Challenge to life companies

[Robert L. Barney]

You seem strangely out of sync with regulation of the insurance market. The NAIC is NOT a regulator, it is an association of regulators. Last time I checked the insurance market is regulated by individual states.

Compulife does not sell insurance. We are a third party, independent source of comparative information about the term life insurance market. Life companies do not tell Compulife what to do. We act independently. If I want to create a category and give it a name which accurately describes the product in the category, any attempt to inhibit free speech would be met with an aggressive and public response.

An 18 year term product, issued to an individual who is 47, is a level term to 65 and if I want to call it that, I don't see what problem that represents for anyone. I would welcome a public debate on that issue and would wonder why regulators have time for such ridiculous trivia. Would I prefer the companies actually create products that are called level to 65, 70 and 75 - you bet. But somehow I've got to motivate them to do it and I suspect this will get it done.

As to the cost of reserves on products going sky high where term premiums are level longer than 30 years, can you point me to the portion of the reserve regulation that says 30 is some kind of magic number. You make it sound like 30 is easy to hit, and if you go to 31 you step off a cliff. Is that really the case?

I seem to recall that guarantees of more than 10 years represented a more significant reserve challenge, versus products with guarantees of 10 years or less.

From a purely logical point of view, I find it hard to imagine that a company can give 30 years of level premium and coverage to a 50 year old, which gives him a level guaranteed premium to 80, but that giving a 25 year old a 40 year guarantee somehow creates a reserve storm. And if it does, and I would need you to point me to the regulation that says so, then it will not be the NAIC chasing me - it will be me chasing the NAIC. As I said, it is an outrage that 50 year old people can get 30 year level guaranteed coverage, but 25 year old people can't get level coverage to 65. I suspect the press would agree with me and if I have to make that point, I will.

And finally, the notion that competitors would "turn me in" is fear mongering at best. It has been my experience that people who make frivolous complaints usually end up with more egg on their face than the person that they complain about.

I note that your userID is somewhat cryptic. You know who I am, I do not know who you are. Would that matter? What is your position in the industry?

Your turn.

[glenn]

Originally Posted by 14U2C

This is only a concept designed by you and nowhere on your site is that explained.

Insurance is sold by concept all the time. It's news to me that a carrier has to call a product by a concept name in order for someone to promote it or sell it. Ever heard of universal life? It's rarely sold as 'life insurance'. Pretty much 100% of the time it's sold via some sort of concept.

And the insurers are 100% on board with that idea. I've personally worked on marketing concept development at an insurer, said concepts weren't called '10 year term' or whatever, but they were intended strictly to facilitate the sale of their line of products. Again, this shouldn't be news to anyone here.

So, in short, Insurance carriers would need ENORMOUS reserves to guarantee term insurance for longer than 30 years

I'll buy that argument when I hear it from a pricing actuary, not before. Agents that talk about reserve requirements quite simply don't know what they're talking about. I don't either - but I do know that unless you're an actuary you're quite simply not qualified to state that so emphatically.

. Been there in 2000. Where were you?

I could be wrong, but are you talking about triple X? If so, I think you're a bit out of the loop. Bob was actually very heavily involved in that.

[14U2C]

Mr. Barney you are a sharp guy! I have no problem with you. In fact, you are a great asset to our industry. Your software helped level the playing field. I am merely pointing out that where there is smoke there is fire. Perhaps I am saving your a$$? Life Insurance products like Term Life, Flexible Premium Life (UL) and Whole Life are recognized products that are admitted in nearly all states thoughout the country with many carriers. There is no such product as a term to age 75 admitted in any state in this country. Unless, of course, your 10,15,20,25,or 30 year term brings you to this age.

Perhaps it would be wise to notate somewhere that the costs and performance for such a product as term to 65 or 75 are merely concepts based on the performance of secondary guarantees within a Flexible Premium Life (UL) that differs from the guarantees offered with Term Insurance. That's all.....I am not trying to bash you. I respect your hard work my friend and thought I would chime in to help a brotha' out!

All it takes is one pissed off consumer or competitor (that could to be an attorney) to call on the hell hounds of any adopted NAIC DOI to ruin your game. It happens more than you think. I also believe that your claimed Blue Sky amnesty could easily be thown out of court as you have no prescriptive rights in this arena (IMO). Again, I am sorry if you take this the wrong way. I have the most respect for you and appreciate your efforts.

Who knows.......maybe the man, the myth.....THE LEGEND behind 14U2C has a JD? Perhaps he knows more than he's leading "glenn" to believe? The bottom line is that, licensed or not, selling insurance or not, you have exposure End of story.

[choicearizona]

Originally Posted by Robert L. Barney

In conjunction with an article I am doing for www.term4sale.com, called "Go Long on Term Life Insurance", I am challenging life insurance companies to create a series of level term to 65, 70 and 75 products. I have even suggested a brand name called "Term to Retire".

IMPORTANT: I feel so strongly about this idea that I am undertaking that Compulife will create Term to 65, 70 and 75 categories if ONLY ONE company introduces these products.

The product idea should be quite simple to price.

For example, a Term to 75 product is nothing more than a 10 year term for a 65 year old, 15 year term for a 60 year old, a 20 year term for a 55 year old, 25 year term for a 50 year old and a 30 year term for a 45 year old.

A Term to 65 product is nothing more than a 10 year term for a 55 year old, 15 year term for a 50 year old, a 20 year term for a 45 year old, 25 year term for a 40 year old and a 30 year term for a 35 year old.

As you can see, lots of these products are already available. Here what's missing:

1. The oddball years in between. For example, if I am 52 and I want a Term to 75, I need a 23 year term plan. It's currently not available.

2. People under age 45 cannot get term periods long enough to get them a level premium to age 75. People under age 35 cannot get term periods long enough to get a level premium to age 65.

It is the second area, and the lack of products for younger people, that needs to be addressed by insurers. It is why I am issuing this challenge and will be pushing this development concept over the next year.

For example, I have a son who is 26. I would like him to be able to get a Term to 65 policy which would require a level premium period for 39 years. Such a product is NOT available that I am aware of.

Having noted that Empire Life, before it ceased selling policies, did offer a no lapse U/L product where you could dial in the coverage period and get a premium guarantee. One of my other kids, who was 26 at the time, needed a Term to 65 and so we got a 39 year guaranteed no lapse U/L product. The premium wasn't that much more than a competitive 30 year term.

Are there other companies offering no lapse U/L on this basis? If yes, I would like to get my hands on no lapse premiums for level premium/coverage to age 65, 70 and 75. I would be happy to include those no lapse U/L products in the categories even if only one company provides me with the rates for this scenario.

Normally I don't do stuff like this but in my view, this is an area which needs to be addressed. Younger people cannot get term products with level periods that are long enough and I think introducing these product categories will put pressure on the industry to respond.

I also think it will give agents more expensive term for younger people, making sales of insurance to younger people more profitable without having to ignore the amount of insurance younger insurance clients need.

I think this is a great product concept - Term to Retire - because a lot of people will see the need for term insurance until people stop working at retirement. I suspect the media and most finanancial gurus will be keen on the concept.

And one last idea. I think Level term to 65, 70 or 75, with ROP is also a very sellable concept. Insurance until you retire, and some cash back for your retirement. Of course I would also like to see the option of a reduced paid up policy, in lieu of taking the cash, as an option.

So what about it life companies, anyone ready to take on the Compulife challenge.

What do you folks think?

MetLife or some other company several years back introduced a term product where you pick out the length of time you wanted it for - 10 years, 18 years, 27 years or whatever. Their agents never sold it. Most stuck with the basic 10/20/30 year plans so they dropped it.

[Robert L. Barney]

And the choices were 5 through 20 year term.

AIG is offering 20 through 35 - very important difference.

Here is what I wrote in my June monthly update:

New ROP Categories Added

Our work to add Critical Illness price comparisons for our Canadian customers got delayed by a couple of weeks due to the work required to introduce 4 new ROP categories for our U.S. software. The categories are:

• To Age 65 Return of Premium
  
• To Age 70 Return of Premium
  
• To Age 75 Return of Premium
  
• Other Return of Premium

The categories were necessary with the AIG Life's introduction of ROP Select-A-Term. This product, much like their non-ROP version, offers a wide number of different initial level periods to select from. They are 15, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35.

The standard categories of 15, 20, 25 and 30 appear in our existing categories. The balance of the level periods are now found in the "Other Return of Premium" category.

We have also gone to the time and trouble of cherry picking premium rates for the various level categories, and built those premiums into our level to 65, 70 and 75 variations. As with the non-ROP products, a person age 42 can have a level to 65 premium by selecting a 23 year level ROP term plan. Our software automatically does that when you choose the level to 65 ROP category. If you choose the level to 70 ROP category, then a 28 year level ROP premium is quoted. And if you select the level to 75 ROP category, you will get a 33 year level ROP premium.

We think the level to 65, 70 and 75 with ROP options are actually a great idea. They allow an insurance buyer to select a term plan that will provide them with life insurance coverage until they retire (we call it "term to retire" or "term to retirement"), and when they no longer need the insurance, because they will no longer be working, they can get all the premiums returned. And under current tax rules, the premium refund is tax free.

In fact AIG seems to be now latching onto this "term to retire" concept and we hope it spreads like wildfire in the industry. There is no reason that life insurance companies cannot build level to 65, 70 and 75 term products.

Generally the objection we hear is that companies just can't provide longer level term periods due to reserve problems. While that may be true for older clients, that is NOT true for younger clients. We admit that if you introduce a 35 or 40 year term product, the maximum issue age is less than it would be for a 30 year term product. But in order to get to age 75, a person buying a 40 year policy is only 35 when they buy it. And if a company says they can't price a 40 year term product for a 35 year old, our question is how is it that Motorist Life Insurance is able to offer 40 year term to consumers who are 45 (40 if they are smokers)?

Once again, there is no technical reason why companies can't create and price level to 65, 70 and 75 products. If there is ANY objection to doing so, it's because they don't like those term concepts biting into their whole life sales. In that regard companies need to realize there is an entire constituency of term sellers who would not sell whole life if their lives depended on it. By offering level to 65, 70 and 75 products companies give that group of agents a product which, for younger buyers, still generates a decent premium and commission for the agent, while giving the consumer a product that covers them for the period of time that they will need most of their life insurance. And by adding an ROP option, companies can increase the premium and still have an attractive term product for agents and their customers.

This is not a "can" problem, this is a "will" problem. Compulife is challenging companies to do something that benefits agents and consumers. And the sooner companies get on board, the sooner they will benefit from the sales of these products.

[Robert L. Barney]

choicearizona:

Question: What is the longest level term product you sell, and WHY do you sell it?

[JMO Fan]

Many carriers don't offer longer-term level premium products because cash values would be required.

Some agents sell no-lapse UL as a substitute, but that's very expensive term.

NAIC is too busy with reserves to worry about the cash value law. Next year they'll start on CV's, but some regulators want to tighten the rules, rather than loosen them up. That would make long-term level term impossible.

Offering Term to 100 (no CV) like Canada still seems a long way off. Missouri, to allow a choice, passed a law 20 years ago permitting 0 cash values if a comparable cash-value product was offered alongside. No other state followed suit, so national companies won't try it.

[Robert L. Barney]

JMO Only:

Let's try to discuss this SLOWWWLY.

Can we agree that the propensity to generate cash in a longer level term product (ie. as a percentage of face amount), is a function of age?

For example, a 30 year term plan, for a 30 year old male non-smoker, has less interim cash build up than a 30 year term plan on a 50 year old male smoker?

Can we agree on that?