Top 5 reader comments this week on ProducersWEBBlog added by Lauren McNitt on November 18, 2011
Lauren McNitt

Lauren McNitt

Denver, CO

Joined: September 08, 2010

My Company

Tom Martin responds to Sheryl Moore's article, Why are indexed life caps so much higher than indexed annuities?

On annuities, insurance companies only have one way to make a profit — through a spread. On life insurance products, insurance companies have several ways that they can make a profit.

Of course there are other elements as well. Life insurance companies are more likely to fund their option budget using portfolio returns while annuity companies are more focused on new money rates. Annuity caps (and pars) will likely fluctuate much quicker than the more stable life insurance backed portfolio option budgets. Since portfolio rates are higher than new money rates, this is another reason why life caps are higher than current annuity caps.
Steve Forman give his opinion on the demise of the CLASS program in response to the news piece, House panel votes to repeal CLASS Act

Members of the health subcommittee at the House Energy and Commerce Committee today passed H.R. 1173, a bill that would officially kill a federal voluntary long-term care (LTC) benefits program, by a voice vote.

Can someone explain to me how officially removing a Program which is described as a half-alive / half-dead "zombie" is somehow disresepectful to the late Sen. Kennedy? CLASS has been de-funded, its staff has been re-assigned, and everyone involved has admitted the legislative framework is self-sabotaging, ie the law as it's currently written cannot create a self-sustaining, actuarily sound, voluntary LTC program as envisioned.

Even if you're in favor of a largely public-payor system, the best route is to remove CLASS from life-support so you can try again.
Chad responds to Cal Burgess's article, LIBR: benefits above and beyond the traditional pension plan.

Many insurance companies have designed lifetime income benefit riders within fixed indexed annuities to provide all of the benefits above and beyond both the traditional pension plan and today’s typical deferred compensation plan.

Great article! I have found that many advisors are using this analogy today to overcome the stigmas placed on index annuities. This approach seems to be the path of least resistance when discussing retirement income planning with clients. Keep the good ideas coming!
In response to Patrick Kelly's article, Why variable loans are a recipe for disaster, Tony Orr gives his opinion on the importance of communication and being bale to explain products in a way clients can understand them easily.

While the indexed UL removes stock market risk for all individuals during the accumulation period, it can place significant stock market risk squarely on the shoulders of the client if the wrong loan provision is chosen.

To quote Roccy - "No one is smart enough to know what the future will hold for the stock market, interest rates, and loans on policies". And yet this entire discussion is based on what may or may not happen. Additionally, I do not not see much conversation about using a non guaranteed dividend paying WL insurance policy. If the idea is to ensure that the client will have "X" amount of dollars in the future, it seems to me that a WL policy should part of this discussion. I also think we should try to help our clients reach his or goals in a safe and predicitible manner, as well as in the most cost effecient way. That being said, how does the EUIL stack up against a WL policy's loan provisions, costs, and cash value guarantees?

Furthermore, this discussion highlights the reason the general public distrusts our profession. We have taken a simple concept and have turned it in to a complex, fluid, future projection, hypothetical, conversation. If we as producers are having a hard time coming to terms amongst ourselves about how these products work, how can we expect prospective clients to understand what we are trying to sell. In short, my only advice - Keep It Simple Stupid. If you as a producer are not able to explain the pros and cons of your product in layman's terms, you either have the wrong product, or you need a obtain some knowledge. More importantly, are you as a producer going to remember all of the nuances of a product that you sold twenty years ago and that may have been discontinued? These are some of the things that must be considered when selling any product.

So, my solution is to offer an EUIL to clients who are primarlily concerend about death benefits, and to offer a WL policy to clients who are more concerend about tax advantaged retirement income. In either case sell the guarantees, and not the hopefully's. You'll sleep much better at night.
In response to Cal Burgess's article Insurance: today's financial pillars of stability, Ike Devji adds his two cents on the value insurance agents offer their clients.

Investors are starting to embrace the financial security that the regulated insurance industry provides. They applaud the idea of these multi-billion dollar institutions having total assets that outweigh their total liabilities.

Great Stuff, Mike.

We are seeing an increased interest in insurance as a tactical allocation in an era of near zero returns, bank solvency risks and of course litigation exposure that skyrockets during tough times. When we have programs that make these allocations largely immune to those risks and carrier solvency itself we really have something magical for the right clients.
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