Clients, Prospects and Centers of Influence Conversation Ideas

​As advisors to your clients, you can start a conversation with 60-page product illustrations, or you can change the conversation to something simpler and closer to home:  Historically low interest rates.  Guaranteed life insurance benefits.  Cash on hand for unexpected circumstances.  Protection for valuable assets.  And easier ways for clients to get the insurance they want and need.  Even in these difficult times, we can do our best to stay calm and communicate clearly.  Here are some ideas from Windsor on how we can begin a conversation about what's important today.

Advanced Planning

Historical Low Interest Rate.  With AFR rates so low (mid-term below 50 basis points and long term just over 1 percent) now is the time to implement planning techniques that take advantage of these extremely low rates.

  • -Intra Family Loans
  • -Loan Regime Split Dollar
  • -Grantor Retained Annuity Trusts

Squeeze and Freeze. Transfer assets at today's potentially depressed valuations using sale with note techniques. Combine with other potential discounting strategies to achieve additional planning and wealth transfer benefits.

Clock is ticking on estate/gift tax limits.  Currently the all-time high exemption limits are scheduled to sunset at the end of 2025 — but with a new election cycle coming in November of 2020 now is the time to put flexible plans in place.The IRS has clarified that there will be no "claw back" of gifts made prior to the sunset.

[Related: Lifetime Exemption - Use It or Lose It]

Premium Financing. 1) Review existing in force premium financing plans to see if the loans can be refinanced or renegotiated (lower interest costs and/or improve terms). 2) Discuss and explore in force financing on existing large life insurance premiums which can provide increased short term cash flow that can be used for alternative needs (business acquisitions, business cash flow, other personal needs, etc.) NOTE: It is very important to fully understand the impacts to life insurance policy and repayment plans.

  Product Pricing and Premium/Face Limits

Long duration guarantee products.  With the 10 year note at historically low levels combined with higher product specific reserving requirements, pricing for products with long duration guarantees like no-lapse universal life is going up.  Locking in rates today could be valuable in the long term.

  • AIG, Symetra, Nationwide, Lincoln and Prudential have all announced or implemented price increases
  • Prudential Protector VUL no increase and no premium limitation
  • Protective introduced a new GUL – Lifetime Assurance UL (all pay only, no 1035)

Premium/Face limits.  Some carriers have used premium and/or death benefit amount limits to diminish exposure to receiving too much business in this category of product. This can limit large 1035 exchanges.

  In Force Review

Stay calm and communicate. This is a great time to review your in force book and reach out to clients. Use data aggregation tools like NIC (Network Insured Connect) to help you quickly and easily segment your book of business and export the data for use in email communications.  During your conversation, gather updated information on clients' life insurance and planning needs and reinforce the positive planning that you helped them implement.

For reference:

Join Windsor, Life Happens and AIG for a New Windsor Webinar (recording)

NIC Inforce Policy Management

Windsor Carrier Marketing Resources

Term Conversions.  Many of the changes in underwriting and capacity (see below) don't apply to in force term conversions. Depending on the conversion rights of a particular carrier, policy owners can often convert to well-priced permanent insurance with long duration guarantees without new medical underwriting.

[Windsor Term Conversion Chart]

External Conversions and use of insurance exam on coverage written within the last 12 months.  Several carriers are offering "external conversions" programs where new permanent coverage is offered if the proposed insured has secured fully underwritten coverage from a list of specific life insurance companies in the last three years.  This is typically capped at $1 million or the death benefit amount of the previous policy whichever is lower.In addition, think about using an insurance exam that was done in the past 12 months (typically up to age 70) to secure new desired coverage (term or permanent).

Caps and Par Rates for IUL Impacted.  The consequence of low interest rates and increased volatility in the equity markets is lower caps and participation rates in IUL products.  Combined with the in force illustration impacts of AG49 regulation (may not be able to illustrate IFL at original projected rate) this is a great time to request updated in force ledgers, communicate with in force IUL policy owners and re-set expectations going forward.  Preparing your clients for potentially their first "zero" crediting rate in their IUL can reinforce the power of the product design when compared to pure equity exposure as well as set reasonable expectations going forward.

[Carrier Inforce Ledger Instructions]

 Underwriting, New Business Processing and Capacity

Limited/restricted capacity for older ages.  Due to COVID-19 many life insurance companies have limited or restricted access to coverage. The most severe limitations are age 80 and over where many companies are postponing consideration all together.  For insureds 60 and over many carriers are postponing coverage if an applicant would be rated above 2-4 tables or if they have certain underlying conditions making them more at risk to serious COVID-19 complications.  It's more critical than ever to shop important cases given these rigorous underwriting conditions.

[Related: COVID-19! What Have You Done to Underwriting?]

[Windsor COVID-19 Carrier Underwriting and New Business Guidelines]

Reinsurance capacity severely restricted.  The reinsurance companies have reduced their maximum exposure to any one life dramatically.In some cases as much as 75% from their previous levels. This means that all ages and all rate classes are impacted if someone is looking to secure large amounts of life insurance coverage (over jumbo limits).

"No exam" options expanded.  Many carriers have expanded their accelerated underwriting options by expanding the death benefit amount limits. Prior to the pandemic most carriers capped at $1,000,000 of coverage. Today there are options at 1, 2, 3 and even 5 million of death benefit.  Note: These programs typically cap at age 60 with much higher success rates at age 50 and younger. 

[Windsor No-Exam Underwriting Programs]

Expanded use of Medical Records in Underwriting.  Several carriers are willing to use medical records (including electronic medical records) in lieu of an exam if the records are complete, including a recent (typically within 12 months) full physical and/or executive physical.  One carrier, Lincoln Life, will go as high as $20 million of insurance.

End-to-End Digital buying experience. Prior to the pandemic many carriers offered some form of a digital buying experience and even a few offered true end-to-end digital experiences but the usage rates were extremely low.  Today all parties, clients, agents, wholesalers and carriers have dramatically increased the use of digital buying experiences including e-delivery and e-signature.

  Putting It All Together

​Leveraging historically low interest rates.  Taking advantage of short-term product opportunities.  Understanding and communicating the dynamics of underwriting, product features and parameters, and reinsurance concerns.  Using technology to discover new opportunities and better ways of doing business.  Making the purchase process straightforward and painless for your clients.  These are all ways that you can get both the attention and the confidence of prospects, clients, their advisors, their businesses and their families.  Now is the time to start a conversation that matters.

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Friday, 14 June 2024

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