brokers to a best-interest standard of care similar to a fiduciary standard, Chairman Jay Clayton has said. Investors, financial professionals and 12

Jay Clayton, SEC chairman, says the best-interest standard will be close to fiduciary, but critics disagree.

special-interest groups flocked to the site during its waning hours to weigh in on the proposals before the lengthy 90-day comment period was up. AARP drove more than 10,000 people to the SEC’s comment page in support of Regulation Best Interest. Other groups such as the Consumer Federation of America spoke loudly in opposition. “One of the key problems with this proposal is that you can’t tell what it means,” said Barbara Roper, director of investor protection for the CFA. Investors and financial professionals joined the discussion too. One comment from a 26-year-old investor reads, “I have reviewed the three proposed disclosures. They are difficult to understand and are not clear in what they are trying to do. Many terms are not defined; not everyone will understand what a brokerage account is. If the idea is to give investors information to help them understand whether their brokers or advisors are harming them, these disclosures do not achieve that end.” Advisors left feedback for the commission as well. “As a fee-only fiduciary advisor, I’m concerned with the Regulation Best Interest proposal. Specifically, the introduction of a new Regulation Best Interest standard would allow broker-dealers to say they act in the best interests of their clients, without actually being subject to

InsuranceNewsNet Magazine » September 2018

a full fiduciary duty to require it. This creates an unfair competitive environment for fiduciary advisors like myself,” said one fiduciary advisor. Now that the comment period is over, the SEC has said previously that it would take time to analyze the comments and feedback it received before it begins altering the rulemaking package. The commission did not specify how long its analysis would take, but it is known that the proposed Form CRS will go through testing before it’s revealed in its final form. Don’t anticipate having the proposal in its final form this year. Industry professionals say, best-case scenario, Regulation Best Interest and the rest of the proposal will take effect in 2020. InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at Follow him on Twitter @INNJohnH. AdvisorNews Managing Editor Cassie Miller may be reached at cassie. miller@innfeedback. com. Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @INNCassieM.

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Please keep in mind that the primary reason to purchase a life insurance product is the death benefit. Life insurance products contain fees, such as mortality and expense charges, and may contain restrictions, such as surrender periods. Agreements may be subject to additional costs and restrictions. Agreements may not be available in all states or may exist under a different name in various states and may not be available in combination with other agreements. SecureCare may not be available in all states. Product features, including limitations and exclusions, may vary by state. These materials are for informational and educational purposes only and are not designed, or intended, to be applicable to any person’s individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. Securian Financial Group, and its affi liates, have a fi nancial interest in the sale of their products. The Acceleration for Long-Term Care Agreement is a tax qualified long-term care agreement that covers care such as nursing care, home and community based care, and informal care as defi ned in the agreement. This agreement provides for the payment of a monthly benefit for qualified long-term care services.

This agreement is intended to provide federally tax qualified long-term care insurance benefits under Section 7702B of the Internal Revenue Code, as amended. However, due to uncertainty in the tax law, benefits paid under this agreement may be taxable. Please ensure that your clients consult a tax advisor regarding long-term care benefit payments, or when taking a loan or withdrawal from a life insurance contract. The death proceeds will be reduced by a long-term care or terminal illness benefit payment under this policy. POLICY FORM NUMBERS: ICC17-20103, 17-20103 and any state variations; ICC1720111, 17-20111 and any state variations INSURANCE PRODUCTS ARE ISSUED BY MINNESOTA LIFE INSURANCE COMPANY or Securian Life Insurance Company, a New York authorized insurer. Minnesota Life is not an authorized New York insurer and does not do insurance business in New York. Both companies are headquartered in St. Paul, MN. Product availability and features may vary by state. Each insurer is solely responsible for the fi nancial obligations under the policies or contracts it issues. Securian Financial is the marketing name for Securian Financial Group, Inc., and its affi liates.

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Stephen M.R. Covey

shows the fasttrack secrets to unbreakable trust 14

InsuranceNewsNet Magazine Âť September 2018



hat is the value of trust? That is difficult to gauge. It is easier to calculate the cost when trust is lacking. Stephen M.R. Covey calls mistrust a tax on your business. Mistrust makes it harder to get referrals and adds friction to your work environment. You end up fighting an uphill battle. You really feel it when trust is lacking. But having trust creates a dividend. It encourages enthusiastic referrals that lead to effortless sales. Life is easier. Business is fun. Who doesn’t want that? Covey is carrying on the legacy of his father, Stephen R. Covey, who wrote The 7 Habits Of Highly Effective People, the groundbreaking book that became essential reading for anybody wanting a more productive life. Stephen M.R. Covey became CEO of his father’s company, Covey Leadership Center, and he doubled sales within three years. He then orchestrated the merger to create FranklinCovey. Covey parlayed his leadership experience into the book The Speed Of Trust, which explains how trust makes success possible. He founded and now heads CoveyLink Worldwide and speaks internationally about leadership and trust. In this interview with Publisher Paul Feldman, Covey explains the value of trust to a business and how to earn that trust. FELDMAN: Gallup recently released the results of its poll on the most trusted professions and unfortunately insurance was pretty far down on the list. COVEY: It’s interesting because when that Gallup survey comes out every year measuring the professions, who you see at the top of the list tends to be in the medical profession and the like. That bottom of the list is often people in sales, and the question is kind of “What’s their agenda? Are they trying to make a sale or are they trying to really add value and really focus on their clients?” The key to improving the trust we have and become that trusted advisor — not just a salesperson — is to truly focus on the win of the client, so that we’re helping

the client succeed and we declare our intent. They see it, they know it and they feel it. They see it in our behavior and we create value for them. And as we create more value, that builds the trust. When we build the trust, our ability to create value goes up and becomes a virtuous upward spiral. Unfortunately, too often we’re starting with a deficit as an industry. That’s the reality. The fact that insurance sales and advisory work are low on the list means that we have an “inheritance tax.” So what we must do is counteract that consciously, deliberately. But here’s my message: If you as an insurance salesperson, as an insurance advisor, as a trusted advisor can get a reputation, a brand for being credible, for being trusted, what an advantage that is in a low-trust world where the trust is going down all around us. It’s a challenge, but it’s also an extraordinary opportunity to differentiate yourself on the basis of trust. That’s the opportunity. FELDMAN: Yes. How do you differentiate yourself with trust? COVEY: Trust is the one thing that changes everything. The more credible you are as a person, as a leader, as an advisor, the faster you can build trust with other people. The less credible you seem, the harder it is to do that. We must focus on credibility and that’s got two halves to it: a character half and a competence half. The character half is all about your integrity and your intent. Are you seeking mutual benefit? Win-win? Or is it just a self-serving agenda? Do you care? Do you care about the client you’re serving? Do they know that you care? Or do they see you as just trying to get a sale and make the deal? Your integrity and your intent flow from your character. The higher you build that and build a reputation and a brand that precedes you, it goes in front of you and you can build trust exceptionally fast that way. So that’s half of it: character. The other half is competence. And that’s all about your abilities, your talents, your skills, but also your results, your track record. What’s your track record?

Who are your clients and are they referenceable? What do they say about you and your performance and what you do for them to create value? The more you build your personal credibility, the quicker you can build trust with other people. It starts with credibility, but the second half of building trust moves to behavior. It’s how we interact with our clients and with our prospects, and how you do what you do can make all the difference. It’s the idea that trust is a function of this credibility. There are certain behaviors that will build trust exceptionally fast. That’s what my work on The Speed Of Trust is about, identifying the highest leverage behaviors. FELDMAN: What I found really interesting about your book was so much of it was actually about you. That you need to have trust in yourself before others will find trust in you. COVEY: Absolutely. Think about it, if you don’t trust yourself, how are you going to sustain trust with other people? Because at some point, that distrust of self will bleed out into the other relationships. FELDMAN: Whether they realize it or not. COVEY: They may not realize it. But it usually will come out. If you start with yourself, you will then be able to more quickly, more naturally, more abundantly build trust with others. Self-trust precedes relationship trust. Relationship trust precedes team trust. Look in the mirror first. Start with yourself. If you do that, then you can really start to build trust with other people. The good news is that it’s always in our circle of influence: We always say, “Hey, what can I do?” I look in the mirror: I start with myself. Trust starts with each of us. And when we do that, then we can build it more with other people. That’s counterintuitive to people who think, “Well, this is about the relationship.” It is. And if you look in the mirror first, you can build a better relationship. FELDMAN: It starts with looking in the mirror and trusting the self. It starts with little things. The little things make the difference. Even using your alarm

September 2018 » InsuranceNewsNet Magazine


INTERVIEW THE FAST LANE TO TRUST clock and saying, “Hey, I set it for 6 a.m., I’m getting up at 6 a.m.” Then you can build on those commitments. COVEY: Absolutely. The quickest way to build trust with another person is to make a commitment to them and then keep it. Make another commitment and keep it. Repeat that process. Make, keep, repeat, make, keep, repeat. You can build trust quickly that way. Guess what? That’s also the quickest way to build trust with yourself. Learn to make commitments to yourself and then keep them. The most important commitments are those little ones because those are the ones we often don’t keep and we say, “Ah, this doesn’t matter. It’s not important.”

virtue. Trust is an economic driver. It is a multiplier. It affects the speed at which you can move and the cost of everything. Think of a referral business, that is the speed of trust in action because it is your client telling your prospect that they should trust you. And there’s a transference of trust from your client to your prospect. Your prospect becomes a new client faster and at less cost. There’s always a speed to trust and when the trust goes up, the speed goes up with it and the cost goes down. That is a dividend. The opposite is true as well. There’s a tax. When the trust goes down for whatever reason, that is a withdrawal and you will pay a tax. Maybe you don’t keep a

The quickest way to build trust with another person is to make a commitment to them and then keep it. It could be as simple as, like you say, “I set my alarm for 6 a.m. to get up and go exercise.” When it goes off the next morning, do I hit the snooze button and go back to sleep, or do I get up and exercise like I intended to? You might say, “Well, that’s not a commitment,” but maybe it is. And in that little thing, that very action of making and keeping commitments — small commitments — that’s where a greater sense of clarity, of integrity, of empowerment begins to emerge. So make and keep commitments with yourself, starting especially with the little things. And I like the expression by Albert Einstein that if you can’t be trusted with the little things, you won’t be trusted with the big things. I like to put it this way — there are no little things. FELDMAN: What would you say about working on trust even if you’re a skilled advisor or insurance professional? COVEY: First of all, the skilled ones are probably good at trust naturally or they become good at it. But you can get better. And getting better has a huge payoff. This is not a little, nice, warm and fuzzy social 16

commitment. You said you’re going to call them but you don’t call them or you’re going to get back with them, on this date and you don’t. Or you’re inauthentic or you spin something instead of just talking straight about it. They’ll start to trust you less, they’ll start to question everything else you’re saying and doing and suddenly everything takes you longer. Everything costs you more. They’re far less apt to be a referenceable client for you and so forth. There are real economics to trust. This matters. It’s not just kind of a warm and fuzzy social virtue: it’s financial, it is a multiplier. It changes everything in sales, in leadership, in life. That’s what’s exciting. It’s really the single highest leverage thing you can do because if you get good at trust, it makes you better at everything else you’re trying to do. You get a multiplier working for you when you’re trusted versus a diminisher working against you when you’re not trusted. I focus on why this matters and how you build trust through your credibility and through your behavior. You can behave your way into greater trust and turn this into your greatest strength. Trust is really the one thing that changes everything.

InsuranceNewsNet Magazine » September 2018

And you already said this matters because we’re operating in a low-trust world. FELDMAN: Yes, we are in a low-trust profession. We have to be able to overcome that with every chance that we have. COVEY: Absolutely. You know, we’ve got a headwind. And because the profession is seen that way — fairly or unfairly — that’s kind of an inheritance tax. We need to counteract that by being extraordinarily credible and trusted in terms of how we approach things. And as we do that, it makes a profound difference. FELDMAN: Most people would think headwinds are bad, but every plane takes off into the headwinds. So there’s an opportunity here, and I think that this industry is just missing a huge opportunity in the marketplace. You know life insurance ownership is down. Right now, we have 70 percent of the American population that either says they’re underinsured or doesn’t have any insurance whatsoever. COVEY: We’re working with people, with prospects, with clients and trying to make a sale, create value for them, build a relationship, become a trusted advisor — the very first job is really to create trust. The second job is to create value because — think about it — people view value through the lens of whether they trust you or not. If you can start off by building trust through your credibility and your behavior, then suddenly people view you through a different lens. And in a profession that starts with a trust deficit, sometimes we’re starting in the hole and so we have to counteract that. I agree with you that rather than viewing that as a negative, I think that’s the opportunity where you can differentiate yourself. You can stand out and you’ll cut through all kinds of noise and clutter to be the high-trust player in a low-trust profession. Not only that, you’ll elevate the profession. Trust is confidence. In fact, in many languages trust and confidence are the exact same word. In English we have two words, but in many languages it’s indistinguishable. Same word.

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Trust Taxes And Dividends The 80% Tax (Nonexistent Trust) In The Organization • Dysfunctional environment and toxic culture (open warfare, sabotage grievances, lawsuits, criminal behavior) • Militant stakeholders • Intense micromanagement • Redundant hierarchy • Punishing systems and structures

In Personal Relationships • Dysfunctional relationships • Hot, angry confrontations or cold, bitter withdrawal • Defensive posturing and legal positioning (“I’ll see you in court!”) • Labeling of others as enemies or allies • Verbal, emotional and/or physical abuse

The 60% Tax (Very Low Trust) In The Organization • Unhealthy working environment • Unhappy employees and stakeholders • Intense political atmosphere with clear camps and parties • Excessive time wasted defending positions and decisions • Painful micromanagement and bureaucracy

The 40% Tax (Low Trust)

In Personal Relationships • Hostile behaviors (yelling, blaming, accusing, name-calling) followed by periods of brief contrition • Guarded communication • Constant worrying and suspicion • Mistakes remembered and used as weapons • Real issues not surfaced or dealt with effectively

In The Organization In Personal Relationships • Common “CYA” behavior • Energy draining and joyless interactions • Hidden agendas • Evidence gathering of other party’s weaknesses and mistakes • Militant stakeholders • Doubt about others’ reliability or commitment • Political camps with allies and enemies • Hidden agendas • Many dissatisfied employees and stakeholders • Guarded (often grudging) dispersing of information • Bureaucracy and redundancy in systems and structures

The 20% Tax (Trust Issues) In The Organization • Some bureaucratic rules and procedures • Unnecessary hierarchy • Slow approvals • Misaligned systems and structures • Some dissatisfied employees and stakeholders

In Personal Relationships • Regular misunderstandings • Concerns about intent and motive • Interactions characterized by tension • Communications colored by fear, uncertainty, doubt and worry • Energy spent in maintaining (instead of growing) relationships

No Tax/No Dividend (Trust Is Not An Issue) In The Organization • Healthy workplace • Good communication • Aligned systems and structures • Few office politics

In Personal Relationships • Polite, cordial, healthy communications • A focus on working together smoothly and efficiently • Mutual tolerance and acceptance • No worries

In The Organization • The focus is on work • Effective collaboration and execution • Positive partnering relationships with employees and stakeholders • Helpful systems and structures • Strong creativity and innovation

In Personal Relationships • Cooperative, close, vibrant relationships • A focus on looking for and leveraging one another’s strengths • Uplifting and positive communication • Mistakes seen as learning opportunities and quickly forgiven • Positive energy and positive people

The 20% Dividend (Trust Is A Visible Asset)

The 40% Dividend (World-Class Trust) In The Organization • High collaboration and partnering • Effortless communication • Positive, transparent relationships with employees and all stakeholders • Fully aligned systems and structures • Strong innovation, engagement, confidence and loyalty Stephen M.R. Covey, The Speed Of Trust, Free Press, 2006


InsuranceNewsNet Magazine » September 2018

In Personal Relationships • True joy in family and friendships, characterized by caring and love • Free, effortless communication • Inspiring work done together and characterized by purpose, creativity and excitement • Completely open, transparent relationships • Amazing energy created by relationships

THE FAST LANE TO TRUST INTERVIEW The opposite of trust is suspicion. I don’t trust someone if I’m suspicious about their agenda. Someone’s selling to me and I’m questioning their agenda — “Are they after my interest or their own?” Or I’m suspicious about their integrity or about their ability to deliver, to perform, to come through, to do what they said they’re going to do. It’s confidence versus suspicion. Now, where does that confidence come from? I suggest it comes from two sources. It comes from having both character and competence. Both are vital. If you have one but lack the other, you won’t sustain the trust. So trust, what is it? It is confidence that comes from having both character and competence. And that combination gives people a person, a leader, a team, an advisor, a product that they can trust. FELDMAN: Can you accelerate the speed at which trust is achieved? COVEY: Absolutely. Trust is learnable. It is a skill and it’s a competence. I like how you phrased that, Paul — “Can you accelerate it?” Yes. Can you take a shortcut? No. There are no shortcuts, but there is an accelerator. The key here is that we understand what trust is and also how we build trust. Trust is built from the inside out — meaning we start with ourselves. Look in the mirror. It comes from our credibility and our behavior. Let’s say I’m in a new relationship — whether with a client or a prospect or someone on my team — and I want to accelerate in building trust. How can I do that? Here’s a three-step process: The first step is to declare your intent. Tell them not only what you want to do, tell them why. Always give the why behind the what. Sometimes people give the what but they often don’t give the why. The why gives meaning. The why gives context. The why can change everything. So give the why.

my success by your success. It’s my only measure. So what I’m trying to do is build a relationship, and I want you to be able to trust me because if we can trust each other, everything’s better. So I’ll go first about this.” I declare my intent to build a relationship of trust in any relationship. That’s the first thing: declare your intent. The second thing is I signal my behavior — meaning that I tell them what I’m going to do. Use the term “signaling your behavior.” It’s kind of like if I’m driving on the freeway in the middle lane and I want to go in the left lane, what do I do? Or what should I do? FELDMAN: Put your turn signal on. COVEY: Not everyone does it, right? But, you know, turn the blinker on: signal. Now who am I doing that for? For myself? No. I know what I’m going to do. I’m doing it for others so they might know. That way, they’re looking for it, they’re aware of it. And when I signal my behavior to others, it’s a similar thing — they’re looking for it, they’re aware of it. So that means I tell them what I’m going to do. “So here’s what you need to know about me. If I make you a commitment, you can count on it because I won’t make a commitment I won’t keep. If I’m going to

talk to you, I’m going to talk straight and honest with you. If I have a concern or an issue, I’ll come straight to you. I won’t go around you or behind your back. If I have an agenda, it will be an open agenda. I won’t have a hidden agenda with you.” I’m telling people what I’m going to do. I signal my behavior. That’s the second step. The third step is now I simply do what I say I’m going to do. I just told them I was going to do it and now I do it -- I deliver. I made a commitment to them, and I keep it. I deliver it, I do what I say I’m going to do. And if you do that, you’ll build trust. If you do that third step, you’ll build trust. But you’ll build it a lot faster if you do the first two steps in front of the third. In other words, if you declare your intent and then signal your behavior and then you do what you say you’re going to do, they see it, they’re looking for it, they’re aware of it, and they credit you faster than had you not done those first two steps in front of the third. And so that’s a kind of way to accelerate trust, build it faster. People are looking for it, and they’ll give you more credit for it. NEXT MONTH: Stephen M.R. Covey explains how he found the value of trust and what it was like growing up Covey.

See Stephen LIVE at the 2018 InsuranceNewsNet Super Conference, Sept. 26–28 in Chicago! Visit us at for more information.

FELDMAN: Can you give us an example of what that looks like? COVEY: You come in and you say, “Hey, I’m glad to be with you. I’d really like to serve you. My goal is to help you succeed. And that’s what I’m all about. I measure September 2018 » InsuranceNewsNet Magazine



Short-Term Plans Get The OK The Trump administration made it easier for insurers to sell short-term health insurance plans that are good for up to 12 months. This latest action overturns an Obama administration ruling limiting short-term plans to 90 days. In addition, insurers now are permitted to make short-term plans renewable for up to three years. Although the Trump administration touted the expansion of short-term plans as a way for Americans to have more options in obtaining coverage, they emphasized that short-term coverage is no fix for the long-term problem of rising out-of-pocket medical expenses. Short-term plans could raise premiums for those who remain in the Affordable Care Act marketplace. In addition, short-term plans are far more limited in scope than ACAcompliant plans. “We make no representation that it’s equivalent coverage,” said James Parker, a senior advisor to Health and Human Services Secretary Alex Azar.


“I gotta have faith,” is what George Michael sang, but some market observers are wondering whether investors are losing faith in the stock market. Stock investing dwindled among millionaires and nonmillionaires from 34.1 percent to 30.2 percent in July, according to a Spectrem survey. Nonmillionaires expressed growing concerns about investing, with nearly half (47.8 percent) indicating that they did not plan to increase their investment in the coming month, the highest level since July 2017. The data, the company stated, pointed straight to geopolitics, especially increased angst among investors over global trade issues.






Unemployment rates are at record lows. Household wealth is up and taxes are down. Everything on the economic front should be great — right? Well, not great for everyone. Oxford Economics recently studied American spending patterns and found that the bottom 60 percent of earners was essentially drawing on their savings just to maintain their lifestyles. Their incomes weren’t enough to cover expenses. Economists describe the economy as fundamentally healthy after recovering from the 2008 financial crisis. The job market is booming. But even many people who have jobs and are in little danger of losing them feel burdened and uneasy. What are the factors driving this unease? The Oxford experts cited surging gasoline prices, rising real estate prices, mounting student debt and the high cost of child care as issues keeping many Americans from sharing in the robust economy.


President Trump is a negotiator who often begins by stating goals that are wildly optimistic — while knowing that his positions will ultimately be moderate. — Timothy Wiedman, a business professor at Doane College in Lincoln, Neb.


A rapidly growing share of older Americans are finding their golden years turned into rust. The rate of people 65 and older filing for bankruptcy is three times what it was in 1991, a study from the Consumer Bankruptcy Project revealed. Fueling this rise in bankruptcy are declining incomes during the working years, longer waits for full Social Security benefits, the replacement of employer pensions with 401(k) plans, and higher spending on housing and health care. When asked what led them to seek bankruptcy protection, those ages 65 and older usually cited multiple factors. About three in five said unmanageable medical expenses played a role. A little more than two-thirds cited a drop in income. Nearly three-quarters put some blame on hounding by debt collectors.

$100 trillion is roughly the net worth of U.S. households and nonprofits.

InsuranceNewsNet Magazine » September 2018

Source: Federal Reserve

the FÄąeld

A Visit With Agents of Change

Reginald Rabjohns never let setbacks get in the way of the hard work of success or of helping others find success.

By John Hilton


InsuranceNewsNet Magazine Âť September 2018



A Role Model Photo credit: Luis Contreras

Like many young men in the late 1960s, Rabjohns wanted to join the military and fight the communists in Vietnam. Although he was accepted into the Marines, an old wrestling injury prevented him from serving. That left Rabjohns looking for a career. A college counselor asked him a simple question: “Who influenced you?” Rabjohns named an old Boy Scout mentor from Jacksonville named Joe

Grojean, who sold life insurance. And with that conversation, Rabjohns had his profession. Hard work followed and success came quickly as the Rabjohns settled in Chicago. He became a State Mutual agent while still in college and qualified for his first Million Dollar Round Table meeting at 22 years old — the youngest ever to do so. In 1974, Rabjohns became a life member of MDRT at just 27. He averaged 125 paid life insurance contracts annually, and “never has less than one appointment a week,” a brief bio from that period reads.

calls. The settings might be different today, but the idea of approaching a skeptical potential client and making a difficult pitch remains the same. “It’s ridiculous because nobody has ever been hurt by talking to somebody on the telephone,” he said. “But instead people change it up. They say, ‘Gosh, this doesn’t feel right.’ Well, then you learn to make it feel right.”

Getting Involved

Like many young professionals, Rabjohns sought mentors early on in his career. A pair of colleagues filled that Photo credit: Luis Contreras

rowing up in Jacksonville, Ill., Reginald Rabjohns wanted to be a basketball player. In Illinois, as in much of the Midwest, basketball was king. One small problem: Rabjohns stopped growing as a high school freshman. “Where I had been average at least, now all of a sudden I was in the bottom half of the group as far as height,” he recalled. Others may have made that setback permanent, but Rabjohns just switched to football and wrestling. As an adult, he won trophies in handball. After he became an enormously successful insurance agent and leader of various associations, Rabjohns took up running and completed five marathons. He drove a car with the license plate “YesUCan.” That attitude and the willingness to keep pushing forward to improve made Rabjohns enormously successful. After 51 years in financial services, Rabjohns, 71, and his wife, Micheline, are “scaling down.” He remains chairman and CEO of Secure Futures, an independent insurance brokerage outside Chicago. Rabjohns will receive the John Newton Russell Award this month from the National Association of Insurance and Financial Advisors. His sales and management style made Rabjohns an in-demand speaker around the world — and will be his legacy, say friends and colleagues. “He certainly has all the characteristics of an outstanding individual — character and honesty,” said John F. Nichols, president of Disability Resource Group in Chicago. “Respect is a big one of those. He has done the work. He has served and he continues to serve to this day.”

At the wheel of his Jaguar, Rabjohns says his business philosophy focused on treating people right and enjoying the fruits of his success.

“If you think things are crappy and lousy, unpleasant, you definitely will find plenty of that kind of stuff going on in your life.” The secret to selling was never a secret at all, he says today. Believing in yourself, believing in the product, and being confident in approaching potential clients were and remain what it takes to be a successful agent. “I had the discipline to go out and do it exactly as they said to do it — exactly,” Rabjohns recalled. In the old days, that meant a lot of cold

role, industrious agency men who belonged to MDRT. “Fortunately, I listened to them,” Rabjohns recalled. “I figured out these guys were the most successful. They seemed to have more smiles on their face than everybody else. Why wouldn’t I just do what they do?” So, getting involved, being a leader and giving back to the industry became a key

September 2018 » InsuranceNewsNet Magazine



plank in Rabjohns’ credo. Leadership roles would follow not only with MDRT, but with The American College, GAMA International, the Life and Health Insurance Foundation for Education, and other Chicago-based organizations.

they needed, and something they would want if he did his job right. “The product is not the deal. The price is not the deal. The problem is the deal,” he said. “There are more people with the need (for life insurance) and the ability

But two days before her death, she called Rabjohns to thank him for the policy. Her children would never have to worry about what college to attend, or how to pay for it, she told him. “She said, ‘You changed the life of the people that I love the most because you took care of what needed to be taken care of,’” Rabjohns recalled. “Times like those are just really life-changers as far as my sensitivity. I think they make me a better person overall by far.”

The Team Concept

He became an in-demand speaker, delivering talks on financial services in 25 countries and 42 states. “If someone needed a speaker for an event, Reggie would be there, and he had a wealth of experience and stories relevant to the people there,” said Brian H. Ashe, a colleague whose friendship dates to the 1960s. “He was able to successfully combine pursuing success for himself while at the same time giving back to the industry.” All along the way, Rabjohns refined the timeless sales and financial advice approaches that delivered him to the top of the industry. “My takeaway was that if you want to be with the big boys, you got to be acting like some of the big boys, and the big boys do things differently than guys who are average or below average,” he said. “It’s a little bit harder, but it’s just getting in the right habit.” Those winning habits included pursuing membership roles in industry associations, putting in 12-hour days if necessary, and adopting a positive, winning mindset. Rabjohns never needed convincing that life insurance is a must-have product. So he was able to talk to potential clients with a confidence that he had something 24

to pay than there are agents with enough courage to ask.” Then there’s the other side of that transaction. Rabjohns once sold a woman who did clerical work in his office about $200,000 worth of life insurance. It was a bigger policy than she thought she needed at the time. Later, after the woman left the company, she was diagnosed with ovarian cancer. After a period in remission, the cancer returned and she died in her early 40s.

InsuranceNewsNet Magazine » September 2018

After many years as a State Mutual agency, Rabjohns disagreed with the direction the company chose to go and switched to New England Life in 1997. His shop would become one of the top-producing New England agencies. Along the way, Rabjohns earned an industry reputation for strong retention and recruitment of the best agent force. Nichols worked closely with Rabjohns on associations and felt the force of his positive personality and leadership. “On occasion you would get that call from Reggie, who would just encourage you,” he said. “You know, just an ‘I’m proud of you’ along with a few words of wisdom.” During trips to industry events, Rabjohns would rent “the largest suite I could get” and host as many of his team as he could fit. Those bonding trips made the agency closer and more productive, he said. During his five decades in the industry, Rabjohns received most every award


Photo credit: Luis Contreras

Rabjohns got into the insurance business after seeing an early Boy Scout mentor do so well. Once he got started, Rabjohns says he succeeded due to a steely discipline that never wavered.

A Few Choice ‘Regisms’ A 51-year veteran of the financial services industry, Reggie Rabjohns developed his philosophies for success early on. They included adopting a positive attitude, putting in the work and giving back to the industry. An accomplished and in-demand public speaker, Rabjohns’ message evolved into many phrases and key points he would repeat often over the years. A few key “Regisms” include:

“If you want to be a leader, you have to explain to yourself that’s what you’re after. And to do that, you have to maintain a higher standard.” i i i

“If you want to be with the big boys, you’ve got to be acting like one of the big boys. And the big boys are doing things differently than guys who are average or below average.” i i i

“You only have to work about half the time. You just decide which half. So you’ve got to work 12 hours a day and do something else the other 12.” i i i

“Figure out what you want and go for it. Keep your head and nose down, and make sure you bring everybody along and tell the truth.”

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john. Follow him on Twitter @INNJohnH.

Tell Us!

i i i

“You’ve got to know what you want and then don’t be willing to compromise. And stick it out.” i i i

to be had. In 2008, he received the prestigious Huebner Gold Medal from The American College, the institution’s highest honor. All of his success and time devoted to the business side of things never came at the expense of family, Rabjohns said. The Rabjohns had three children, including a mentally challenged son, Christian, who died in July 2017. “I’m not the person who did it all by himself. If it weren’t for my wife, no one would have ever heard of me, and there is no doubt about that,” Rabjohns said. “And we have been a great team now for almost 51 years.” From their home base of Northbrook, about 25 miles north of Chicago, the Rabjohns lived a thrilling life. Activity and adventure were predominant themes. Rabjohns got his pilot’s license and bought a plane. He owned boats and went scuba diving. Daughter Stephanie and son Joshua were both Division I athletes and are married with their own families. The Rabjohns have four grandchildren. As Reggie manages his departure from the financial world, there will be more trips to the beach. And plenty of family time. He remains heavily involved with community organizations such as Lutheran Church of the Ascension. It is a life made possible by a fear-free commitment to being happy and successful, Rabjohns said. “I’m just one guy doing my part in this happy life,” he said. “If it feels too good to be true, tough luck. It is true, so it may as well work for you.”

“There are more probably people with the need (for life insurance) and the ability to pay than there are agents with enough courage to ask.”

Do you know someone who would make a compelling profile story? Shoot us a quick email telling us who it is and why you think so. Send it to, and put PROFILE in the subject line.

September 2018 » InsuranceNewsNet Magazine



InsuranceNewsNet Magazine Âť September 2018


The Cold War Between Fees and Commissions Freezes Life Insurance Growth • by Steven A. Morelli


may be quiet but make no mistake, there is a war going on. Each side has the same rallying cry — “the client’s best interest” — but each side sees that cause differently. At stake is the future of not only the life insurance industry but also how the largest demographic groups of Americans enter their graying years. The population of independent life insurance agents has been thinning for decades, mostly because of an aging sales force that is no longer being replenished by life insurance companies or agencies. Insurers got out of the training business long ago, tired of spending resources only to see their most successful agents go independent. The threat of regulation to change the basic rules of sales has helped drain the pool of agents even further in recent years. The Securities and Exchange Commission tried to make fixed indexed annuities securities products with Rule 151A in 2010. Then the Department of Labor tried to throw a fiduciary umbrella over annuity transactions involving individual retirement account money. The regulatory rumbles continue with the SEC revisiting the fiduciary model while the National Association of Insurance Commissioners also looks at toughening the suitability standard. Most of these examples involve annuities, but the message is clear: The fee-based world is pressuring the commission-based sales tradition. Some agents are changing their business model to be more holistic in their approach. But many older insurance agents found they preferred retiring rather than overhauling their practices. Others have migrated to the world of financial advising, where more and more insurance companies see their future. Here’s the thing — financial advisors are not completely crazy about insurance. Even some former insurance agents are reluctant to recommend insurance products. Ashley Foster of Nxt:Gen Financial Planning in Houston started in the insurance business before becoming a fee-only advisor. Although he worked for 10 years in the business, he rarely recommends permanent insurance. “When you’re working on a commissionable product that’s going to pay you, let’s say, 80 percent of the first-year premium, there’s an incentive there,” Foster said. “If I’m going to put that money into an IRA where I make 0.8 percent versus 80 percent of that money, it’s very hard to separate that conflict.” September 2018 » InsuranceNewsNet Magazine




20 PoliciesPolicies (millions) (millions)





Premium ($ Prem

Growth of Growth of Lifetime Lifetime Great Great S&P S&P Market Market Guarantee UL Guarantee UL recession recess ↑ 20% Weak ↑ 20% Weak UL UL conduct conduct per yr per yr replacing replacing economy economy issues issues 16 Premium ($billions) WL 16 16 WL Premium($billions) ($billions) Premium

Individual Life Sales 14 14 Policies(millions) (millions) Policies

es (millions) 20 20


18 18 16 UL 16 Policies (millions)

replacing WL

14 14 30yr 12 12 T-Bill 14%

10 10

30yr T-Bill 14%

88 66 44 22

UL replacing WL



Weak 10 economy





30yr 30yr economy T-Bill14% 14% T-Bill 6







Growth of

30yr 30yr Lifetime T-Bill 14%S&P T-Bill 14% Market GuaranteeMarket UL Market ↑ 20% Weak Weak per yr economy economy

conduct UL UL replacing replacing issues WL WL S&P Market conduct issues

↑ 20% per yr

Growth of Lifetime Guarantee UL

Growthofof Growth Great Lifetime Lifetime S&P S&P recession Guarantee UL UL 20% Guarantee ↑ ↑20% 16

Market Premium ($billions) conduct conduct peryryr per issues issues Great recession

14 Great Great recession recession

14 14


12 12


10 10










14 12

4 95 77 78 79 77 80 78 81 79 82 80 83 81 84 82 85 83 86 84 87 85 88 86 89 87 90 88 91 89 92 90 93 91 94 92 95 93 96 94 97 98 96 99 97 00 98 02 00 03 01 04 02 05 03 06 04 07 05 08 06 09 07 10 08 11 09 12 10 1 201 99

0 ▬ Premium ▬ Policies ▬ Policies▬ Premium 2


1 82 83 84 85 86 14 777787 787888 797989 808090 818191 828292 838393 848494 858595 868696 878797 888898 898999 909000 919101 929202 939303 949404 959505 969606 979707 989808 999909 000010 010111 020212 030313 04040 050515 060616 070717 0808090910101111121213131414151516161717 9 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

▬ Policies ▬ Policies

Premium ▬ Premium ▬▬ Premium ▬ Premium ▬ ▬ Policies Policies 1Q 2018:1Q -3% 2018: -3%

22 00

1Q 2018:1Q -2% 2018: -2%

Source: LIMRA’s Individual Life Sales Survey and LIMRA estimates 2018: -3% -3% 1Q1Q2018:

1Q 2018: 1Q-2% 2018: -2% 1Q2018: 2018:-3% -3% 1Q

1Q2018: 2018:-2% -2% 1Q

LIMRA’s Individual Life Survey LIMRA estimates LIMRA’s Individual Life Salesand Survey LIMRAisestimates Even Source: with newSource: fee-based products be-Sales San Antonio, said and insurance essential ing developed, he is still skeptical. to holistic planning. Life Sales Survey and LIMRA estimates Source: LIMRA’s Individual LifeSales Sales Surveyand andLIMRA LIMRAestimates estimates Source: LIMRA’s Individual “The problem isLife that theSurvey insurance “I recommend insurance — even a industry has a very bad reputation in small amount — to my clients, as the the fee-only advisor world,” Foster said, majority of my clients do have a need for identifying permanent insurance in it, including single individuals.” Chan particular. “Fee-only planners shy away said. “As a holistic financial planner, I from complexity. So recommending a understand that the base for financial product whose cost of insurance is not planning is insurance, as it is an efficient fixed and whose crediting rates caps can means to cover obligations.” be changed by the insurance company at Not only does he see this need in his any time throughout the life of the con- clients, but he is seeing the effect of untract are unknown factors that are hard der-insurance all around him. to account for in planning.” “Personally,” Chan said, “I’ve experiHe was especially critical of the in- enced the effects of my peers not having creased cost of insurance in some older sufficient coverage when they unexpectuniversal life policies, making them edly passed and the burden was left to unaffordable for some clients. He did family members.” not spare the old insurance standby, whole life. Relationship Status: Complicated “Since dividends are not guaranteed How things got so complex is complicated. and have been in long-term decline, recIn the early 1980s, policy count for ommending a product that is sold on the individual life insurance peaked. This strength of nonguaranteed participating was the end of the door-to-door, home dividends is difficult for fee-only plan- service era. ners,” Foster said. That era was when cold-calling often Although Foster represents the opin- meant a knock on the door to sell smallion of a hardened base of advisor re- face term or whole life policies. Premium sistance to insurance, many financial was often collected weekly or every othplanners see recommending coverage as er week at the same door by a debit agent. part of their fiduciary duty. If clients wanted more coverage, they John Chan, a partner at Alamo would buy more policies. Any overall Insurance and Wealth Management, market growth corresponded with an

dividual Life Sales Survey and LIMRA estimates


InsuranceNewsNet Magazine » September 2018

increase in policy count. Companies focused on increasing premium per policy and decreasing the labor-intensive home service model. As they went upmarket, the companies required fewer field career agents. Another major factor in the drop in individual policies was the rise in group coverage during the 1970s and ’80s. As more people were covered at work and remained at companies long term, they often felt little need for additional coverage. Certainly, many agents would argue that those workers should have had their own coverage secured in their younger, more insurable years — coverage they could keep regardless of employer. Overall group coverage dropped after the 2008 economic crash and has stalled ever since. But perhaps the most significant change since the early ’80s was the arrival of universal life. UL is flexible, so clients could increase or decrease coverage without having to buy a new policy — and not adding to overall policy count. The products boomed in popularity. They were seen as an alternative to whole life — viewed as opaque, inflexible and expensive. In a sense, UL was an independent agent’s whole life, which was usually sold by mutual companies. UL was more transparent, showing the

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416314 US (08/18)


Individual Life Sales by Product Policies Policies (millions) (millions) Annualized New Premium ($Billions)

Great Growth Growthofofrecession Growth of Market S&P Lifetime Lifetime S&P S&P LTG UL conduct Market ↑ 20% ↑ ↑20% Market Weak Guarantee Guarantee UL UL 20% Weak Weak issues conduct conduct economy per yr per economy economy peryryr issues issues Forecast

S&P ↑ 20% per yr

UL UL UL replacing replacing replacing WL WL WL Great 30yr 30yr T-Bill T-Bill T-Bill 14% 14% recession 14% Growth of LTG UL Great recession Forecast

Growth of LTG3.9 UL Great recession

Forecast 15.5


Great Great recession recession


8 Term

15.5 Variable Products

Universal Life

Variable Products




Universal LifeTerm

1980 1983 1986 1989 1992 1995 1998 2001 2004 2010 2013 2019e 778787979801977 8081818282 8383848485 8586868787 88888989 9090919192 9293939494 95959696 9797989899 9900000101 020203032007 0404050506 0607070808 090910102016 1111121213 131414151516161717




Variable Products

▬ ▬ Policies Policies Universal Life


▬ ▬Premium Premium Whole Life

Source: LIMRA’s U.S. Individual Life Sales Survey and Preliminary LIMRA estimates

accounts within the product. But they During this time, indexed UL boomed Could 1Q 1Q2018: 2018:-3% -3% 1Q 1Q2018: 2018:-2% -2% insurance companies make inUniversal Life Term 2016 Whole Life 2019e faded. Whole life also as other UL roads into that world? accused of being a “black box,” but it was bounced back after the crash. Now IUL simple in the sense that clients knew what and whole life are the leading lights of The Industry Slowly Pivots they would pay and what they would get. the fixed life insurance market. The life insurance industry has re’s A’sIndividual IndividualLife LifeSales SalesSurvey Surveyand and LIMRA LIMRAestimates estimates Term Life Riders could be attached Another rising star has been with- gained its footing since the 2008 crisis, 2001 2004 2007 also 2010 2013 to exist2016 Whole 2019e ing UL policies, which also did not add drawal riders, particularly ones target- but it is still not back to the precrash to policy count. The growth in UL sales ing long-term care needs. LTC insurance peak of 2007. corresponded with an increase in overall has not been selling well for several Robert Kerzner, CEO of LIMRA, said Whole Life So a smaller of the years, despite consumers’ anxiety about he is not satisfied with where the numbers 2007 premium. 2010 2013 2016 percentage 2019e population was being covered but paying their lengthening longevity. Rather than are. But he pointed out that the 2007 spike a higher premium. dying early, Americans are facing the coincided with a surge in stranger-owned Variable UL started growing in the risk of needing some kind of long-term life insurance, which the industry identilate ’80s and roared with the stock mar- assistance in their later years. fied as a scourge at that time. Current pol0 2013 2016 2019e ket into the ’90s. VUL met the same fate LTC riders answer the two objections of icy count nationally is equal to the count as equities in 2000, with sales plummet- an insurance product. Consumers often just before the peak. ing with the Dow Jones average. balk at putting money into a product they The insurance world has been recalibratAgents had switched to lifetime guar- suspect they or their heirs might never ing to adapt to a shifting American demoantee UL, or simply guaranteed UL, af- use. They resist LTCi because of cost and graphic, particularly the part that has the ter the 2000 crash. But that also dropped the history of carriers changing pricing money to spend on insurance products. after the 2008 crash. and conditions on existing policies. “When you look at the U.S., 80 percent After the crash, indexed products took Those products are helping insurance of the money is in the hands of boomoff because of their combination of the agents, but the independent field force ers — preretirees and retirees,” Kerzner inherent safety of the underlying annui- is still shrinking. More have been retir- said. “So if you’re in the annuity business, ty or UL and the possibility of gain with ing or just leaving the business, pushed clearly that’s where the money is. If you’re the indexed account. But fixed indexed along by threats of regulatory changes, in the asset accumulation business, that’s annuities were assailed, first by the SEC, and they are not being replenished. where the money is. If you’re looking at which tried to regulate them. Then the Over on the financial advising side of the life insurance business, clearly those Department of Labor tried to restrict the the fence, RIAs were rallying, fiduciary who are younger and having families are sale of FIAs bought with IRA funds. flag in hand. more important.” 1998weren’t 2001 2007might2010 2013 simple.2004 Whole life have been



Whole L

15.5 14.3


Variable Products




Variable Product


15.5 14.3


Premium Premium($billions) ($billions)

InsuranceNewsNet Magazine » September 2018


Figure 7.1 Figure 7.1 Individual, Group, and Credit Credit Life Life Insurance Insurance in in Force Force in in the the United UnitedStates States(face (faceamount) amount)


$ Trillions 20 Credit

Individual, Group and Credit Life Insurance in Force in the United States (face amount)

with compensation. He said he understands the reasoning but still does not buy the arguments. $ Trillions 10 “I know, having priced products — no 20 matter how much people make such a big Credit Group 5 deal out of the front-end-loaded nature Individual 15 of life policies and the high commissions — when you take commissions out of 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 10 a product and you price a life product Source: ACLI tabulations of National Association of Insurance Commissioners (NAIC) data, used by permission. Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Data represent U.S. life insurers, and, as of 2003, fraternal benefit societies.over 20 years, over 30 years, it has very 5 limited impact,” he said. “In fact, frontSource: ACLI tabulations of National Association of Insurance Commissioners (NAIC) data, used by permission. NAIC does not endorse any analysis or conclusions based on use of its data. end-loaded products are often better Notes: Data represent U.S. life insurers and, as of 2003, fraternal benefit societies. consumer values because it allows you to 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 reward the people who stay with you for Source: ACLI tabulations of National Association of Insurance Commissioners (NAIC) data, used by permission. 30 and 40 years.” Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Data represent U.S. life insurers, and, as of 2003, fraternal benefit societies. Figure 7.2 Average Face Amount of Individual Life Insurance Figure 7.2 But, even so, advisors would still feel Source: ACLI tabulations of National Association of Insurance Commissioners (NAIC) data, used by permission. NAIC does not endorse any analysis Average Face Amount Individual Life Insurance Policies Purchased Average Face of of Individual Life Insurance Policies Purchased or conclusions based onAmount use of its data. Policies Purchased the stigma of being paid up front. Because Notes: Data represent U.S. life insurers and, as of 2003, fraternal benefit societies. of that, products should be built for the $Thousands way fee-based advisors do business. 183 200 168 166 Kerzner is still skeptical that those 165 163 153 147 150 products would make an enormous Figure 7 .2 135 Figure 7.2 119 difference because he is not seeing advi115 Average Face Amount Individual Life Insurance Policies Purchased Average Face Amount of of Individual Life Insurance Policies Purchased 100 sors recognize the intrinsic value of life 91 $Thousands insurance. 50 183 “It’s really about a change in philosophy 200 168 166 165 163 about all of the financial risks their cli153 147 150 ents face and one of those risks is death,” 135 0 119 115 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Kerzner said. “I would argue with any RIA 100 that if you’ve got a 45-year-old you’ve just 91 Source: ACLI tabulations of National Association of Insurance Commissioners (NAIC) data, used by permission. Source: ACLI tabulations of National Association of Insurance Commissioners (NAIC) data, used by permission. Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Data represent U.S. life insurers, and, as of 2003, fraternal benefit societies. done a retirement plan for and you’re not Source: ACLI tabulations of National Association of Insurance Commissioners (NAIC) data, used by permission. NAIC does not endorse any analysis NAIC does not endorse any analysis or conclusions based on use of its data. or basedrepresent on use of its data. 50conclusions Notes: Data U.S. life insurers and, as of 2003, fraternal benefit societies. going to talk about what happens to their Notes: Data represent U.S. life insurers and, as of 2003, fraternal benefit societies. financial plan when the breadwinner or the predominant of the two breadwinners 0 Policy count an move2012 to be 2014 more diversified dies, how is that a plan?” 1996 1998 has 2000ticked 2002up since 2004 2006 agent 2008 force 2010 2016 all-time low point in 2013. Kerzner saw and include asset management. If they Another argument against insurance Source: ACLI tabulations of National Association of Insurance Commissioners (NAIC) data, used by permission. that as encouraging, but said any products, they tend to be products is complexity and opacity, a Notes: NAIC does not endorse any analysis or conclusions based onthe use oftypes its data. Datasell represent life insurers, and, as of 2003, fraternal benefit societies. Source: ACLI tabulations of National Association of Insurance Commissioners (NAIC) data, used by permission. NAIC does not endorse any analysis and purpose insurance have changed annuities. charge usually leveled at annuities. But or conclusions based on use of itsof data. Notes: Data represent U.S. life insurers and, as of 2003, fraternal benefit societies. dramatically since the heyday of 40 years He has seen that migration go to two permanent life insurance, particularly ago, when he first got into the insurance areas over the past 20 years: bank plat- whole life, is a target for this criticism. In business. forms and broker-dealers. fact, that accusation was one of the moti“We’re certainly not going to get back “And typically once they make that vations for creating universal life, which to the ’70 and ’80 levels,” Kerzner said. move, they spend less time on life insur- bares its inner workings. Life Insurance 67 “But, remember, in those days people ance and more on asset management,” Kerzner is not completely swayed by were buying policies on each of the kids. Kerzner said. “So a lot of your RIAs start- the complexity and transparency arguSometimes mom and dad had six or ed out as life insurance people. Remember ment either. seven policies each. Today, people are LPL actually started out of Linsco and “They aren’t recommending term eibuying bigger face amounts, UL to VL. Private Ledger. They were very much peo- ther,” he said. “Why wouldn’t you at least They can often add more premium with- ple who sold life insurance.” for the 45-year-old be recommending out buying a new policy. So the dynamKerzner will be retiring at the end of this term? I do think the bigger issue is not Life Insurance 67 ics have changed, but I think that we’re year after 14 years with LIMRA. Before the product, it’s the mindset. Although I seeing a slight uptick in policy count is then, he was with Hartford Life for 30 fully understand why our current prodreally significant.” years, having risen to executive vice presi- uct design is a problem for them.” Nevertheless, it is clearly challenging dent and head of the individual life division. to sell life insurance products other than In that time, he has not only seen the Finding The Fee-Based Fit annuities. The demographics are not in shift from insurance agent to financial The industry is responding by crafting the sweet spot, and the traditional sales advisor, but he has also heard the argu- fee-based insurance products to appeal force is shifting. ments advisors make against life insur- to advisors. Carriers are shaving corners Kerzner has seen a large chunk of the ance — too complex, too front-loaded off the square pegs, but the products still Figure 7.1 Figure 7.1 Group and Credit Life 15 Individual, Group, CreditIndividual Life Insurance Insurance in in Force Force in in the the United UnitedStates States(face (faceamount) amount)

September 2018 » InsuranceNewsNet Magazine



The number of affiliated agents has declined more than 40 percent


















Sources: NOT constant groups of companies, Census of U.S. Sales Personnel, LIMRA [1973-2010] U.S. Insurance Sales Professions, LIMRA [2013 Agency-building and home service combined]

don’t always fit neatly into the round holes. For example, how should an advisor charge a fee? Should the product be considered an asset under management, even though it is not an asset that needs much management? And where does the fee come from? That is a problem that Terrence Herr of Herr Capital Management in Chicago grapples with. Fee-based products tend not to have all the bells and whistles of commissioned ones, particularly UL, but some of those features are missed. However, Herr said he is encouraged by changes he is seeing with newer fee-based products, 400


where many of the same features or new ones are being offered. There is still the issue of charging fees though, especially on annuities. “With an annuity where you’re managing underlying investments on an ongoing basis for a customer, that’s where it gets difficult,” Herr said. “If you pull a fee from an annuity contract, the IRS is going to consider that a distribution and a 1099 will be generated.” Another route is charging a fee for time. Clients usually are not eager to write a check for service, but Herr said that is changing. Many of his clients are coming from large brokerage houses that

The Recruiting Gap 34



were pushing investments rather than doing a holistic financial plan, which he believes must include life insurance. “I think it’s more about having an appreciation for the financial planning work,” Herr said of clients willing to pay a fee. “As our profession comes of age, we’re going to be set up more like CPA firms and more like law firms. I think all the discussion about the fiduciary role pushed our industry closer [to that]. I used to think we were going be there in 15 to 20 years. Now I think we’re going to be there a lot faster.”

A Bridge Over Troubled Advisors

David Lau is one of those trying to build the bridge between RIAs and insurance products. His firm, DPL Financial Partners in Louisville, is not an insurance company, insurance marketing organization or RIA. It is an insurance agency working with about 20 insurers. Lau set up the agency four years ago after nearly 10 years with Jefferson National, where he was the chief operations officer. He helped Jefferson build variable annuity distribution for RIA clients. His experience showed him that insurance companies and RIAs seem to be speaking past each other. “For a while now, insurance carriers have been trying to crack the code with RIAs,” Lau said, “because it’s such a huge market. CONTINUED ON PAGE 41


45 40 35

34 30




28 29


30 25 20 15


10 5


2000 U.S. population (millions)



Recruits (000) actual and projected




Recruits (000) needed to keep up with population growth

U.S. Census Bureau and LIMRA’s U.S. Recruiting Trends


InsuranceNewsNet Magazine » September 2018

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The Life Insurance Issue • Special Sponsored Section

Consider Intergenerational Planning for Producer Asset Retention A family approach to planning may mitigate risk to your business


ong-term financial planning strategies require a financial professional to consider the impact of a client’s death on loved ones. However, historically, financial professionals focused only on preparing the assets for the beneficiaries. They didn’t focus on the second part of the equation: helping the beneficiaries build a strategy for those assets. Giving thoughtful consideration to this continuum of service is beneficial not only to the client’s family but also to the financial professional, whose book of business can experience a significant impact after the death of a client, especially when beneficiaries spend their inheritance or take their business elsewhere.

The biggest obstacle to financial professionals retaining assets passed to beneficiaries:

20% Children spend the assets too quickly


Clients are unwilling to include adult children in meetings about wealth


Children show no interest in having the same advisor manage their assets


Inherited assets are too small to manage profitably Source: InvestmentNews, “The great wealth transfer is coming, putting advisors at risk,” July 2015

The Value of Intergenerational Wealth Preservation and Management

With so much at stake, it’s more important than ever for producers to do their own financial planning and expand the scope of client relationships to include the next generation. “Taking time to meet with your client’s spouse, children and grandchildren during the financial planning process can yield several benefits,” said Scott Kellen, regional vice president, Allianz.

18% Inheritance is split among too many parties

30% No relationship exists with family members

The odds of a financial professional losing the family’s business upon a client’s death are high. Less than a quarter of U.S. consumers plan to use the services of a trusted financial institution or professional to handle an inheritance.1 An April 2018 InvestmentNews survey indicates that 66 percent of inheritors change advisors. Considering these trends, plus the fact that $1 trillion will pass from one generation to the next each year, mitigating the resulting decrease in value of one’s book of business should be top of mind for financial professionals. “You’ve spent years working with that client to build and foster the relationship, and to grow and protect their assets. If you don’t get to know the spouse, their partner or their children, and your client dies — the next generation will take over,” said Nate Lund, regional vice president, Allianz Life Insurance Company of North America. “If you don’t have a relationship built with that generation, you are more than likely going to get fired and lose those assets.”

• Asset retention at death. Building a strong relationship with the next generation before a wealth transfer makes beneficiaries much more likely to continue that relationship. • Generating new leads. Relationship building across generations acts as a potential lead generator for many producers, increasing revenue opportunities and integrating life insurance into your business. • Business succession planning. Expanding your book of business across generations increases interest for future partners or owners. The next generation of financial professionals wants to see a client base built on multigenerational relationships.

How to Provide Immediate Value to the Next Generation

Part of the financial professional’s job is to create a holistic financial strategy that focuses on more than just the parents. “Bringing up wealth transfer with clients shows them that you care about the future success of their children,” said Brett Novielli, regional vice president, Allianz. “This can be a

The Life Insurance Issue • Special Sponsored Section

American families lose their wealth following a time-tested pattern.3 70% of families waste away their wealth by the second generation. By the third generation, 90% of families have little or nothing left of money received from grandparents.

big differentiator. Only 20 percent of financial professionals are targeting younger family members2, so this approach will help you stand out.” A starting point can be asking what future clients would like to see for their children and grandchildren. Some clients are concerned about children not having enough income to support themselves or not setting anything aside for educational expenses. In particular, some grandparents may be interested in ensuring their grandchildren have adequate college funding. In addition to offering a death benefit that is generally income-tax-free to beneficiaries, fixed index universal life (FIUL) insurance can potentially provide the opportunity for supplemental college funding as well as supplemental retirement income.

The Need for Financial Planning Strategies and Support 2 Agree there is a retirement crisis

For example, a client who is concerned for both her daughter and granddaughter may consider FIUL to provide for both generations. Your client may gift funds to her daughter that can be used to pay the premiums on an FIUL policy on which the daughter is both the owner and the insured. That way, if the daughter were to pass away before the granddaughter goes to college, the policy becomes a self-completing vehicle and the death benefit would help pay for college costs. But if the daughter lives as planned, she can take policy loans1 against any available cash value that can be used to supplement other college funding sources. Clients utilizing a loan strategy should carefully manage their policy values so as to help prevent a policy lapse and adverse tax consequences. Clients should consult with their team of professionals, including a tax adviser, to determine what may be appropriate for their situation. FIUL insurance can be a powerful way to help provide for a child’s future — and help supplement retirement income too — all while providing reassurance to beneficiaries through a generally income-tax-free death benefit.2

Allianz provides a variety of potential solutions to help financial professionals give their clients the reassurance that comes with protecting future generations. Want to understand how fixed index universal life insurance products from Allianz can help your clients’ beneficiaries pursue their dreams — and potentially protect your business in the process? Visit to discover more about our innovative FIUL solutions and to get the “Solution for life’s many stages” sales idea.

Baby boomers 84% Gen-Xers 92% 1. U.S. Consumers are Unprepared for Coming Wealth Transfer, New FIS Study Finds, May 16, 2018, Business Wire, U.S.-Consumers-Unprepared-Coming-Wealth-Transfer-New 2. Allianz Generations Apart Study: 3. Here’s why 90% of rich people squander their fortunes, Moneyish, Catey Hill, April 24, 2017, Policy loans and withdrawals will reduce the available cash value and death benefit and may cause the policy to lapse, or may affect guarantees against lapse. Withdrawals in excess of premiums paid will be subject to ordinary income tax. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. If a policy is a modified endowment contract (MEC), policy loans and withdrawals will be taxable as ordinary income to the extent there are earnings in the policy. If any of these features are exercised prior to age 59½ on a MEC, a 10% federal additional tax may be imposed. Tax laws are subject to change, and you should consult a tax professional. For financial professional use only – not for use with the public. Product and feature availability may vary by state and broker/dealer. Products are issued by Allianz Life Insurance Company of North America. Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America. 53764-18 9/2018

The Life Insurance Issue • Special Sponsored Section

Whole•istic thinking … With Guardian Life

A key ingredient to living confidently: whole life insurance — share the whole perspective.


hen a client understands and owns whole life insurance, they are more likely to have higher financial and emotional confidence. In fact, 81 percent of the most financially confident Americans own whole life insurance, according to the Guardian Study of Financial and Emotional Confidence. Why does owning whole life promote confidence? Because most Americans want to protect their families in the event of death or disability.1 In fact, 85 percent of working Americans place a priority on providing for their families if they die or are unable to work. Yet more than 52 percent of households need more life insurance. “When it fits in a financial plan, the benefits of whole life can add up to helping clients live life to its fullest with growth and diversification, while also giving them the comfort of knowing that the people they love are financially protected when they pass away,” said Chet E. Schwartz, registered representative and financial advisor of Park Avenue Securities LLC, an indirect, wholly owned subsidiary of The Guardian Life Insurance Company of America. “You can’t leave a more valuable gift for your family than to give them security or financial confidence, but there are some added benefits your clients should be aware of that can directly benefit them as well.”

Strengthen the conversation

Filling the gap between clients’ goals and the reality of their planning can help them address the top priorities of many working Americans: protecting their families, having enough money in retirement and educating their children. Yet, low awareness and misunderstanding can prevent clients from valuing the benefits of whole life or what whole life insurance can mean to them. That makes it essential to be equipped to have effective discussions with them.

Present the wide range of whole life benefits

Some clients are fully unaware of the multiple benefits offered by whole life and might not understand the full scope of that benefit — or even know about the others. “The idea of life insurance can give clients tunnel vision. They may see a death benefit only,” said Schwartz. “But when their needs go beyond death benefit protection, we can help

them understand that whole life has other value. For instance, there is the potential to build cash value that could be used to help fund certain needs such as education, buying a home or retirement. It can also serve as an invaluable source of capital when opportunity knocks and liquidity is needed to benefit from it, without the restrictions, limitations, taxes and penalties often associated with other asset types.” 2, 3, 4

The Life Insurance Issue • Special Sponsored Section

Tools to Tackle the Myths Myth: Whole life is expensive. Myth: Whole life policy premiums increase with age or illness. Myth: Funding options are limited and inflexible. Myth: Term life is a better option for most people.

When reviewing the benefits of whole life, finding out that it can help your clients manage risk by working alongside their traditional mix of investments (like stocks and bonds) may surprise them. They also may not know cash value is insulated from market fluctuations, so it’s there when they need it, now or in retirement.

Build your clients’ confidence

There’s so much more to whole life than your clients may know. Listen to their needs and what they want and provide them with the life insurance solution that’s right for them. If protection, growth and diversification and ultimately cash flow matter to your clients, whole life may be right for them.

» It’s an essential part of planning for the unexpected and covering them and their loved ones.

Myth: People rarely use the living benefits of whole life when they’re alive.

» It will continue to grow no matter what happens in the stock

In Guardian’s conversation guide for advisors, “A Look Inside the Uncommon Knowledge of Life Insurance,” learn how to address these common myths and several others in your client conversations.

These benefits make whole life insurance a strong asset for diversifying a financial portfolio.

The cash value that grows tax-deferred is the amount accumulated over time by the premium payments your client makes, and the dividends paid into their policy. 4, 5

Take the mystery out of whole life

A valuable way to break down barriers to understanding whole life is tackling the misconceptions many people have about it. Framing fact versus fiction can boost clients’ knowledge in an easy-to-understand way. “Myths stand in the way of clients making the kinds of decisions that are in their best interest and divert [their] thoughts from those things that are truly important to them,” said Richard M. Weber, MBA, CLU, AEP (Distinguished), managing member of Ethical Insurance Solutions LLC.

Explain whole life as an asset class

Guardian’s Study of Financial and Emotional Confidence revealed more than one in four Americans are overwhelmed with day-to-day stress and finances, leaving them wanting to feel more confident and secure in their finances, both today and tomorrow. If your clients are unaware that whole life is considered an asset class that can help diversify a portfolio, just starting that discussion can help them take action. Making a plan can help them feel more positive and secure about the future, easing some of the worry they feel today. “Cash value is a meaningful asset that rightfully has an important place in an individual’s portfolio,” said Weber. “Even though life insurance is not purchased as an investment, once acquired, it can and should be managed as a valuable component of the overall financial portfolio.”

or bond markets.

Visit to check out Guardian’s resources for advisors and discover how whole life can help your clients live with greater financial — and emotional — confidence. 1 Riders incur an additional premium or cost. Riders may not be available in all states. 2 Some whole life policies don’t have any cash value in years one or two. Whole life insurance should be considered for its long-term value. Early cash value accumulation and early payment of dividends depend upon policy type and/or policy design, and cash value accumulation is offset by insurance and company expenses. Consult with a Guardian representative and refer to a whole life insurance illustration for more information about a particular whole life insurance policy. 3 Policy benefits are reduced by any outstanding loan or loan interest and/ or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59½, any taxable withdrawal may also be subject to a 10 percent federal tax penalty. 4 Guardian, its subsidiaries, agents and employees do not provide tax, legal or accounting advice. Consult your tax, legal or accounting professional regarding your client’s individual situation. 5

Dividends are not guaranteed and are declared annually.

2018-63491 Exp. 7/20

The Life Insurance Issue • Special Sponsored Section

The Art of Story Selling Proven Techniques to Sell Life Insurance By Chris Coudret*, vice president, distribution and market strategy, OneAmerica®


s human beings, we’re conditioned to believe we’re invincible. It makes sense. If we spent every day wondering about all the bad things that could happen to us, Chris Coudret we’d be paralyzed with fear. While useful in some aspects, this natural suspension of disbelief makes it challenging for financial professionals to help prospective clients develop solid financial plans, especially when an important part of those plans is life insurance. Even when clients are receptive to financial discussions involving life insurance, it’s often too difficult for them to conceptualize the tangible benefits. They may see numbers and understand basic principles, but the idea of a death benefit may not be relatable simply because they can’t conceive of ever needing to use it. But a classic technique is taking the insurance and financial world in a whole new direction. It’s called story selling, and it is changing the way today’s agents and advisors are communicating with clients and prospects. “My dad was a general agent, so I learned from him and the older agents to tell stories and keep it simple,” said Steven R. Lewis*, LUTCF, a registered representative in the Fresno, California, area. “Using stories helps your client remember what they got and why they got it. When they have a deeper connection to their coverage, you’re more likely to retain the relationship and their business.” When we interviewed some of our leading financial professionals about using stories to help their clients understand the value of life insurance, we discovered consistent themes. Effective stories are true, relatable, reasonably short and easy to understand. Effective stories can have happy or sad endings; but either way, they evoke some sort of an emotional response. Take the story told by Mary Lyons*, a financial advisor with Dallas-based Personal Economics Group. This tale is a sad one, but it contains a lesson her clients never forget. “My brother’s good friend was 32 years old. He had a 9-month-old baby girl and a new wife. One day, he began having headaches. “A few days later, they took a weekend trip to visit friends. On the way back, his head was bothering him so he told his wife that he was going to take a nap. When she tried to wake him, he didn’t respond. She immediately took him to the emergency room, where he was declared brain-dead. “He had meningitis.

“Three weeks later, she was forced to go back to work fulltime and put their house on the market because he had only $200,000 of life insurance. Here’s this woman who had a great life, and the whole thing was gone overnight,” Lyons explained. While more seasoned agents, like Lyons, have plenty of client stories to share, newer agents have stories to tell too. They may have a personal story about why they got into the business or what event inspired their career choice, how life insurance changed the life of their mother or grandmother, or the experience of losing a close friend to an unexpected illness. “We have to be aware of our own stories. If you’re in the business for the right reasons, and you focus on helping clients have a better plan than the way you found them, it helps you as an advisor and as an agent,” said Ryan Leggett*, LUTCF, president and CEO of Anchor Financial Group in Richmond, Virginia. Becoming both a good listener and a storyteller can help you build your business. When you hear what your client is really saying and know what is truly important to them, you can tell the right story — one that relates to their unique situation — and build stronger, longer-lasting client relationships. Get inspired by OneAmerica financial professionals who have used story selling to help clients make smart decisions about life insurance.

Download the OneAmerica storybook at and get started with story selling today.

*Securities offered through OneAmerica Securities, Inc., a Registered Investment Advisor, Member FINRA, SIPC. Personal Economics Group and Anchor Financial Group are not affiliates of OneAmerica Securities or the companies of OneAmerica and are not broker dealers or Registered Investment Advisors. The names and when necessary specific information used in this example have been changed to protect privacy. This example is not necessarily indicative of future results and may not reflect the experience of all clients.

The Life Insurance Issue • Special Sponsored Section

Business Processing on Your Terms With New First Protective Technology By Eric P. Miller, FLMI, president, First Protective Insurance Group


irst Protective has made a big investment in a tool that makes doing business easier for our top insurance producers. SalesUP HQ — a new mobile application that none of our competitors offer — reduces manual hand-offs and brings efficiency, transparency and accuracy to every step in the Eric P. Miller, president case management process. The new tool reflects First Protective’s dedication to earning our producers’ business every day. We are well-known for our long-term relationships with producers — relationships that work because of a high-touch, value-added approach. SalesUP HQ empowers producers to spend more time with clients and less time in the back office.

Doing business is easier with SalesUP HQ

SalesUP HQ takes the guesswork out of case management, so producers can focus on producing. The app offers an easy way to use a smartphone to stay on top of all pending business across the spectrum of all products and carriers First Protective offers. Push notifications via instant messaging alert producers of any status changes, so everyone stays up to date on where their business stands, and key status information is available with just a glance at the screen of a mobile device.

SalesUP HQ empowers producers with: Easy access to case status Real-time text message updates on case requirements Unresolved issues right from your phone Convenient oversight of all your business Real-time case management and underwriting make the difference

At the end of the day, time is money. And our producers are looking for new ways to improve efficiency and effectiveness as they deliver vital financial solutions to their clients. SalesUP HQ makes the case management process easier and faster. Once cases are submitted, real-time status updates via text messaging keep everyone focused on filling requirements. Producers are in-the-know sooner, requirements are filled quickly, and cases are issued and paid faster.

Enhanced communication improves the producer experience

Producers are our customers. First Protective wants to give them as many options as possible to communicate with us in the ways that work best for them. SalesUP HQ makes it easy for our producers to contact their First Protective

support team, stay in sync on case status and follow up on outstanding requirements — all in just a few clicks on their mobile devices. But SalesUP HQ is just one ingredient in the First Protective solutions and support formula that includes continually finding new ways to deliver producers the support they need, in the ways they want it. For producers who prefer support by phone, email or another method, First Protective will strive to make it happen.

High touch service results in growth and sales

First Protective’s mission is to build meaningful, profitable and enduring producer relationships by delivering superior insurance solutions, hands-on sales support and high-touch service to enable our producers to grow and prosper as we solve the financial needs of those we serve together. It’s a mission that First Protective takes seriously — and we believe we walk the walk, not just talk the talk. At First Protective, everyone goes the extra mile to earn the business, trust and confidence of our producers every day.

Manage business on your terms — anytime, anywhere

First Protective is differentiating itself from competitors by making it as easy as possible for producers to produce. SalesUP HQ is just more evidence of First Protective’s commitment to delivering state-of-the-art solutions, sales support and service to our producers and partners.

Find out why SalesUP HQ is the most powerful, time-saving app on producers’ smartphones. Simply visit to download a one-page information sheet on this breakthrough producer advantage.

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IUL and LTG Share of UL Sales 47%









IUL Indexed Universal Life IUL






LTG Price increases due to interest rates

AG38 reserves kick in


39% 27%

37% 35%






34% 30%



Period of low interest rate + good S&P performance



LTG Guarantee Lifetime LTG







Source: LIMRA’s U.S. Individual Life Insurance Sales Survey and LIMRA estimates

AG38 reserves kick AG38 reserves kick in in It is almost a $4 trillionPrice market, and there’s Price increases duetheir products. The agency is helping reform, companies and agents were still increases due 59% 59% very little penetration from insurance work with RIAs. using inaccurate models. His research toaninterest rates some companies56% to interest rates 55% 56% 55% point of view.” showed a failure rate of more than 90 53% 53% 52% 52% 48% Commission was the biggest problem Where They Live percent of commonly used illustrations. % 44% 44% in the fee-based world, particularly with Companies are building special products Barry D. Flagg of Triangulum 34% 34% 39% 39% fee-only advisors. So he saw that advisors and trying to cater to fee-based financial Financial in Tampa said he has spent 37% 37% were excluding insurance, which he con- advisors. What more do advisors want? more than 30 years in life insurance and sidered key to a27% complete financial plan. Like partners in any relationship, they is now a sub-advisor for thousands of life 27% 35% 35% 23% But it was more than just the product. would like to be spoken 22% to on their terms insurance trusts and for RIAs, CPAs and 22% 21% 21% 20% 30% 23% 20% 30% 19% 19% “I saw many carriers trying to get into and in their comfort zone. tax attorneys. He said he finds those du15% 15% the market and really copying what I’d A key concern is how product perforbious projections are the biggest hurdles 10% % Period low interest rate + good Period of of low interest rate + good built at Jefferson National on the prod- S&P mance is presented. Illustrations help to acceptance by those professionals. S&P performance performance uct side,” Lau said. “So I thought what I really need to do is work with carriers In 1900, 75 percent of the people in the help them understand how2013 to work2014 2008 2009 2010 2011 2012 2012 2013 2014 2015 2015 2016 2016 2017 2017 08 2009 to 2010 2011 United States died before they reached age with RIAs, because it’s not just a product problem. It’s systems problems. It’s com- 65. Today, this is almost reversed: About 70 pliance issues. It’s all kinds of things to percent of people die after age 65. really work well with fee-only advisors.” Lau’s agency’s unusual setup is that RIAs pay to be a member of it. DPL then clients understand how products are “Life insurers and marketing organisells fee-free and commission-free insur- projected to perform for decades out. zations don’t provide advisors with the ance to the RIAs’ clients. Insurance com- The models became popular as universal information essential to advice — the panies pay the agency to sell the product. life grew. Agents would use illustrations competitiveness of internal policy ex“Through working with the RIA, what to show premiums that often ended up penses and historical performance of their clients’ insurance needs are, we can being insufficient because of inaccurate invested assets underlying policy cash bring various commission-free solutions assumptions in the models. values,” Flagg said. “Instead, insurers to it,” Lau said. “Instead of being the Quite a few academic studies have and marketing organizations offer comagent, the RIA can be the advisor and found a high failure rate for those scenar- parisons of hypothetical future policy have access to the account through the ios. In fact, InsuranceNewsNet Magazine values as supposed due diligence, but limited power of attorney.” published an award-winning article such hypothetical comparisons are DPL is advising some of the 20 compa- written by Richard Weber in July 2013 now considered misleading, fundamennies it works with, not necessarily selling that showed that 15 years since industry tally inappropriate and unreliable by September 2018 » InsuranceNewsNet Magazine


COVER STORY TEAR DOWN THIS WALL financial, insurance and banking industry authorities.” They are useful to “salespeople” but are “inconsistent” with the advisors’ duty to exercise reasonable care, skill and caution, he said, adding that this issue eclipses the commission vs. fee argument. “Until insurers and marketing organizations provide advisors with reliable cost and performance information needed to actually make a recommendation in the clients’ best interest, and do so in ways that are consistent with the advisors’ way of doing business, financial advisors will continue to be reluctant to recommend life insurance without regard to the form of compensation,” Flagg said.

Insurance companies have said that they are being transparent in their products and the information is available to advisors. Herr of Herr Financial in Chicago said advisors have to know where to look. “They’ve never looked under the hood closely,” he said. “Insurance is one of the most highly regulated industries out there, so the information’s there. You just have to know where to get it and know how to read it.” But Herr is not leaving it just in advisors’ laps. Insurers have to break it down in the ways advisors want it. “If they want to gain traction with advisors, it’s education,” Herr said. “So

Americans’ Financial Concerns: Protecting family members in the event of one’s death not in the top 5 Money for a comfortable retirement



Paying for long-term care services


for medical expenses Money for aPaying comfortable retirement

9% 17% 7% 11%

Supporting myself if disabledcare & unable to work Paying for long-term services Paying monthly bills Paying for medical expenses

54% 66% 51% 55% 43%54% 39% 51%



Paying off or reducing credit card debt Supporting myself if disabled & unable to work


10% 7% 5%14%

Burdening others with my monthly funeral expenses Paying bills moneycredit on my investments Paying offLosing or reducing card debt

38% 43% 39%38%

8% 10% 5% 7% Paying my investments mortgage or rent Losing money on my 8%6%

38%37% 35% 38%

Burdening if I die prematurely Burdening others dependents with my funeral expenses

Leaving an ifinheritance for my heirs Burdening dependents I die prematurely

3% 7% 3% 6%

Paying for amy child's schooling/college Paying mortgage or rent Leaving an inheritance for my heirs

33% 37% 27% 35%

Concerned Largest concern Concerned Largest concern




3% Since 2007, life-combination product sales have grown more than $3 billion Paying for a child's schooling/college

Premium ($billions)

Policies (1,000s) 400

New Premium










$3.5 $3.0 $2.5 $2.0







$4.5 $4.0





New Policies















72 2011



$0.5 2012







Premium shown is Total Premium (Recurring + Single Premium). * 2010 First year to include Life-Chronic Illness riders. ** 2015 New participants into survey. Source: LIMRA’s 2016 Life-Combination Sales Survey


InsuranceNewsNet Magazine » September 2018

here’s a universal life policy [and] how it works — here’s the money going in, here’s the money going out, here’s where the insurance company takes money, here are the different sorts of riders that are out here and here’s how they work.” When Herr started in insurance more than 20 years ago, he sat with agency managers who explained the products. “They basically dissected the insurance policies for me,” Herr said. “But they’d also brought in policies from major competitors and broke them down — here are the differences, here’s how they work.” But an advisor starting with a broker-dealer is unlikely to get the same instruction. “If you went to Merrill Lynch, they’re going to break down all the nuances of investing, but they’re not doing it with insurance,” Herr said. “The problem is career insurance agencies have dried up and that’s where you got that education.” If companies want to reach a new audience, they will have to go to new places, Herr said. “Show up at TD Ameritrade conferences and Morningstar conferences,” Herr said, “and put on continuing education sessions that are product-agnostic, dissecting universal life insurance, dissecting variable universal life — that’s how an insurance company can gain traction.” But Herr did not let his fellow advisors off the hook. If they are going to consider themselves holistic, best-interest advisors, they need to change their metrics. “The biggest challenge investment advisors have is that they tend to put their value in their performance numbers,” Herr said. “And they have virtually no control over their performance. The markets are going to dictate your range of performance from year to year; and if that’s the only value you’re bringing a client, then you’ve got a problem.” Steven A. Morelli is editor-in-chief for Insurance N ewsN et . He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at


SHOW YOUR CLIENTS THE POWER OF WEALTH + HEALTH Potholes. Detours. Bumps in the road. We can’t predict life’s challenges, but we can prepare for them. Help your clients live longer and better by helping them secure their financial and physical well-being today. Discover the Wealth + Health connection at

©2018 Transamerica Corporation. All Rights Reserved. 26856_ADBRAD0718

September 2018 » InsuranceNewsNet Magazine




Insurers Dive Into Expansion Life insurance sales may be flat,

but major insurance companies are pressing ahead with ambitious real estate projects. Companies that have recently announced multimillion-dollar expansions, renovations and changes of address include Thrivent Financial, MassMutual, Guardian Life, Jackson National, MetLife, Nationwide and Transamerica. Around the country, life insurers owned and occupied real estate values equivalent to $6.16 billion last year, compared with $6.14 billion in 2007, according to calculation supplied by the American Council of Life Insurers using data from the National Association of Insurance Commissioners. The value of owned-and-occupied life insurance real estate sank to an 18-year low of $5.58 billion in 2005, the data show. quarter will call to purchase a policy (26 percent) and a little more than 1 in 5 will go online (22 percent).



Not all direct mail pieces end up in the circular file. A new LIMRA study finds 23 percent of consumers say receiving a direct mailer sparks the recognition that they need life insurance. Direct mail was ranked as the most influential method of triggering consumer interest — ahead of speaking to a financial professional (15 percent), talking with friends and family (15 percent), and information received by email or at work (10 percent each). But although direct mail might get consumers thinking about life insurance, these prospective buyers are likely to use online and in-person methods to gather more information about coverage. By the time consumers are ready to buy, they are most likely to talk to an agent or advisor in person (27 percent). Another DID YOU




New parents’ baby registries list everything from car seats to footed pajamas with ducks on them. Now, friends and family have a new option for a gift for that little bundle of joy — the gift of life insurance.

The baby registry platform Babylist has partnered with Prudential to offer new parents the option to add a life insurance policy to their baby registry in addition to traditional registry items. An expectant parent setting up a baby registry through can add a Prudential term life insurance goal in the Cash Funds section, then select a target amount that friends and family can contribute toward. Some parents might choose a goal that would cover just the first

John Y. Kim will retire as New York Life president at the end of the year.

InsuranceNewsNet Magazine » September 2018

Source: New York Life

The number of in-force individual life insurance policies has been in decline over the past decade despite the steady increase in the prime insurance buying age population.” — Scott Hawkins, Director, Insurance Research at Conning

year’s insurance premiums; others might set a goal high enough to cover two or more years of coverage. Regardless of the goal amount, any monetary contributions are transferred to their bank account, minus a small processing fee. Setting up that fund doesn’t secure their policy, though. Parents will then need to go to Prudential to select their desired amount of coverage and purchase a plan.


Consumers without life insurance are aware that they are not financially prepared for the death of a loved one, but they are not likely to act to reduce the risk. That’s the result of a survey by AIG. Those who said they do not have life insurance: » Feel 11 percentage points less prepared for death of self than those who have life insurance. » Are 14 percentage points less likely than life insurance owners to increase their rate of retirement savings in response to the risk of a market crash. » Are twice as likely to take actions to reduce the financial risk of illness of self than of death.

Nope, don't need it ...


How IUL Helps The Asian-American Business Succession Market The number of Asian-owned small businesses will continue to rise. This represents an opportunity to present life insurance solutions as a way to solve business succession needs. By Jeff Marsh


erhaps no market holds as much potential for financial professionals to meet needs as the Asian-American smallbusiness market. As a recent Washington Examiner article shared: “Asian-Americans have excelled in virtually every field and occupation imaginable, but there continues to be a strong tradition of entrepreneurship. There are now almost 2 million Asian-owned small businesses.” Furthermore, according to the article, “Small businesses as a whole support nearly half of all private sector employees 46

and account for nearly two-thirds of new jobs. Asian-owned small businesses already employ over 3.5 million people, but that number will continue to rise as more young Asians are starting businesses and doing so in higher numbers than any other demographic.” In the burgeoning Asian-American entrepreneurial community, opportunities abound to help with business succession planning. Some Asian-Americans have not taken steps to ensure a smooth transition of their small businesses simply because of language challenges or cultural barriers they may encounter with a non-Asian advisor. Therefore, carrier-provided, in-language educational materials and the support of bilingual carrier staff can be crucial in successfully meeting needs. Cash-value life insurance — in particular, indexed universal life solutions — can also be instrumental in serving business succession needs in the

InsuranceNewsNet Magazine » September 2018

Asian-American market. When a business owner dies, the financial consequences depend largely on how well the business has prepared for a transition of ownership. Buy-sell agreements that are fully funded with IUL insurance are designed to address numerous key challenges.

What Surviving Owners Want

Surviving owners typically look to retain total control of the business without interference from the deceased owner’s heirs. They may also expect that the heirs will sell them the deceased owner’s interest promptly and at a fair price. Most important, they want to retain the loyalty and support of employees, customers and creditors during and after the change in ownership.

What Heirs Want

The deceased owner’s heirs want ongoing financial security, especially after the

HOW IUL HELPS THE ASIAN-AMERICAN BUSINESS SUCCESSION MARKET LIFE loss of the owner’s salary and benefits. Heirs typically expect prompt settlement of the deceased owner’s estate, including a proper valuation of the business interest if they plan to sell it. The family may want to retain the business interest or sell it promptly at an attractive price.

Without Preparation

When there is no formal buy-sell agreement addressing what will happen when an owner dies, unhappy consequences can result. Litigation between the deceased

credit interest based on the performance of an underlying index strategy selected by the client and the upward movement of the index or multiple indices. It is important to note that index interest crediting accounts do have limitations, such as participation rates or rate caps, which can limit or reduce the interest earned. Therefore, always see the contract for additional information. A legally binding buy-sell agreement is designed to:

fund the purchase. To provide funding, each owner buys a life insurance policy covering the life of every other owner. Each person owns and is the beneficiary of each individual policy. For example, assume a partnership valued at $750,000 is owned by three equal partners — Kwan, Zhang and Dao. With a cross-purchase agreement, each partner buys policies on the lives of the other two in the amount of $125,000 each, so that each partner is insured for a total of $250,000. If Kwan dies, the

An IUL insurance product may be the best source of funding for many buy-sell arrangements. As permanent life insurance, IUL products offer death benefit protection as well as the potential for cash value accumulation. owner’s heirs and surviving owners is not uncommon. Delays in settling the deceased owner’s estate and conflicts with surviving owners can result in loss of customers, employees and creditor confidence. These outcomes can damage the business — and possibly even force liquidation, the worst possible result.

The Solution

A formal, written buy-sell agreement between the business owners is the first step in ensuring an orderly, successful transition following an owner’s death. Buy-sell agreements are complex instruments and, therefore, consumers should consult their legal and tax advisors regarding creation of such documents. But they are designed to serve the needs of smallbusiness proprietors well. An IUL insurance product may be the best source of funding for many buy-sell arrangements. As permanent life insurance, IUL products offer death benefit protection as well as the potential for cash value accumulation. Also, IUL insurance is designed to help guard against market volatility, while providing clients alternatives to supplemental retirement income. Although IUL policies are not investments, they

» Establish a fair price for the business interest and terms of sale that are acceptable to all parties. » Establish a value for estate tax purposes, which helps avoid estate settlement delays and IRS challenges. (A professional appraisal of the business should be performed; seek legal counsel for advice on this subject.) » Establish the basis for determining the amount and funding of life insurance needed to fund the purchase of the business by heirs or others. » Encourage confidence in the ongoing vitality of the business in the eyes of customers, creditors and employees. There are three primary types of buy-sell agreements. While this article provides a brief overview of each type, it’s important to review the attributes of each in greater detail to determine the type of agreement to put in place.

Cross-Purchase Agreement

In a cross-purchase agreement, each owner buys part of the interest. Each owner buys insurance on every other owner to

death benefits on the two policies insuring his life — one owned by Zhang and one by Dao — are paid to the two surviving partners as beneficiaries of the policies. Together, the surviving partners have a total of $250,000 to purchase Kwan’s business interest from his heirs. With a cross-purchase buy-sell agreement in place, surviving owners are assured of having the funds to buy out a deceased owner’s heirs and maintain control of the business. Although all the terms of the sale are decided in advance, the agreement should provide a mechanism (a periodic stock revaluation clause, for example) so that heirs receive a fair price for the deceased’s interest. Surviving owners receive an increase in basis that can reduce the capital gains tax on a future sale of the business interest. Be sure, however, to tell clients to consult a qualified tax expert regarding their own situation.

Entity Purchase Agreement

With an entity purchase agreement, the business buys insurance on each owner to fund the purchase, with the business entity designated as the owner and beneficiary of each policy. The business must give notice that it intends to insure the

September 2018 » InsuranceNewsNet Magazine


LIFE HOW IUL HELPS THE ASIAN-AMERICAN BUSINESS SUCCESSION MARKET owner-employees and must also secure each owner-employee’s written consent. The amount of insurance approximates the agreed-upon purchase price for each owner’s interest. The agreement stipulates either a specific purchase price or a formula for determining the purchase price. Life insurance proceeds provide the funds to buy the deceased owner’s interest. Although premiums paid for the insurance are not tax deductible, death benefits are generally excluded from federal income tax when the notice and consent requirements have been met. Redemptions that meet certain requirements can avoid being taxed as dividend distributions. An entity buy-sell agreement is preferable when there are many owners, since this arrangement requires that the business purchase only one life insurance policy on each owner. A cross-purchase agreement requires that every owner buy a policy on every other owner. An entity agreement may also be

preferred when there is a wide age disparity among the owners, because younger owners would bear a greater premium burden to insure older owners under a cross-purchase agreement. If the business wants access to policy cash values, the

sole-owner business. The buyer typically purchases life insurance on the owner in an amount equal to the purchase obligation under the agreement. The agreement may require the buyer to maintain the policy by paying the premiums when due.

A properly designed buy-sell agreement represents a clear solution to a series of difficult challenges that Asian-American small-business clients may face. business must own the policy. This is not possible in a cross-purchase agreement, where individuals are the policy owners.

One-Way Agreement

In a one-way agreement, an individual (usually a key employee) agrees to buy a

The agreement usually provides that the buyer will not assume the business liabilities. The sole owner’s executor may use cash from the purchase to pay off the liabilities, as well as other estate costs and taxes. The balance is distributed under the terms of the owner’s will to

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InsuranceNewsNet Magazine » September 2018

HOW IUL HELPS THE ASIAN-AMERICAN BUSINESS SUCCESSION MARKET LIFE the estate beneficiaries or, perhaps, to a trust for their benefit. As the policy’s owner and beneficiary, the buyer is obligated to notify the owner before exercising any policy rights that might affect the policy value. Similarly, the agreement may prevent the owner from disposing of key business assets or assigning them as collateral without the buyer’s consent. The buyer often has a “right of first refusal” on any lifetime disposition of the business by the owner. This means that the owner must first offer the business to the buyer before selling it to a third party during the owner’s life, including at retirement. Only after the buyer declines the option can the owner pursue a third-party sale. Although this clearly restricts the owner’s freedom, it also ensures that the buyer will not pay insurance premiums in vain. The buyer can make the purchase in installments, providing the installment sale is structured to comply with the Internal Revenue Code’s installment

sale rules. This could be particularly useful in the case of a lifetime purchase, when only the policy’s cash value — not the full death benefit — is available to the buyer. A one-way buy-sell agreement is an effective way to resolve myriad problems that can otherwise affect a one-owner business. The key is to find a willing buyer to complete the agreement — ideally, someone already employed by or familiar with the business.

The Result

A properly designed buy-sell agreement represents a clear solution to a series of difficult challenges that AsianAmerican small-business clients may face. It ensures stability in business transition and prevents heirs from having to run or sell the business after an owner dies. Thus, it can benefit all parties — heirs, owners, employees, customers and suppliers. Fully funding the buy-sell agreement with IUL insurance may be the most

effective way to help ensure the viability of the sale when the time comes. Take the time to learn more from carrierprovided advanced markets portals and online IUL insurance resource centers. When you have the appropriate resources and in-language support, as well as insights into the culture, traits and values of the Asian-American community, you have the best potential to meet this market’s pressing needs. Jeff Marsh is senior vice president, life sales, at AIG Financial Distributors. Jeff may be contacted at jeff.marsh@

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September 2018 » InsuranceNewsNet Magazine



Congress Looks At Annuities In 401(k)s

J. Scott Applewhite / Associated Press

Congress is showing interest in legislation that could allow the purchase of annuities in workplace retirement plans. The proposed legislation is known as the Retirement Enhancement and Savings Act of 2018. It could add millions of people to the rolls of tax-deferred retirement accounts by boosting incentives for employers and workers to participate. The incentives would make it easier for small companies to pool together to reduce the costs Senate Finance Committee Chairman Orrin Hatch, R-Utah, has co-introduced the Retirement of maintaining retirement plans Enhancement and Savings Act of 2018. and would allow the purchase of annuities in 401(k)s. The legislation offers employers a “fiduciary safe harbor” from liability in the event that the annuity provider stops making payments. House Ways and Means Chairman Kevin Brady, R-Texas, has indicated he intends to include retirement account provisions in a “Tax Reform 2.0” package expected to reach the floor this fall.

Prudential’s in-force block is performing well and the message to outsiders is the company intends to go after annuity business in an even bigger way, he said. The carrier is pushing ahead with new products, having entered the indexed annuity market in February.


While some companies are running away from annuities by selling their portfolios, Prudential is embracing a bigger commitment to the business. For Prudential, doubling down isn’t simply developing new products and adding to the number of distribution channels through which it sells. Forging ahead means integrating annuities into the discussions advisors are having with clients and helping advisors better communicate the benefits, said Kent Sluyter, president of Prudential Annuities.

A startup called Blueprint Income aims to be the first digital retirement plan that focuses on annuities. The website’s three co-founders said they want to make it easier for consumers to buy annuities by offering them online.

One of Blueprint’s innovations involves how deferred-income annuities are sold. The


has disposed of its remaining stake KNOW MetLife in Brighthouse Financial for a loss of $212



million in connection with the sale.

InsuranceNewsNet Magazine » September 2018

Source: MetLife


With thousands of people retiring every day, there is a need for increasing retirement savings and putting less pressure on government programs. — Jeanne de Cervens, vice president and director of federal government affairs at Transamerica

website spits out a quote for a contract in 60 seconds and requires an initial investment of $5,000. A twist on this is offering annuity buyers a subscription-based service. After the initial investment, buyers can increase their retirement income stream with deposits of as little as $100 a month to create what Blueprint calls “a personal pension.” New York Life and Guardian Life are Blueprint’s partners in the subscription service.


With the approaching change of seasons comes a list of new products in the annuity world. Here are some of them. » The Standard’s Index Select Annuity is a single-premium, deferred index annuity that credits interest based on the performance of the S&P 500 index. Index Select Annuity offers clients a choice of surrender charge periods, including five-, seven- and 10-year options. Clients can also select their preferred interest-crediting strategy, as the product can include rate cap, participation rate or fixed interest crediting. » Sammons Retirement Solutions began distributing the LiveWell Freedom Variable Annuity with a new guaranteed lifetime withdrawal benefit rider through banks, independent broker-dealers and full-service broker-dealers. The rider isn’t optional and comes only with the purchase of LiveWell Freedom VA, which is issued by Midland National Life.

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Selecting The Most Suitable Income Rider For Your Client The complexity of a lifetime income benefit rider benefit crediting can raise questions if a suitability-based recommendation becomes an issue. By Jim Pedigo


ost advisors have two or three favorite quality annuity carriers to choose from when it comes to selecting a fixed indexed annuity with lifetime income benefit rider for their clients. But is this really the most suitable recommendation? And what about the risk of a complaint against the agent if a “suitability”-based recommendation becomes an issue? The complexity of a lifetime income benefit rider, or LIBR, benefit crediting can create the illusion of a better FIA income product. Although the annuity LIBR with the highest bonus or highest rollup rate, doubler or other bells and whistles gives the appearance of being the most suitable, the real test of suitability is this: Does the FIA LIBR provide the best payout for your client when they want to start receiving income? Maybe not! To cut through all the hocus pocus, avoid hypothetical illustrations and consider only the guaranteed income payout rates to better determine annuity product suitability for your clients. The following story will help illustrate the product suitability issue. Dan has made a good living since the 1990s selling fixed equity index annuities with LIBRs to his conservative clients for their future income needs. He usually turns to one of his favorite, quality carriers when he needs products with good commission and service. His clients are happy with his service and the guaranteed lifetime income they are receiving. He has never received a client complaint — until now! 52

He just received a complaint from the Department of Insurance, which came from the attorney representing the children of one of Dan’s retired clients. The children question the guaranteed income their parents will receive, and they want to know on what basis Dan selected the carrier he recommended. The children are also asking for a full refund of their parent’s annuity premium deposit plus interest since this annuity does not appear to be the most suitable indexed annuity with LIBR for their conservative parent’s future income needs.

tentative annuity transactions model law. In brief, the law opts for a sales standard of “Suitability Plus” as opposed to “Best Interest.” Meaning: A suitable sale requires “reasonable competence, trustworthiness, fair dealing, diligence, care and skill by the producer.” In addition, any recommendation “shall be made without placing the financial or other interests of the producer ahead of the consumer’s interests as known from the consumer’s suitability information.” In addition, the standard states, “A producer shall at the time of the recommendation or sale,

NAIC WORKING ON ANNUITY STANDARD The National Association of Insurance Commissioners’ annuity sales standard is not as onerous as the Department of Labor fiduciary rule, but it could change the way agents do business. The NAIC Annuity Suitability Working Group came up with a tentative framework for an annuity transactions model law. The highlights that apply to agents include: • Annuity sales language. A suitable sale requires “reasonable competence, trustworthiness, fair dealing, diligence, care and skill by the producer.” Likewise, any recommendation “shall be made without placing the financial or other interests of the producer, or insurer where no producer is involved, ahead of the consumer’s interests as known from the consumer’s suitability information.” • Strengthened documentation requirements. The language reads: “A producer, or insurer where no producer is involved, shall at the time of recommendation or sale, make a record of any recommendation and the grounds for the recommendation.”

The basis of Dan’s recommendation was the proposal he gave his clients from one of his choice insurance companies. Reading the complaint, Dan is not too concerned about a premium refund since he sold an annuity from a quality carrier. And he knows that the Department of Labor fiduciary rule — including the language for “Best Interest” and all that it requires — is no longer applicable. What Dan does not know is that the attorney is aware of the National Association of Insurance Commissioners’

InsuranceNewsNet Magazine » September 2018

make a record of any recommendations and grounds for the recommendations.” Dan could be in for a difficult time. Although he can provide a sales proposal from a quality carrier, he may not walk away from this complaint unscathed. Dan could have better, and probably successfully, answered this complaint if he had used a detailed guaranteed payout software program that is able to list the dollar amount of the LIBR minimum guaranteed lifetime income payout from the universe of most fixed

SELECTING THE MOST SUITABLE INCOME RIDER FOR YOUR CLIENT ANNUITY indexed annuities. This software, based on each client’s profile and needs, ranks income payouts from best to worst, from the time the client wants income to be turned on, plus cumulative amounts after 10 years and at age 95. Granted, the ranking may not include one of Dan’s favorite carriers, or pay the best commission, but it does provide a detailed list of fair recommendations for his clients. Had Dan offered his client two or three of the top performers on this list, he would have soundly answered the attorney’s challenge about which product would be the most suitable for his client’s future income needs using the LIBR of a fixed indexed annuity. Jim Pedigo, CLU, ChFC, CASL, is an investment advisor representative, retirement income planning specialist and trainer with Financial Rate Watcher$ in Lake Mary, Fla. Jim may be contacted at jim.pedigo@


Here are the top three income examples as of July 6, 2018. Florida male, age 67. Deposit of $100,000. Single life income to start at age 70. Guaranteed lifetime benefit riders based on contract minimum income guarantees from carriers rated A- or better.

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• Power Select Plus Income • First year age 70 benefit: $7,440 • Lifetime income value (Age 95): $193,440

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Index-Linked Annuity Segment Getting Crowded The index-linked annuity market has been growing stronger in recent quarters, and that is good and bad news for one carrier. Meanwhile, advisors seeking to match clients with the best annuity benefits need accurate tools to help protect them in an era of regulatory pressure, analysts said. By Cyril Tuohy


t’s getting crowded in the indexlinked annuity market, and that presents a good news/bad news situation. That’s the word from Mark Pearson, president and CEO of AXA Equitable, a pioneer in a market segment that turned in double-digit growth rates last year. “Yes, there is more competition, particularly in the space where we have our [Structured Capital Strategies] product,” Pearson told analysts recently. “A number of competitors have come out with similar products in there — so it’s a little bit more crowded there,” he said. AXA Equitable’s Structured Capital Strategies index-linked annuity has been in the market for several years. Since the beginning of this year, Lincoln, Great American and Great West have launched index-linked annuities to round out their annuity portfolios. Allianz, CUNA and Brighthouse are also active in the segment. It was AXA Equitable’s first quarterly conference call since the company was spun off in May from its Paris-based parent AXA SA. Last month’s initial public offering signaled “an important new chapter” in the company’s 159-year history, Pearson said.

Fast-Growing Product Category

Index-linked annuities use indexes as a measuring stick with which to credit contract holders and most index-linked 54

contracts limit market-related losses. The product category has grown quickly. Sales rose 25 percent last year to $9.2 billion compared with 2016, while the overall variable annuity market shrank. With the Department of Labor fiduciary rule tossed by an appeals court, “we are beginning to see an improved operating environment for our company financial advisors and the services they offer,” Pearson said. The overall VA market is forecasted to grow again this year. Many index-linked annuities sit on a VA chassis and come with or without subaccounts, while other index-linked annuities sit on a registered fixed annuity chassis.

Flows Drop

AXA once had the index-linked market segment to itself, but the arrival of new competitors is a sign that maintaining market share is going to be harder. Product net flows in the first quarter were $579 million, compared with $1.1 billion in the year-ago period, the company said. Structured Capital Strategies annuities with a term of five years are maturing, and now that the term is up, contract holders are moving out of the product — so the outflows were expected. First-quarter net income was $168 million, compared to a net loss of $290 million, the company reported. New York-based AXA Equitable Holdings is a holding company for AXA Equitable Life and asset manager AllianceBernstein.

Juggling The Best VA Benefits For Clients

Meanwhile on the VA front, lower expenses don’t necessarily correlate to a better VA for the client because of other factors such as asset allocation and rate of withdrawals. Advisors are trying to juggle the best annuity benefits for clients, while seeking

InsuranceNewsNet Magazine » September 2018

accurate expense-to-benefit ratio tools to help protect them in an era of regulatory pressure. For example, lifetime withdrawal riders allow retirees to receive income for the rest of their lives, even if the account value drops to zero. Annuity companies charge extra for the riders, however, so there’s a cost-benefit analysis to be done. The advisor needs to figure out which riders are the best fit for the needs of a client, particularly as a fiduciary era takes hold. A new software tool, branded as Variable Annuity I.Q., is designed to shine more light on the value of lifetime withdrawal benefits attached to VAs and could help advisors in their annuity selection process. “The Department of Labor’s fiduciary rule has been eliminated, but now [tighter regulations are] under review by the SEC,” said Kevin Porter, chief revenue officer for the analytics firm Hedgeness, which markets the software.

Institutional-Level Analytics

Advisors should think of the tool as “bringing institutional-level analytics to the retail advisor market,” Porter said. Quantification of the variable annuity is “very much an imperative in today’s market environment,” he added. “The variable annuity market has been lacking a standardized platform not only from the advisor’s perspective, but from the insurance carrier’s perspective too,” said Jay Singh, CEO of Chicago-based Hedgeness, in a news release. VAs with income riders make up the bulk of the trillion-dollar VA market, and many people consider a lifetime income stream vital in replacing the role of the defined benefit pension, to which fewer people have access. New product introductions, higher crediting rates for guaranteed living benefits, and the loosening of investment restrictions are expected to help VA sales rise by 5 percent this year over last year,

LIMRA analysts forecast. VA sales were $96 billion last year, down 9 percent from 2016.

Sample Scenario

The software illustration compares different VAs with lifetime withdrawal benefits from seven top annuity companies. An analysis was run for a hypothetical retired couple electing joint/spousal lifetime withdrawal benefits, taking out between 4 and 5 percent annually starting one year from the date of purchase. Allianz’s Connections VA with the Income Protector withdrawal benefit rider had the lowest expense-to-benefit ratio with a score of 40.59. Jackson National’s Perspective II with the LifeGuard Freedom Flex lifetime withdrawal rider had the highest expense-to-benefit ratio with a score of 52.03. Brighthouse Financial’s Series VA with the FlexChoice Access lifetime withdrawal rider ended in the middle of the pack with a score of 49.28. Allianz’s Connections VA with Income Protector had the lowest expense-to-benefit ratio, in part because the product had high restrictions on asset allocations into the subaccounts.

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Interplay Between Expenses And Income

“The higher the expense-to-benefit ratio, the more valuable the interplay between the expenses and income benefits when it comes to income distribution,” Porter said. Benefit variables include the specific features of the lifetime withdrawal riders, the cost of derivatives and a credit rating weighting factor. Expense variables include the income benefit rider charge, subaccount management fees, and mortality and expense fees. Other companies such as Morningstar offer VA analytics, but those services are often only available to or priced for institutional clients. InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@

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Prescription Drugs Take The Biggest Premium Bite Exactly where do consumers’ health care dollars go?

Milliman looked at the money Americans spend on health care premiums and found that the biggest percentage of those dollars is spent on prescription drugs. Prescriptions eat up 23.2 cents out of every health care premium dollar. Close behind prescriptions are doctor fees (22.2 cents) and all other costs at doctors’ offices and clinics (20.2 cents). On the opposite end of the scale, only about a penny and a half of each premium dollar is spent on activities related to claims, including programs to battle fraud, waste and abuse. How much of each premium dollar actually goes to health insurance provider profits? Only 2.3 cents, Milliman said, noting that it’s less than half of the amount that goes toward state, local and federal taxes (4.7 cents).


The U.S. House of Representatives passed legislation that would increase the annual limits on contributions to health savings accounts to match the out-of-pocket deductibles of the high-deductible health plans that the accounts were implemented to support. The bill would nearly double the limits on annual contributions to HSAs. Those with employee-only health coverage would see their contributions limits increase from $3,450 to $6,550. Those with family coverage could contribute even more — $13,300, up from $6,900. Account holders over age 55 can contribute an additional $1,000 regardless of their health coverage level. Would this legislation inspire more HSA owners to put more money into their accounts? The Employee Benefit Research

Institute found that only 13 percent of HSA owners put the maximum into their accounts in 2016. However, EBRI’s research also found that the longer someone has an HSA, the more likely they are to contribute the maximum to it.


Medicare Advantage plans already offer a slew of benefits from eyeglasses to gym memberships. And that list is about to get longer.

Medicare’s open enrollment period begins Oct. 15 and the private insurers that underwrite Medicare Advantage plans will be free to add new supplemental benefits, if they are deemed health-related.


States look very seriously at ways to reduce Medicaid spending because every dollar spent on Medicaid is a dollar not spent somewhere else. Jeff Myers, chief executive of Medicaid Health Plans of America

These new benefits will include adult day care programs, home health aides, home safety adaptations and transportation to medical appointments. “This will potentially help people stay in their homes longer and not have to go to institutions,” Seema Verma, administrator of the Centers for Medicare and Medicaid Services, said.


Health-tracking apps and devices are hot these days. They are good at screening people for health problems before they develop into serious medical issues. But there’s one thing they can’t overcome. They can’t force people to see the doctor. Many digital health companies won’t diagnose disease for regulatory reasons, even if they’re picking up strong signals through sensors and algorithms, so instead they’ll suggest that a user see their doctor. The problem is that people hate going to the doctor. Many avoid it because the experience is unpleasant and others are put off because of high copays.


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InsuranceNewsNet Magazine » September 2018

Source: Asbury Park (N.J.) Press

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It Is Time To Acknowledge Standard LTCi Alternatives The growth of nontraditional long-term care coverage is opening up options for prospects who can’t afford or who are ineligible for stand-alone insurance. By Roxanne Anderson


ou can’t move against the winds of change. Stand-alone long-term care insurance is no longer the only form of protection consumers have against unexpected health care costs during retirement. With their unique designs, nontraditional forms of LTC coverage, such as hybrid life and annuity LTC plans and short-term care insurance plans, have taken the market by storm. Advisors must present these products as reliable alternatives to traditional LTCi, taking care not to overlook the latter’s inherent value. Why?

Guaranteed Paid Benefits And Other Perks

Although they can be more expensive than traditional policies, nontraditional LTC plans such as hybrid life and annuity combination plans can guarantee something “use it or lose it” stand-alone LTCi plans don’t: paid benefits even if LTC coverage isn’t needed. Thirty-six percent of participants in Life Happens and LIMRA’s 2016 Insurance Barometer Study marked this unique advantage as a reason they’re interested in life/LTC combo products. Generally speaking, policyholders are not guaranteed a benefit with traditional LTCi. They could pay for a policy for years and then never need the policy to pay out. With hybrid LTC, policy owners can buy a special type of annuity or life insurance policy and then use the policy’s cash value or death benefit to pay for LTC expenses. If they end up not needing LTC or don’t need to use all of their policy’s funds to cover any care they do need, the remaining funds can go to their designated heirs 58

when they pass away. Depending on the carrier and product, underwriting for hybrid LTC plans may be streamlined, instead of full, which is also a common caveat associated with traditional LTCi. Additionally, with hybrid annuity/LTC and life/LTC policies, policyholders don’t have to worry about potential rate increases — something that prevents some prospective buyers from purchasing traditional LTCi.

Market Interest And Growth Potential

Nontraditional LTC solutions present easy-to-understand, outside-the-box ways people can obtain extended care coverage. Although different is not necessarily better, market research tells us consumers and carriers alike may be open to new LTC options. LIMRA reported in 2017 that standalone individual LTCi sales have dropped 60 percent since 2012. Conversely, research from this same organization shows

their bags and left the traditional LTCi market, new carriers continue to enter the hybrid market and bring innovative plans to the table. The U.S. Department of Health and Human Services estimates that 52 percent of individuals in the U.S. will need LTC services and support after they turn 65. However, in 2014, only 11 percent of adults age 65 or older had LTC coverage, according to the Urban Institute. The potential for LTCi sales is great. But by including nontraditional LTCi solutions in their portfolio, advisors will be able to present reliable and popular solutions to more individuals, and to better help those who may not be able to qualify for or afford a traditional LTCi plan.

Helping Those Who ‘Can’t’ Be Helped

Imagine you have a client named Bob. Let’s say he’s either a healthy 84-year-old man or a 56-year-old man who’s had some health issues. He wants to purchase some form of

The U.S. Department of Health and Human Services estimates that 52 percent of individuals in the U.S. will need LTC services and support after they turn 65. that LTC combination product sales have been climbing over the last few years. Not only do hybrid LTC products evidently appeal to consumers, but it seems they’ve piqued the interest of insurers as well. Milliman found that in 2016, only 17 insurers were selling traditional policies, with two of the carriers accounting for around 50 percent of the sales. LIMRA previously reported that at the end of 2016, about 20 carriers were already offering life combination products and five were offering annuity combination products. Whereas many carriers have packed

InsuranceNewsNet Magazine » September 2018

financial protection against major unexpected health care costs in retirement. Can Bob purchase traditional LTCi in either scenario? He can try, but his chances are slim to none. Traditional LTCi carriers typically issue policies only up to age 79, and it can be difficult for clients to qualify for coverage if they have certain pre-existing conditions that make them ineligible for LTCi. What if Bob is a healthy 65-year-old man, but he’s able to spend only a maximum of $45 monthly for a plan? Or what if Bob’s healthy identical twin sister, Barb,

IT IS TIME TO ACKNOWLEDGE STANDARD LTCI ALTERNATIVES HEALTH/BENEFITS is living on a similar budget and also wants coverage? Would a stand-alone LTCi policy be a good fit for either of them? Probably not. Traditional LTCi rates are gender-based and age-based. Premiums can get expensive, especially for women and older seniors. We’re talking an average annual premium of $1,870 for a 55-yearold man and $2,965 for a 55-year-old woman, according to the American Association for Long-Term Care Insurance’s 2018 National Long-Term Care Insurance Price Index. Although Bob or Barb may not be able to get an LTCi policy, they may still be able to qualify for and afford a hybrid annuity/LTC product or short-term care insurance. Hybrid annuity/LTC policies tend to have less underwriting than life/ LTC hybrid and traditional LTCi plans. And although a short-term policy doesn’t offer individuals coverage for as long a period of time as an LTCi plan does, it could still protect them from some of the costs of their care. The AALTCI reports that approximately four in 10 LTCi claims last less than one year.

Traditional LTCi Is Not Dead!

Although nontraditional LTC products have become increasingly popular and may open the doors to coverage for more individuals, they shouldn’t replace stand-alone LTCi products altogether. It’s important to recognize traditional LTCi is not dead! Rate hikes and carriers leaving the market have made people apprehensive about purchasing traditional LTCi. However, over the last few years, carriers have modified stand-alone policies to make their rates more sustainable over time, taking into consideration low lapse and interest rates and claims data. Additionally, when it comes down to which LTCi product provides consumers with more for their money, the answer is often traditional LTCi. There’s a chance that someone could buy a traditional LTCi policy, pay thousands of dollars in premiums over several years, and never need the policy. Should that someone go with a nontraditional form of LTCi and get fewer LTC benefits? Maybe, but it really depends on what the individual can afford now and over time, their need or desire for (more) life coverage

or guaranteed income, and whether they view their risk of needing LTCi like they view their risk of needing cell phone, car or homeowners insurance. In the words of one LTCi expert, “If we, the LTC brethren, continue to market the same way we have over the last 15, 20, 25 years and expect sales to change, we’re kidding ourselves.” If you’re looking to continue growing your LTCi business, you can’t ignore which way the wind is blowing. You can keep your roots, but stay flexible. Roxanne Anderson is a senior copywriter at Ritter Insurance Marketing, Harrisburg, Pa., a national field marketing organization in the senior health and life insurance markets. Roxanne may be contacted at

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September 2018 » InsuranceNewsNet Magazine


NEWSWIRES Working In Retirement – A Reality Check

A large percentage of Americans say they plan to stay in the workforce longer in order to alleviate their fears of having saved too little. But do they really remain employed? Even though half of those who were under retirement age told a survey they plan to keep working into their golden years, only about 6 percent of today’s retirement-age population is still employed. That’s according to a survey commissioned by PGIM Investments. The survey further found that a worker’s decision to retire is based more on how much money they have saved and less on having reached a certain age. “Pre-retirees are more likely to base their decision about when to retire on their wealth rather than on their age, with half of Generation X and 62 percent of millennials saying they will retire when they have saved enough money,” the report noted. “Current retirees decided when to retire largely based on their age and eligibility for Social Security and pensions.” the Robo Report. Independent robos also compete with larger companies such as Vanguard and Fidelity, which have rolled out their own versions of robo advisors.


Some smaller players in the robo-advising world are being left in the dust as robo movement continues to gain traction. Hedgeable, a pioneer in automated advice, shut down its managed accounts just shy of the company’s 10-year anniversary. As more players enter the robo space, some robos will not survive, analysts said. “The robo cycle is maturing and separating the winners from the losers. A lot of robos thought people would flock [to them] — true to a certain extent — but many are finding customer-acquisition costs are higher than they expected,” said David Goldstone, a research analyst for DID YOU




What is the ideal age to retire? To buy a first home? To get a first credit card? A report showed that different generations have different ideas on the best ages to achieve personal finance milestones. On average, GenXers and millennials tend to believe the ideal age for retiring or buying a first car is younger than what older Americans believe. So what is the ideal age to retire? On average, Americans believe the best age to retire is 61. In order to retire at 61, Americans believe the best age to begin saving for retirement is 22.

65% of advisors said they had no succession plans for their practices.Source:Source: LIMRA Business Alpha Data Survey

InsuranceNewsNet Magazine » September 2018

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QUOTABLE There will always be a gender difference in finances and in financial preparedness. — Len Hayduchok, CEO of Dedicated Financial Services in Hamilton, N.J.

The 20s are also a good time to hit some other financial milestones, the report said. Those surveyed said they believe 21 is the best age to buy a first car, 22 is the best age to get a first credit card and 28 is the best age to buy a first house.


Second-quarter RIA mergers and acquisitions fell 21 percent to 32 transactions compared with the year-ago period, and it’s “even money” whether mergers finish the year in record territory, an RIA market expert said. “We are in a unique period of extreme turbulence,” said David DeVoe, manag-


MERGERS AHEAD ing director at DeVoe & Co. “Quarterly M&A transaction volume has careened to recent record lows, shot up to an alltime high, only to drop back into the basement again.” The number of RIA deals collapsed compared with the first quarter, which saw a record 49 transactions, the DeVoe RIA Deal Book reported. The first quarter is usually the most active quarter. Tax reform and market volatility also played roles in the M&A drop, DeVoe said.

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The Medicare Conversation Leads To A Financial Touchdown If you want to be that true financial quarterback, you need to add the Medicare position to your team. • Joanne Giardini-Russell


exclusively in the Medicare space. There are 10,000 baby boomers turning 65 each day. Do you know where they are turning for Medicare advice? We do. And it’s not from you or your firm. They are turning to their friends, their relatives, their mail carrier, their doctor

THE GRAY WAVE IS COMING U.S. Senior Population 1900–2050* 25%

Percentage Age 65 and Over


et me share with you my background and why I believe that Medicare – as a topic – can help you turn your practice into one that can be truly holistic. I graduated with a marketing degree in 1987 and landed in the medical malpractice field. That began my career in insurance and financial services. I worked within all lines of insurance and ventured into the financial field in 2010. The world of Series 6, 63, 65 and compliance. Let’s just say it wasn’t for me. My nature is black and white; insurance just fits. My 22-year-old son, Cameron, graduated from college and wanted sales experience. I introduced him to some Medicare salespeople to begin. Little did I know that my life would change after he started a job. Cameron loves to learn. After each section of Medicare that he tackled, he would call me and ask, “Did you know this?” My answer was typically, “Wow! No, I didn’t.” I began polling financial advisors, CPAs and insurance folks around me: What did they know about Medicare? Not very much, it turns out. In fact, I visited a firm where I asked seven financial advisors, “Is Medicare’s Part A mandatory?” Seven out of seven answered the question incorrectly (it is not). Who is guiding the client? Medicare is highly complex and causes your clients amazing levels of stress. Mistakes are routinely made when making Medicare coverage decisions. Some mistakes can be irreparable and cause your clients to overspend by tens of thousands of dollars over their lifetimes. I know exactly what conversations are not taking place in the majority of financial advisors’ offices across the land. My mission is to change that. I have left my Series 6, 63 and 65 behind to work

must be good for you — right? Or, worse for you as a financial advisor, your clients are seeking information from a library flyer or a dinner seminar. They are being introduced to new advisors who are seeking new clients. We can vouch for the power that this health care conversation brings to the table. Health care is incredibly personal to people in their mid-60s. If you can help solve this puz-






1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

U.S. Census Bureau, U.S. Department of Commerce, Projections of the Population by Age and Sex for the United States, 2010 to 2050 * population projection

and their neighbors. They are hearing incorrect information on TV or getting information that doesn’t pertain to them at all from well-intentioned friends and family. They are signing up for plans that the billing manager at their doctor’s office prefers to accept for prompt payment to that office, for example. How’s that for choosing your lifetime health care plan? If it’s good for the physician’s office, it

InsuranceNewsNet Magazine » September 2018

zle for them, you’ve become their trusted advisor. Be sure that your client “love” is going to you and not someone else. Solution? Incorporate the Medicare conversation into your practice and watch how your clients react. Advisors who take on the challenge of learning a bit about Medicare and deciding to broach the subject are reaping the rewards. Here are some starter ideas:


» Use webinars, seminars and podcasts to communicate with your clients. We find these media to be very successful with the 65-plus market. Suggest that your clients share these events with family and friends. The advisors we know are meeting new family members via the Medicare conversation. Again, if you don’t want to produce these shows, pair up with a Medicare firm that you can plug into. » Schedule a day in your conference room with appointments set on the hour for clients to have their Medicare questions answered by a qualified agent. You’ll get traffic into your firm, it’s a great value-add service for the client and the Medicare partner will gain new clients. Win, win, win.

Joanne Giardini-Russell is a Medicare specialist and owner of Boomer Health Group in Brighton, Mich., an independent provider of Medicare products nationally. Joanne may be contacted at

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3. If your client has a Medicare Advantage plan, they can choose to go to any doctor that accepts and participates with Medicare. 4. Monthly Medicare Part B premiums are based on income. 5. If you elect to fund a health savings account and also elect to get Medicare’s “free” Part A coverage, you are able to do so. 5. False

» Don’t suggest shared compensation from your Medicare partner. First, the commissions in the Medicare world, and second, keep it clean with no financial incentive involved.

2. When a person has COBRA coverage after leaving work and then they turn 65, they do not have to get Medicare Parts A and B because COBRA is considered “creditable” coverage.

4. True

» As a firm or advisor, don’t try and sell Medicare products unless you designate one or a few people in your firm to solely handle Medicare coaching. This is a jack of all trades, master of none conversation. It doesn’t end well.

1. If your client is on a group insurance plan with a small employer that has fewer than 20 employees, they need to get Medicare Part A and B at age 65.

3. False

» Build some Medicare questions into your client review meetings. Start with the basics: Are you on Medicare Part A and/or Part B? Should you be enrolled? What type of Medicare supplement do you have? Do you understand how it works? We feed our advisors with the questions so they sound intelligent on a topic that is alien to them.

True Or False – How Much Do You Know About Medicare?

2. False

» Communicate to your clients that you have a resource that can help them navigate through the Medicare system. Your clients tell us that they didn’t think to ask you, their advisor, for a referral to a Medicare solution. If you want to be that true financial quarterback, you need to add the Medicare position to your team.

A CPA’s spouse attended our seminar. She introduced us to the small firm where he is a partner. We were able to create a group Medigap contract that saved the firm $22,000 annually on health insurance premiums and provided their age-65-and-older clients with far better health coverage. Could that $22,000 then be used to secure additional services that you can help them with? An advisor’s client called from a cancer center telling us that she needed cancer treatments again and her transition to Medicare coverage at age 65 in a few months needed to be seamless. Could you confidently handle the question or call? A 66-year-old man is retiring and going to live overseas for two years with his spouse. He was diagnosed with cancer as well. How do you navigate his health care to avoid financial penalties and protect his pre-existing condition time frame with Medicare? Does it help your practice? We were virtually introduced to “Peter’s” client. She emailed me after the call and said that she was forever grateful to Peter for the introduction. Forever grateful. Do you ever hear that about an introduction to a life insurance advisor? It’s possible, but likely infrequent. We hear it routinely in the Medicare space. Financial advisors know that expanding beyond the normal scope of the traditional financial advisor role is necessary to provide a great client experience. Leveraging expertise from outside resources allows advisors to provide a high level of service, while still focusing on their core specialties. Give Medicare a test drive in your world. Your clients will love you for it.

Answers: 1. True

» Pair up with a firm or person that specializes in Medicare. By this, I mean someone who handles Medicare coaching and products 100 percent of the time and offers no other types of financial products. These folks are out there.

September 2018 » InsuranceNewsNet Magazine


How To Boost Retirement Readiness In An Automated World Five key ways a managed service can help your client’s plan participants get on track for retirement. • Ken Waineo

recommendations to help keep an employee on track for retirement.

he industry is rolling out newer, flashier innovations — from robo-advising platforms to smart speakers that provide account balance updates — that many plan sponsors think could be the solution that helps their workforce get on track for retirement. Although clients may be wowed by flashy technology, it probably isn’t creating better participant outcomes or helping employers create better plans. In contrast, managed services can provide a balance between technology and tailored support for better outcomes for employees and better plans for employers.

3. Incorporate automatic contribution increases to help meet retirement income goals. Many employees are behind in making contributions to meet their retirement goals. Other employees are unaware of the need to increase their retirement contributions to meet their goals. Some managed services can help boost contributions with annual automatic deferral rate increases. For most


Regardless of the approach, managed services can implement a specific investment strategy based on goals, investment styles and life stages. 2. Provide a view of the bigger picture. A comprehensive retirement strategy is most successful when all the pieces of the financial puzzle are accounted for. Whereas target date funds

Going Beyond A Smart Speaker

Today’s managed services are more than set-it-and-forget-it retirement accounts. Many address the needs of individual participants, considering their risk tolerance, personal savings goals, retirement timeline and projected retirement income needs. These services can paint a holistic picture for each employee by building a plan around their unique situation. Consider these five key ways a managed service can help your client’s plan participants get on track for retirement: 1. Create personalized savings and investment plans. Some managed services allow plan participants to have as much — or as little — of a role in customizing their savings strategy as they would like. For some participants, it’s important to be in the mix of choosing their preferred investment options and determining how their money is invested. For others, a more hands-off approach may be preferred, leaving the investing and decision making in the hands of experts who will select appropriate investment options.


take into account only a participant’s estimated retirement date, some managed services provide a complete picture of a plan participant’s situation, including other retirement savings accounts like an individual retirement account or their spouse’s assets. This makes the plan more concrete and can result in better

InsuranceNewsNet Magazine » September 2018

workers, this is just a 1 percent increase. But that additional increase each year can make the difference in making a specific retirement goal a reality. 4. Monitor portfolios and adjust funds as necessary. Managed services will regularly review each portfolio to


allocation, some managed services have a team of dedicated and licensed advisor representatives available. This human interaction can serve as an important resource for participants who prefer to talk about their options instead of access information online.

Moving The Needle

• • • ensure a participant is on track for retirement. To help meet retirement goals, managed services may rebalance investments or swap out investment options to ensure a portfolio is performing in the participant’s best interest. 5. Provide access to dedicated

support. Although a worker’s contribution amounts, investment options and balance updates are all available at the click of a mouse, there are some questions that are better addressed offline. When a plan participant wants to better understand their plan’s performance or is curious about changing their asset

The ability to create better participant outcomes is a crucial concern for today’s plan sponsors. Because of that, your role in incorporating proven solutions to move the needle for plan participants is key. Positioning managed services that keep everyone on track can help plan sponsors and participants rest easy in knowing they’re on the right path toward a secure retirement. Ken Waineo is the senior director of business development and sales operations at The Standard. Ken may be contacted at ken.waineo@

September 2018 » InsuranceNewsNet Magazine



Is Your Client List More Like A New BMW Or An Old Pontiac? Here are four ways to keep up with demographic trends that will affect the financial services industry. By James Cowan


MW is one of the most valuable car brands in the world. Although the automaker originated more than a century ago, it has continued to innovate through the years. In fact, BMW recently unveiled its i Vision Dynamics, an all-electric sedan that puts the automaker at the forefront of technology and helps position the company for the future. Similarly, Pontiac was once one of the top-selling brands in the United States. Unfortunately, its manufacturer was unable to devise a strategy to keep the brand on top. Pontiac struggled for an image ever since it was an enthusiast’s 66

dream in the 1960s with the GTO. From then on, it lost its way as its manufacturer tried to graft onto mass-market cars. The Pontiac brand was discontinued in 2009. As a forward-thinking financial professional, it’s fair to ask whether your current list of clients and prospects is positioning you for future success. In other words, is your client list like a well-established, innovative BMW? Or is it possible your client base is more like the ill-fated Pontiac, relying only on the prospects of today? Here are four strategies to help keep your client list “tuned up,” addressing today’s needs as well as that of generations ahead.

1. Engage more with female prospects and recruits.

As you think about the future of your business, consider that over the next 35 years, women are due to inherit 70 percent

InsuranceNewsNet Magazine » September 2018

of the $41 trillion in intergenerational wealth transfers, or approximately $28.7 trillion in assets. Additionally, women already control the majority of wealth in the U.S. and make approximately 80 percent of family household buying decisions, including those related to banking and financial services. As an industry, we’re making an effort to connect with this influential population, both as potential clients and as potential advisors. Proactive financial professionals are visibly intentional about engaging with female prospects. They are building bridges with professional organizations that focus on the needs of women, leveraging existing relationships and contacts to gain referrals, and arranging meetings and prospecting to female family members of existing clients. It’s important to be transparent about your desire to partner with women and

IS YOUR CLIENT LIST MORE LIKE A NEW BMW OR AN OLD PONTIAC? BUSINESS worthwhile to become more familiar with the business insurance products in your toolbox and take steps to connect with business owners. This is a strategy that could generate business not only today but also well into the future.

4. Recruit diverse advisors and colleagues.

ensure your business — and your business mix — reflects our society and culture.

2. Make sure millennials are wellrepresented on your client and prospect lists.

Millennials are our country’s largest living generation. In 2016, there were an estimated 79.8 million millennials compared with 74.1 million baby boomers. And the force and influence of this population will only continue to grow. This is your future customer base. Start identifying ways to gain the trust of this up-and-coming generation. The influence and sheer size of this generation make it a crucial group of potential clients to help fuel your BMW-like client list. Although millennials may be early in their earning years, many see the importance of saving for the future. Overall, 72 percent of millennials are finding ways to save for retirement and setting aside an average of 7 percent of their paychecks. Their resources and earning power will only increase over the next several years.

Additionally, millennials are 1.3 times more likely to turn to a financial advisor than Generation X or baby boomers. If you’re willing to invest the time, you will build your competencies in meeting the needs of a very influential demographic. For starters, you may want to consider offering to connect with and share “free” financial perspectives with the adult children of some of your current clients. Don’t forget to make sure you’ve established a credible online presence through your website and social media.

3. Grow your competencies with small-business owners.

Small-business owners represent a tremendous opportunity for financial advisors. Small-business firms comprise about 98 percent of all U.S. employers and provide jobs to more than 40 million people, according to LIMRA research. New businesses are continuously being launched, and technology is breaking down former barriers to entry. Depending on your target market and expertise, it may be

According to the U.S. Census Bureau, the non-Hispanic white population is projected to drop from more than 60 percent of the U.S. population today to 40 percent by 2060. On the other hand, nonwhites will grow to 60 percent of our population, transforming the United States into a “majority-minority” nation over the next two to three decades. (In fact, Texas, New Mexico, Arizona and California are already majorityminority states.) Your business is more likely to grow well into the future if you expand your pool of prospects to include Hispanics and people of color and the changing demographics of your region. Financial professionals who are members of these groups — or who are familiar with these populations — can help you with referrals and with your agency’s efforts to better speak to the needs of groups underrepresented in our industry. Positioning your business for future success is about staying abreast of demographic, psychographic and social trends that could impact populations and subgroups. Diverse recruiting and prospecting will be a must for advisors positioning themselves for the future and aspiring to be our industry’s version of the BMW. On the other hand, those advisors who resist change and ignore emerging population trends may want to take a lesson or two from Pontiac. Even if you’ve enjoyed years of success, nothing is guaranteed. James Cowan is the director of Next Markets at Ohio National Financial Services. He may be contacted at

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September 2018 » InsuranceNewsNet Magazine



Founded in 1890, NAIFA is one of the nation’s oldest and largest associations representing the interests of insurance professionals from every congressional district in the United States.

How To Gain Traction In The Growing Hispanic Market Understanding the nuances of this important group can lead to strong relationships that are critical for success. By Evelyn Gellar


orking in the Hispanic market presents an opportunity for agents and advisors to serve individuals, families and business owners. However, this requires an understanding of the nuances that exist inside this fast-growing market. The Hispanic market is multifaceted and can present a challenge for advisors who take a onesize-fits-all approach.

The Hispanic Market

With a population of more than 50 million, and with $1.7 trillion in purchasing power, it is important to understand that the Hispanic market’s population growth is no longer limited to the “gateway states.” In her article “Hispanic Member Growth Not Just For Gateway States Anymore,” Miriam De Dios, CEO of Coopera, stated that the largest Hispanic population growth from 2007 to 2014 occurred in North Dakota, Kentucky, Louisiana, Delaware and Maryland. There are more than 20 Spanishspeaking countries and each country has its own set of pronunciations, vocabularies and accents. Although individuals from different countries have no difficulty understanding each other in a conversation, the words used alone are not sufficient to build a strong relationship. Identifying the prospect’s country of origin can provide important insights into their attitudes and experiences toward financial firms and financial advisors; their views on money, investing and savings; and their beliefs about protecting their loved ones.


Family And Core Values

Hispanics place a strong emphasis on family, and women are central to family life. They are major influencers in the family and often hold the key to family decisions. Hispanics also show reverence for tradition and ancestry, and they place a high value on relationships, trust and advice. Engaging the entire family in making decisions is common. Parents, especially those not born in the U.S., believe that their children are more knowledgeable on the financial system in the U.S. So parents depend on their children to help make decisions. Thus children are often invited to financial meetings. In working with this market, advisors are likely to be working with multiple generations within a family. The younger generation is more adept digitally. As a result, it is critical to leverage technology when working with them while utilizing traditional relationship-building skills with the older generation. One-third of the Hispanic population is third-generation (or higher) in the U.S. and speaks English fluently. They think, speak and behave differently from their parents, but still identify with the family’s country of origin. In fact, research has indicated that bilingual audiences use English online, and a large percentage are loyal to companies whose marketing collateral and advertising incorporate Spanish and Hispanic cultural elements.

Engaging The Hispanic Market

So where should an advisor start to engage in this market? Here are four things to consider if you want to gain traction in this growing market: 1. Accelerate your learning curve. Consider joint work with an advisor who has a track record of success in this market, not just with someone who is bilingual. Being bilingual is only one element

InsuranceNewsNet Magazine » September 2018

of the equation. Matching a joint work partner based on experience and commonality with your prospect eliminates roadblocks and provides you with a lift in credibility. 2. Invest time and resources to understanding the needs of the local community. To become the trusted advisor in your local Hispanic community, identify and connect with community leaders, speak with community members and become a partner at local events. Your goal should be to get a clear understanding of the unique needs of the local market and identify how you can be a resource. 3. Does your process resonate with women clients? The fastest-growing sector of Hispanic-owned businesses are women-owned and women-operated businesses. This provides agents and advisors with an opportunity to address the business and personal needs of women in this market. 4. Refine your referral process. Six in 10 Hispanics consider companies recommended by relatives, compared with only four in 10 of the general population, according to LIMRA research. Building relationships in this market can lead to introductions to other family members, friends and business acquaintances. If your goal is to build a referral-based practice, working in the Hispanic market will help you get there. Evelyn Gellar, LUTCF, is head of strategic partnerships for myWorth LLC, a Penn Mutual Life Insurance Company. Gellar is Immediate Past President of Women in Insurance and Financial Services, serves on NAIFA’s Diversity Task Force, and has received NAIFA’s Diversity Champion Award. Evelyn may be contacted at


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The Changing Role Of Life Insurance In A Financial Plan When we are passionate about life insurance’s role in proper planning, there is no limit to the value we can provide.

It is commonplace to meet clients in the medical field who owe more than $300,000 in student loans.

By Brenton Harrison


s an advisor in the Nashville area, I have a front-row seat for some of the economic trends and concerns that will have a major impact on Americans over the coming years. Nashville attracts a diverse mix of residents as a university city with more than 20 four-year colleges in the area, low cost of living and no state income tax. As a result, my client base represents a cross-section of young and late-career professionals as well as retirees. Each generation has its own unique needs and challenges through the financial planning process. The following are key issues and developments that have shifted the role of life insurance in a financial plan.

Student Loans

A 2015 study by The Institute for College Access and Success found that more than six in 10 college graduates leave school with some level of debt. It is commonplace to meet clients in the medical field who owe more than $300,000 in student loans. Advisors must provide strategies for debt repayment and how this high-level debt will be handled at death. Federal student loans and some private loans are discharged upon the death of the borrower, while others are left as a burden to the estate. If you understand the terms of a student loan, you can put together a strategy that protects all parties involved. For example, if a couple has two sets of student loans that die with them, it might be worthwhile to put insurance on each spouse in the amount of the survivor’s loans. That way, should the loans die with the husband or wife, the surviving spouse can use the proceeds to pay off their loans as well. 70

The Sandwich Generation

The decreasing number of companies that offer traditional long-term care insurance has come at a time when the cost of care is higher than it has ever been. It’s particularly challenging for individuals in their peak earning years, as many have been forced to pay for their parents’ care while they also plan for their own futures. To top it off, members of this “sandwich generation” also may need to support their children financially. A 2012 Pew Research Center survey found that 48 percent of respondents ages 40-59 provided financial assistance to an adult child in the previous 12 months, while 21 percent also provided assistance to a parent over the age of 65. These unique circumstances change how insurance plans are structured. In the past, the extent of someone’s inclination on subject matters such as the term versus permanent debate might have been a matter of preference. Today, individuals with this level of responsibility find their needs can’t be met entirely by either category. Instead, a mix of different life insurance vehicles might be needed to mitigate their risk. These clients might purchase a larger term policy to cover the increasing college costs for their children and long-term care costs for their parents should the clients die prematurely. To reduce the risks of paying for their own care, permanent products with additions such as longterm and critical care riders could provide more peace of mind for their own futures.

InsuranceNewsNet Magazine » September 2018

Retirement Planning

If clients are responsible for some or all of the financial obligations mentioned previously, it could be tough for them to stay on track for retirement. As a result, I’ve seen an increased level of interest in the role of permanent life insurance in retirement planning from clients who were unable to save the amount they had planned and now want to make up for lost time. Use strategies such as overfunded permanent life insurance and leverage the ability to take withdrawals from and loans against the cash value. This is a subtle but substantial difference when you compare the longevity of their cash value to that of a 401(k) or individual retirement account — to give clients the opportunity to quickly establish an income strategy for retirement. An advisor who is knowledgeable about products uniquely positioned for retirement planning, such as an indexed universal life policy’s ability to participate in some market gains and avoid market losses, can help clients maximize the use of every dollar they’ve saved before and during retirement. It’s clear that as circumstances change, we must be willing to change with them. If we as advisors take it upon ourselves to listen intently to our clients’ concerns and stay abreast of changes in our industry, we might find a host of new uses for life insurance that suit their needs. When we are passionate about life insurance’s role in proper planning, there is no limit to the value we can provide. Brenton Harrison is a financial advisor with Henderson Financial Group, a wealth management firm in the Nashville area. He is a four-year member of the Million Dollar Round Table. Brenton may be contacted at







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More than 850 financial services companies in more than 70 countries turn to LIMRA first to help them build their businesses and improve their performance.


Protecting Loved Ones Isn’t Cliché The life insurance industry must provide information in ways that reflect how consumers are thinking about coverage and that appeal to the younger generations. By Gina Birchall


fter Labor Day arrives here in New England, thoughts turn to back-to-school, changing leaves and pumpkin latte season. We become aware of fewer daylight hours and a little chill in the evening air, and we start to look forward to all the pleasures of the autumn season. September also is Life Insurance Awareness Month, an industrywide campaign to raise awareness around the importance of protecting both your loved ones and your financial security with the help of life insurance. More than half of Americans have some form of life insurance coverage, whether it is an individual policy or coverage through an employer. Although many people own life insurance, there are still a lot of people who need coverage. Based on LIMRA’s 2018 Insurance Barometer Study, 41 percent of Americans indicate that they do not own life insurance. Moreover, our data suggests that an additional 20 percent of

the population thinks they do not have enough life insurance. According to LIMRA’s 2016 U.S. Ownership Study, the top three reasons Americans own life insurance are to cover burial and final expenses (91 percent), help replace lost wages of a wage earner (66 percent), and transfer wealth or leave an inheritance (63 percent). With these very compelling reasons to have coverage, why don’t more people buy it? The most common reason is cost, as more than six in 10 perceive it as too expensive. Other financial priorities (61 percent) and the belief that they already have enough coverage (52 percent) round out the top three reasons. Misconceptions, particularly among the younger segment of the population, are creating barriers to purchase. Most consumers estimate the cost of coverage at more than three times its actual cost. Almost half of millennials estimate the cost at more than five times the actual cost. Add that to a lack of knowledge on how much and what type of coverage to buy, and it’s no surprise that a large segment of the population is uninsured. Now is the time for financial professionals to approach prospects – especially young adults — armed with information to overcome the obstacles to purchase. Nearly a quarter of respondents to LIMRA’s 2018 Insurance Barometer Study indicated that no financial professional

Most consumers estimate the cost of coverage at more than three times its actual cost. Almost half of millennials estimate the cost at more than five times the actual cost. 72

InsuranceNewsNet Magazine » September 2018

has approached them about life insurance, with 43 percent of millennials making this claim. Although the ways consumers purchase life insurance are changing, the professional advisor is still important. About half of all adult consumers visited a life insurer’s website and/or sought life insurance information online, and 29 percent of all consumers indicate they would research and buy life insurance there. People still seek out advisors, however, particularly through social media. Social media sites have become a common source for reviews and recommendations. More than half of millennials and 40 percent of Generation X are likely to check recommended advisors for a social media presence (Facebook, YouTube and LinkedIn are viewed as most important by millennials). Consumers also often ask their social media contacts for recommendations on a variety of products and services. Onethird of people would ask social media connections for advisor recommendations; that number rises to more than half of millennials who say they would do so. Advisors are well-served not only to establish a social media presence, but also to keep it active and current. During Life Insurance Awareness Month, let’s take the opportunity to educate more Americans about the realities of life insurance. We as an industry must take steps to provide information in ways that reflect how consumers are thinking about coverage and that appeal to the younger generations. It’s true that it can be difficult to talk about the important reasons to have coverage without sounding cliché. But protecting the ones we love is never cliché. Gina Birchall joined LL Global as chief operating officer in 2017. In this role, she is responsible for LIMRA’s and LOMA’s legal and accounting departments, information technology, marketing, talent solutions and member relations. Gina may be contacted at

InsuranceNewsNet Magazine - September 2018  

How to Gain Trust Faster Than Ever

InsuranceNewsNet Magazine - September 2018  

How to Gain Trust Faster Than Ever