Docstoc

BISYS Sales Meeting January 5-6_

Document Sample
BISYS Sales Meeting January 5-6_ Powered By Docstoc
					                      Life Insurance Evaluation

                             “Doing Right By Clients”
                        “The Policy Enhancement Program”


                        Understanding Life Insurance Products Today
                                             for
                                  Advisors and Trustees




The Policy Enhancement Program – Understanding Life Insurance Today   Page 3
Disclosure
  This material is designed only for training purposes and is
  not intended to be used with the general public. Nothing in
  this presentation represents a legal or tax opinion or
  conclusion.
  This material contains references to concepts that have
  significant legal, accounting, and tax implications. It is not
  intended as legal, accounting or tax advice. Agents and
  clients should always consult their own attorney and/or tax
  advisor for advice regarding application of these concepts
  to their particular situation.
  To ensure compliance with requirements imposed by the
  IRS, we inform you that, unless expressly stated otherwise,
  any U.S. federal tax advice contained in this
  communication (including any attachments) is not intended
  or written to be used, and cannot be used, for the purpose
  of (i) avoiding penalties under the Internal Revenue Code
  or (ii) promoting, marketing or recommending to another
  party any transaction or matter addressed herein.




The Policy Enhancement Program – Understanding Life Insurance Today   Page 4
Before We Get Started…

   Please write down the following numbers:

   • 57

   • 184




The Policy Enhancement Program – Understanding Life Insurance Today   Page 5
First – Some Questions

• Who here has or has advised someone to
  refinance their home within the last few years?

• Why?

• Top Three Answers
       – To Save Money
       – To Pay For an Addition/Remodel
       – To Help Pay for College




The Policy Enhancement Program – Understanding Life Insurance Today   Page 6
We Have a Problem

• When policies were purchased they were
  purchased with a sales illustration based on:



       – A Current Interest Rate – Universal Life
       – A Current Dividend Scale – Whole Life
       – An Assumed Rate of Return – Variable Life




The Policy Enhancement Program – Understanding Life Insurance Today   Page 11
What Is This?




The Policy Enhancement Program – Understanding Life Insurance Today   Page 12
Interest Rates for UL



    14.00%

    12.00%

    10.00%

     8.00%

     6.00%

     4.00%

     2.00%

     0.00%
             84

             86

             88

             90

             92

             94

             96

             98

             00

             02

             04

             06
          19

          19

          19

          19

          19

          19

          19

          19

          20

          20

          20

          20
The Policy Enhancement Program – Understanding Life Insurance Today   Page 13
Life Insurance Carrier
General Account - 2003




                  72.6%




                                                                                            5.2%



                                                                                        11.2%

                                                                                0.8%
                                                                      10.2%




                           Bonds    Stocks    Mortgages    Real Estate    Other Fixed




      EOY 2003 Data from Vital Signs - Average of Top 100 Carriers
The Policy Enhancement Program – Understanding Life Insurance Today                                Page 15
Life Insurance Carrier
General Account - 2004




                   73.6%




                                                                                                   5.2%



                                                                                           10.7%

                                                                                  0.7%
                                                                      9.8%




                           Bonds    Stocks    Mortgages    Real Estate       Other Fixed




      EOY 2004 Data from Vital Signs - Average of Top 100 Carriers
The Policy Enhancement Program – Understanding Life Insurance Today                                       Page 16
Life Insurance Carrier
General Account - 2005




                    74.5%




                                                                                               4.8%



                                                                                       10.6%

                                                                             0.6%
                                                                  9.5%




                            Bonds   Stocks    Mortgages    Real Estate   Other Fixed




      EOY 2005 Data from Vital Signs - Average of Top 100 Carriers
The Policy Enhancement Program – Understanding Life Insurance Today                                   Page 17
Life Insurance Carrier
General Account - 2006




                  72.1%




                                                                                                   6.5%



                                                                                           10.9%

                                                                                  0.6%
                                                                      9.9%




                           Bonds    Stocks    Mortgages    Real Estate       Other Fixed




      EOY 2006 Data from Vital Signs - Average of Top 100 Carriers
The Policy Enhancement Program – Understanding Life Insurance Today                                       Page 18
General Account Investments


                        Percentage of Investment in Bonds

              74.50%
              74.00%
              73.50%
              73.00%
              72.50%
              72.00%                                                          Bonds
              71.50%
              71.00%
              70.50%
                            2002        2003        2004        2005   2006
                                                    Year



                             Average of Top 100 Carriers
The Policy Enhancement Program – Understanding Life Insurance Today              Page 19
S&P 500 Yearly Returns



    40.00%

    30.00%

    20.00%

    10 . 0 0 %

      0.00%
                     1993    1994    1995    1996    1997    1998     1999   2000   2001   2002
  - 10 . 0 0 %

  - 20.00%

  - 30.00%




The Policy Enhancement Program – Understanding Life Insurance Today                               Page 20
S&P 500 Yearly Returns



  40.00%

  30.00%

  20.00%

  10 . 0 0 %

    0.00%
                  1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
 - 10 . 0 0 %

- 20.00%

- 30.00%




The Policy Enhancement Program – Understanding Life Insurance Today                       Page 21
Keep in mind …




                         If you lose 20% one year,
          You need to gain 25% the next year
                  … to break even


                                    If you lose 40%,
                       You need to gain 66 2/3%


The Policy Enhancement Program – Understanding Life Insurance Today   Page 22
Life Insurance Marketplace Today


     • Charges inside policies have dropped
       dramatically
           – Mergers and Acquisitions
                  • Greater efficiency of the marketplace
           – Advances in Medicine
                  • Results are easiest to see in term insurance
           – Availability of new products
                  • Secondary guarantees
                        – UL
                        – VUL
     • A 1998 study showed that in 75% of
       trust policies that were at least 5 years
       old, the death benefit could be increased
       by 40% without any increase of premium
                                     – Cited in Trusts & Estates Magazine, May 2003 *


The Policy Enhancement Program – Understanding Life Insurance Today                     Page 23
What’s the Outcome?



  • When policies were purchased they were
    purchased with a sales illustration based
    on:
         – Current interest rate – Universal Life
         – Current dividend scale – Whole Life
         – Assumed rate of return – Variable Life

  • Policies may not perform as expected
         – “The vast majority of life insurance policies funding
           trusts are not performing as originally projected.”
               A quote from PA Bar Association CE Credit Course
                  on Trust Owned Life Insurance – 12/7/2003




The Policy Enhancement Program – Understanding Life Insurance Today   Page 24
What if policies don’t perform?
Why Should We Care?

• If clients objectives are not met
       – Clients may need to pay more premium
       – Clients may need to pay premiums for longer periods
       – Usually both

• Possible litigation for those who “participated
  in the process.”
       –   Life Insurance Agent
       –   Attorney
       –   CPA
       –   Trustee
       –   Advisor




The Policy Enhancement Program – Understanding Life Insurance Today   Page 25
What if policies don’t perform?
Why Should We Care?

• Uniform Prudent Investor Act
       – Provides a safe harbor for fiduciary
             • …”invest and manage trust assets as a prudent
               investor would…exercise reasonable care, skill,
               and caution”
• Federal Regulations - Title 12, Section 9.6
       – Mandates requirements for national banks
         dealing with trusts assets, including life
         insurance
       – Regular reviews
             • Pre-acceptance, post-acceptance, ongoing annual
• IPS
       – Investment Policy Statement



The Policy Enhancement Program – Understanding Life Insurance Today   Page 26
Our Response


       The Policy Enhancement Program




The Policy Enhancement Program – Understanding Life Insurance Today   Page 27
PEP –                 Creating the Process

• Goals of the Process

       – Educate the Policy Owner about life
         insurance, and about their own policy

       – Show the Policy Owner their present
         situation

       – Outline possible alternatives for the policy
         going forward



The Policy Enhancement Program – Understanding Life Insurance Today   Page 28
PEP –                 Creating the Process

• Review the Policy
   – Current Situation
   – Possible changes in life insurance needs
• Create a Presentation
   – Logical
   – Provides…
      • real numbers
      • real analysis
      • real alternatives
   – Easy to understand




The Policy Enhancement Program – Understanding Life Insurance Today   Page 29
PEP –                 Results of the Process

There are three logical outcomes from a PEP
Review


        1. The policy is performing as it was sold –
           changes are not required.
        2. The policy is not performing as it was sold
           but can be salvaged with some minor
           modifications.
        3. The policy is not performing as it was sold
           and requires major renovation and
           probable replacement.


The Policy Enhancement Program – Understanding Life Insurance Today   Page 30
PEP –                 Results of the Process




              Let’s take a look at some case studies!


                      • WA Client -- 5,000,000
                      • UT Client -- $250,000




The Policy Enhancement Program – Understanding Life Insurance Today   Page 31
PEP –                 Marketing The Process




                      Illustrations are easy…

                            Marketing is hard!

         Let’s take a look at the PEP Kit!



The Policy Enhancement Program – Understanding Life Insurance Today   Page 32
PEP –                 Marketing The Process

• Supporting Materials
   – Broker Side
             • Getting Started
             • Broker of Record Letter
             • Fact Finder/Authorization Letter

       – Consumer Side
             •   Sample Prospecting Letters
             •   Personalized Flyers
             •   Program Overview
             •   FAQ
             •   Sample In-force Illustration
             •   Sample PEP Illustration

             Other materials are available at
             www.CrumpLifeInsurance.com

The Policy Enhancement Program – Understanding Life Insurance Today   Page 33
PEP – The Next Step
What Should You Do?

  • Review all of your clients.
  • Look for
     – Any policy in a trust
     – Any policy issued with a substandard
       rating
     – Any policy issued with a permanent flat
     – Any policy with a loan
     – Any policy written with a company that is
       no longer “active”




The Policy Enhancement Program – Understanding Life Insurance Today   Page 34
PEP – The Next Step
What Should You Do?

  • Review your clients
     – Start with your largest cases
  • Contact your clients as needed
  • Always obtain authorization letters




The Policy Enhancement Program – Understanding Life Insurance Today   Page 35
PEP – The Next Step
How can I get a PEP Analysis?


• Gather the required information
       – Need to obtain two inforce illustrations for the
         current policy
             1.Current situation going forward
             2.Modified to meet original sales goal
• Complete the PEP Fact Finder
• Fax/Mail/Email the completed fact finder and
  inforce illustrations into your Crump Sales
  Representative.
• Receive a completed PEP Analysis in
  3–5 business days


The Policy Enhancement Program – Understanding Life Insurance Today   Page 36
Objections



  “It’s too good to be true”

  • Changes occur in the
    marketplace constantly

  • New Riders




The Policy Enhancement Program – Understanding Life Insurance Today   Page 37
Objections


 “Surrender Charges”
   –Mortgage refinancing
     • Points

 Is the client better off?
    –Does the new insurance
     cost less?
    –Does the new policy
     owner get more
     coverage?



The Policy Enhancement Program – Understanding Life Insurance Today   Page 38
Objections

“Cash Value Drop”

       – Initially
          • Is client better off?
          • Is it really important?
          • Often times the cash
             values catch up



       – Long Term
          • Product selection
          • Pay a little more
            premium
          • Like term insurance

The Policy Enhancement Program – Understanding Life Insurance Today   Page 39
Sweet Spots

• Whole Life
  – Death benefit sale
  – Polices with scheduled premium increases
     • DB at a high cost
• Universal
  – 10-20 years old
     • Shorter periods
       have worked
• Variable
  – Scared of market
  – Objectives changed


The Policy Enhancement Program – Understanding Life Insurance Today   Page 41
Sweet Spots - continued




• Underwriting
  – Changes in health
  – Or changes in way health viewed by carrier
  – Table shave programs

• Client changes
     – Increased DB need
     – Decreased DB need
     – Objective changes


The Policy Enhancement Program – Understanding Life Insurance Today   Page 42
How Long Will This Last?



      Are premium costs going up soon?


 • AG-38
   - aka “AXXX”




The Policy Enhancement Program – Understanding Life Insurance Today   Page 43
Remember these?



       • 57
       • 184

       In FY 2006
       • $57,000,000 –                                     Target Premium

       • $184,000,000 –                                    Total Target Premium
                                                           Since Program Began




The Policy Enhancement Program – Understanding Life Insurance Today          Page 44
Back to My First Question…


   No one here had a philosophical problem when
   we refinanced our mortgages.

   We should think of the PEP process as
   refinancing for our insurance policies.




The Policy Enhancement Program – Understanding Life Insurance Today   Page 45
Bob Hertz’s First Law…




        When in doubt…Get a Timesaver.




The Policy Enhancement Program – Understanding Life Insurance Today   Page 46
If you don’t review your clients’
policies…Somebody else will!




 Source: The Wall Street Journal, April 2005
The Policy Enhancement Program – Understanding Life Insurance Today   Page 47
If you don’t review your clients’
policies…Somebody else will!




                                                             Source: The Wall Street Journal,
                                                             March 2005


The Policy Enhancement Program – Understanding Life Insurance Today                       Page 48
     Thank You for Your Attention!
                 and
     Thank You for Your Business!




The Policy Enhancement Program – Understanding Life Insurance Today   Page 49

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:17
posted:5/21/2010
language:English
pages:42