There are people in our lives we would all like to think we can just get advice from and not be worried about the answer steering us over a cliff. Our banker, pastor and doctor are good examples. They all know there is a right thing to do to keep our lives on track and they all know the dangers of ignoring the basics and trying to shortcut or game the system.
Your life insurance agent should fall into the same category. Life insurance agents as a whole are a miserable lying lot and it would be no great surprise to see insurance companies dump them for direct sales at some point. We’ve already seen American General go with direct sales through Matrix Direct (an AIG company) and the more straightforward AIG Direct. They still use independent agencies and large on line agencies, but they give their own outlets underwriting advantages. It doesn’t kick the independents out of the game, but it does create a situation where we can get a decline to participate response to shopping from AG and the same person can get approved directly.
But back to the miserable lying lot. There was an article in an industry on line magazine this week called, “Illustrated Promises, Unmet Expectations” by Richard Weber, the president of the Society of Financial Services Professionals. Understand that with only a very small change or two we think Mr Weber has knocked it out of the park with his take on how the insurance industry as gamed and abused the illustration system for universal and whole life to their own gain and the detriment of millions of clients for who knows how many billions of dollars. There is no exaggeration in the idea that unscrupulous insurance agents have ruined family’s futures and damaged estates without conscience.
This is a topic we have been screaming about for years, the misleading of clients through illustrations that use assumptions instead of guarantees and have moving parts where everything should be structured to never change and be counted on for the future of your family. There is so much pressure for agents to make money because honestly, life insurance is not a business that very many succeed at so those that struggle or are willing to be less ethical have a way to beat the competition and get paid, at your expense. When Agent A shows you a policy that is guaranteed for life with a level premium and death benefit for, say, $200 a month and then agent B shows up and shows you how you can get the same coverage for less by just putting a little faith in just how good these companies are, far too many misplace their faith.
What those agents are doing is interjecting assumptions where things should be guaranteed. It does lower the price but it increases the risk that your life insurance won’t last. An unscrupulous agent will poopah the difference as being so small that the chances of the policy falling apart are almost zero. Some will even claim absolute zero and both are the liars in our business who don’t care about their customers or the health of our industry and know by the time your policy starts bleeding out, they either won’t be around or they will have developed a great lying pitch about what happened and how, if you trust them one more time and are willing to spend more, they can put the train back on the tracks.
The truth is that most universal life policies are likely to fail, that is to start collapsing for need of more premium money. After surveying several companies it would appear safe to say that more than 50% of universal life policies are supported by assumptions. This means that more than half of universal life policy owners are just hoping they have insurance when they need it. They don’t know that because that isn’t what they were sold or isn’t what they thought they were sold, but those policies, without review, are in peril. One bad year and it almost always becomes a matter of not if it will fail, but when.
So what to do? If you’re an agent you should be doing annual reviews and if you’re an agent that sold based on assumptions and things are even looking the slightest bit dicey, you should call your client, confess your sins and correct the problem before it can’t be done. If you’re a client and you’re not sure what you have or if it’s healthy, read your annual reviews carefully and call your agent if they aren’t calling you and make them explain the state of your UL policy every year. Especially if you’re over 50 your universal life insurance needs to be monitored because as we age the policies mortality risk cost goes up every year. If you can’t find your agent or want a second opinion, call or email us directly. We can help.
By the way, our only disagreement we have with Mr Weber in his article is we believe, given the litigious nature of our country, that there are a lot more lawsuits coming because of unscrupulous life insurance sales.
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