Challenge to life companies

[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?

[glenn]

I think that's the best idea you had since you licensed me to use your quoting engine . Which was of course a very very good idea.

This concept IMO has a huge punch with consumers. Sell it with all the benefits of term insurance. After it's been in force a while, I think it's got alot of the benefits of permanent in terms of lower lapse rates as well.

Now what happens to the policy at 65? Conversion anyone?

The marketing aspect is huge. Compare it to how well ROP has done recently, and that's a 100 year old idea that's been rehashed and is full of flaws. Websites spring up all over the place just to sell ROP, and consumers aren't even looking for it. A product like this, with a bit of a push, what's a consumer going to think? They're going to love it. And it's simple and easy to explain.

And agents are going to love it too. Easy to sell, an easy concept. And for younger folks, a longer term and thus a bit higher premium.

The income replacement calculator needs analysis ("Income from Capital Analysis" in Compulife) is a great fit with this as well - it's a perfect fit for selling more insurance. Want to replace your paycheck til retirment? The needs analysis shows you how much you need, this product answers to the penny how much you need.

And if any insurer doesn't understand how much traffic Compulife can generate on something like this, then.....well, you don't understand how much traffic Compulife can generate on this.

I love this idea -a lot. I can just hear my son saying "if you love it so much, why don't you just marry it". Well, maybe I will.

[Brad Howard]

AIG is rolling out such a product probably late April. You choose the term between 10 and 30 years........

[Robert L. Barney]

The problem is there are no rates for longer level periods than 30 years.

For example, younger people can't get a 40 year term.

You will notice with the current crop of level term plans, that the longer the level term period, the lower the maximum issue age. For example most companies cut off 30 year term at age 45 to 50 but 10 year term is usually available for ages up to age 70 to 80. The longer the period, the lower the maximum issue age.

In that regard you would expect a 40 year term to have a maximum issue age of 35 to 40 (based upon the trend I just noted). Most would not create a product like that, because the maximum issue age appears to low.

But this is not an issue if the actuary is pricing the product as level term to 75. Here are examples of the level term periods for each age:

Issue age

18 - 57 year term
19 - 56 year term
20 - 55 year term
21 - 54 year term
22 - 53 year term
23 - 52 year term
24 - 51 year term
25 - 50 year term
26 - 49 year term
27 - 48 year term
28 - 47 year term
29 - 46 year term
30 - 45 year term
31 - 44 year term
32 - 43 year term
33 - 42 year term
34 - 41 year term
35 - 40 year term
36 - 39 year term
37 - 38 year term
38 - 37 year term
39 - 36 year term
40 - 35 year term
41 - 34 year term
42 - 33 year term
43 - 32 year term
44 - 31 year term
45 - 30 year term (product already exists)
46 - 29 year term
47 - 28 year term
48 - 27 year term
49 - 26 year term
50 - 25 year term (product already exists)

One company has already gotten back to me to say they will be providing me with no lapse U/L premiums solved to guarantee coverage and premiums to ages 65, 70 and 75. That's great, we'll get that in the system as soon as we get the numbers.

One actuary commented that if this was done with term products that they would still need YRT tails - that's OK too. Who cares? What we want is guaranteed level premiums and coverage to 65, 70 and 75. If the coverage can be continue beyond that initial level period - no problem.

I think Glenn is right, this idea is just so obvious and precisely what many consumers need that it has to take off.

[Brad Howard]

Agreed, if this takes off the way you say, and I think it would, they would certainly consider looking at longer terms going forward.........or it seems they would. The MP market place could do good things with this also, many applications where this would be the best fit........

AIG also has a "dial a UL" product too. I think it's their ContinUL and that can be set to a specific year out to age 120. ING has one too on the UL side I'm told Robert........

[Todd Simpson]

There are many companies with Guarantee UL products that you can dial in a specific number of years for the coverage and make it look like level term to whenever you want it. That's the main reason I don't think you'll see many companies wanting to put time and money into pricing a term product like this. Here's the underlying problem, the companies aren't sure how long they can sustain selling the guarantee ul's at the current pricing - if you look at these products, they are lifetime term. Not alot of motivation for companies to be putting our longer term products. I do think the idea of dial-in term up to a 30 year level (depending on age) is a good idea and you will see several companies try it, but that's as good as it's going to get. Most of the companies selling ROP term right now are not building a large enough block of business to keep these products going if consumers don't catch on the the concept soon. These are at best "niche" products at this point. Some of the term sales guys wil want to shoot me, but younger people shouldn't be buying term - while being in the best health of their lives, they should lock in on some good cash value products while they can. We sell 70% WL/UL vs Term in our Agency and specialize in impaired risk and jumbo cases. 90% of the older age clients we are selling bought term at a young age, let it lapse, didn't do anything about it until the point where their business or estate had grown to a large amount, are now in poor health and realize they now need several million of life insurance for business continuation or estate planning. We must educate as well as sell our clients.

[glenn]

Originally Posted by Todd Simpson

Most of the companies selling ROP term right now are not building a large enough block of business to keep these products going if consumers don't catch on the the concept soon. These are at best "niche" products at this point.

I referenced that earlier. I see this concept as far, far more sustainable than ROP. With all the fervor over ROP term, it's still not something that consumers generally would push for, or even have as the primary focus of a sale. This concept however is totally different. It's got great marketing jingle, a bit of a push and every consumer and they're dog will be looking for it, and it's a dead simple concept to explain. ROP is a feature, and one that costs more than the product without it - and it's not the reason for buying the insurance. THis concept is the exact opposite - a few companies in the mix and rates are competitive, there's not much to compare it with other than 30 year term, and it's the *entire* reason for a consumer to buy life insurance.

In short, consumers typically don't want, need or even look for ROP. This product could be all of that.

And if you're selling it as retirement term, well, we're already talking about retirement products aren't we . Time to move onto a second sale, generated from an entry level term product. Again, ROP doesn't do that.

[Robert L. Barney]

There's the "will" versus the "can" aspect to the concept of "term to retire".

"Will" a company create a level term to 65 and/or level term to 70 and/or 75 is a question simple to answer. So far no one has been willing to do it - which is why we don't see any. But then I remember a market in which 10 year term was the longest level period and there was no such thing as 30 year level term. In fact some companies still don't offer 30 year term but it's not because then can't, it's because they won't.

I suspect this is because companies don't want level term plans that compete too effectively with their whole life product lines and would prefer to have a gap. If you know you need insurance longer than 20 years, you have no other choice but whole life. Forget the fact the market would prefer something in between, and push something else in its place. Kind of a like a car dealer where you can buy Kia or Cadillac. If you want more than a Kia, you'll need to get a Caddie. The stategy works unless you competiting with Toyota who's selling Camry's.

To summarize, there is no "will" to do this - yet.

The "can" part of this argument seems to have been answered already. According to many you "can" take a no lapse U/L scenario, dial in a coverage and guaranteed period to age 65, and get a premium. In case anyone forgot, my son did just that with an Empire Life policy and got a 39 year guarantee (he was age 26) which gave him exactly that.

So it appears the market "can" create a level term to 65, unless someone can explain to me why you can do this with no lapse U/L and not with term.

So here's how I think the "will" part of this is going to go. Some companies are going to generate some no lapse numbers for me for level coverage to age 65, 70 and 75. They are going to send the numbers to me and I am going to create those level term categories in Compulife - just as I promised here. I will then distribute that to the market and those that like the idea will sell it, and the folks who don't won't.

Once I have some products in the system I'll be promoting the idea to the media and at www.term4sale.com in the content that I am generating. I suspect others will begin to immitate that quickly and demand should also grow quickly.

Now if it turns out I'm right, and the market wants the product idea, then I suspect other life companies will start paying attention and start sending me their no lapse numbers and/or creating new products. And maybe, as happened with 30 year term, the "term to retire" product concept will gain in popularity.

[Robert L. Barney]

I have now had serious conversations with two life companies (they shall remain unnamed until we roll this out) who have agreed to provide me with no lapse U/L premium values for level premiums and coverages to ages 65, 70 and 75. We will refer to this as "term to retire" with options of ages 65, 70 or 75.

Because of the commitments we have received, Compulife is moving forward with the introduction of these new categories effective May 1st.

NOTE: We can only add or remove categories at the point of a monthly update. Even if the companies don't have the info to us, those categories will be introduced May 1st and we will add companies, by midmonth update, if necessary.

[Robert L. Barney]

I just posted a link to a new article I have finished writing in conjunction with the challenge I made to life companies. I'd like to see some feedback on it:

http://www.americaninsurancebroker.c...=2451#post2451

Have a look!