With over 14 years in the Life department with Financial Independence Group, I’ve seen the good, the bad, and the ugly in regards to the life insurance industry. Over the years, I have seen the industry transition through advanced technology, product innovations and improvements in the underwriting process, each piece helping to provide more support to independent financial advisors as they protect their client’s future.
Since 2002, our life team has grown significantly and continues to adapt to industry change through providing life insurance resources to support our independent advisors and their clients.
Technological advances have improved many aspects of the life insurance industry. Most importantly, for me, has been the improvement in ease of doing business with life insurance agents. Getting an advisor contracted with a life carrier used to be quite a chore. I’d have to fax or email a full contract (usually 10-15 pages) to the advisor, he or she would have to manually fill it out with a pen and sign in several spots. Nearly every time I’d get the contract back, there’d be something missing-usually including a signature or two. I’d have to refax the pages that needed to be signed and call the agent to ask that they sign and resend those pages. This took a lot of time and was tedious, taking away valuable relationship building time.
A couple of years ago, this all changed due to new technology, and I couldn’t be happier. Now when an advisor needs to get appointed with a life insurance carrier, the advisor can go into FIG’s agent portal, click a button, answer one or two simple questions, and click submit-and it’s done. Contracting technology has literally shaved hours of wasted time each day, turning what used to take 20-30 minutes per contract into 1-2 minutes.
Another significant technological advancement involves client applications. The process used to involve the agent and client sitting down and manually filling out a paper application (typically 20-25 pages), then mailing or faxing the app to me. Filling out the app would often take an hour or longer, and getting the complete app to me would be arduous too. The biggest problem I always saw was missing signatures. If a client missed a signature, I’d have to call the agent, and the agent would have to re-visit the client and get the signature(s) before we could even submit the app. I dealt with many a disgruntled agent through this process. Now, with the advent of e-apps (electronic applications) and drop tickets, the process has become so much simpler. The agent can even submit an application without the client having to sign anything! The process of applying for life insurance with e-apps can now take as little as 10 minutes!
Another change I’ve seen over the years is with the actual life insurance products in the market. At the forefront of these product innovations is the inclusion of living benefits to many life insurance products. When I started 14 years ago, very few products included living benefits-and you would have to add these living benefits as a rider onto the policy, which was an additional (sometimes costly) expense. Now, many of the life insurance products out there include living benefits as an endorsement, meaning they are automatically included and there isn’t an additional cost. So someone who purchases a life insurance contract to protect their family in case they die unexpectedly now has this additional protection in case they need it for long term care, chronic illness, critical illness and terminal illness. Life insurance companies are adding these living benefits at a tremendous pace now, as they need to include them to stay competitive in the marketplace-a great benefit to the consumer who is shopping for life insurance.
With all of these changes and innovations, I’ve seen many life insurance companies come and go through the years. During the financial crisis of 2008-2009, we saw a lot of life insurance companies fall into distress, and it was an interesting time in our industry for carrier turnover. Many got bought out by other carriers, some simply stopped selling new life insurance policies, and some have even gone into receivership. Many advisors who have been in the business a while will remember these names: Lincoln Benefit, CNA, Shenandoah Life, Presidential Life, Beneficial Life, US Financial, Jefferson Pilot, and one company that has changed names at least 4 times-AmerUs/Indianapolis/Aviva/Accordia Life! Even some of the bigger names in life insurance have recently exited, in Hartford and Genworth. AIG was a well-publicized carrier that was hit hard by the financial crisis, but they have stuck it out and are still a very competitive and strong life insurance company today. New names have popped up too, such as Zurich, Symetra, Accordia and VOYA, and next year MetLife will rename its retail life insurance side Brighthouse Financial. Even with all of these changes, the industry remains incredibly strong, and should continue to build further strength in the coming years.
One element of product innovation that has come about due to the extremely low interest rate environment has been the gradual modification of universal life insurance. From the early 2000’s, all the way up to the early 2010’s, Guaranteed Universal Life Insurance has been the ‘hottest’ product in our industry. This product offers secondary guarantees on the death benefit, usually up to age 120. As long as the policy owner paid his premiums on time, the policy was guaranteed to remain in force up to age 120. Starting in the early 2010’s, some carriers started playing with the guarantees, allowing consumers to ‘dial a guarantee’ to save some premium dollars. In other words, where a GUL might have been guaranteed to age 120 in the past, now a carrier would allow the guarantee to be dialed back to age 90, 95, or 100 in order to reduce the cost. With interest rates staying so low for so long, some carriers have gone back to ‘current assumption’ UL plans that work much like the old ULs back in the 80’s and 90’s. Most of these CAUL’s offer limited guarantees-typically to ‘life expectancy’, which is a feature that the old 80’s and 90’s UL’s didn’t offer. These also build some cash value, which allows the plan to remain inforce even after the limited guarantee period has passed. The transformation of universal life has also included a significant growth in ‘indexed universal life insurance’. IUL was a relatively new concept when I started back in 2002, with only a handful of carriers offering it. The concept took off over the years, especially in the past 5 or 6 years, and now seemingly every life insurance carrier in the industry has their own IUL product. I foresee the indexed UL industry growing even more significantly in the years to come.
Improvements in Underwriting
The last significant change I have seen in the years I’ve been with FIG has been with underwriting. Granted, underwriting is still the bane of existence for many life insurance sellers, and it will likely continue to be for many years down the road. But, as with most things in the 21st century, technology has created a ‘paradigm shift’ in the world of underwriting. We are still in the infancy phases of this underwriting revolution, and I think great things will be coming our way very soon, but I have already seen significant improvements in underwriting just in the last couple of years. Many carriers have minimized the necessity of paramed exams, APS records and other intrusive data collection methods, and have replaced these with simple internet searches, allowing them to collect much of the data they need on an applicant without having to get the applicant directly involved. His has expedited the underwriting process significantly. Where a life insurance case would have taken 6 weeks from submission to placement using the old underwriting process, it now can take as little as 3 days! As more carriers begin to use this new method of underwriting, we should see vast improvements in processing times, and much fewer headaches. I’m looking forward to these days ahead of us!
Finally, there will be change in the very near future for all of us in the life insurance industry. The adoption of the DOL Fiduciary Rule is affecting many (if not all) in the financial services industry, and the life insurance side of the house is not immune. There will be implications immediately, especially involving IRA and RMD transfers into life insurance (qualified money).
As a seasoned veteran of this industry, I can say the 2 toughest periods for me in this industry were the 2008 financial crisis, and the change in the estate tax rules in the early 2010’s. The estate tax exemption going up almost five-fold, created new and significant challenges for this industry, and we are still dealing with these challenges. I feel that the challenges we’ve faced from these two specific events will have us prepared for dealing with the potential challenges that lie ahead of us in the form of the DOL Rule, the ‘soon to be’ newly elected President and administration, and the inevitable changes these and other future events will certainly bring.
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