5 life insurance game-changers and cautionary notes for 2015

Life insurance industry innovations, trends and pitfalls that advisors should heed in the year ahead

This year will see huge decreases in underwriting times for those who take advantage of new technologies. This year will see huge decreases in underwriting times for those who take advantage of new technologies.

With the New Year now past us, you should be aware of several significant changes in store for the life insurance industry. Many of the changes are great for both agents and their customers, though there are some pitfalls to avoid. Technology has played a big part in many of the new trends. And the industry has been adapting and moving quicker to meet the needs of consumers as these new technologies become mainstays.

If you have clients or customers who have been putting off meeting with you or have been reluctant to explore life insurance because of the perceived drawn-out process, below are some great opportunities for you to offer your customer along with easier, less expensive, and quicker life insurance options.

1. No medical exam necessary

As advisors, we are well aware of customers’ reluctance to take a medical exam. Some have difficulty working it into their schedules, some have a fear of needles, and others simply don’t want to go through the hassle. The great news is that no-medical exam policies have proven to be an extremely successful product for insurance companies.

Consumers have overwhelmingly opted for no-medical exam options when given the choice, even when the policies are more expensive than traditional medical exam options. Five years ago, we had one or two options to offer clients in the no-medical exam product category. In 2015, we have 10 + companies offering these simplified issue policies.

One of the downfalls of these simplified issue life insurance policies is the maximum benefit amounts are often under $400,000. An option for some clients is to get multiple no-exam life insurance policies from different carriers. The great news is that we have seen the first company offering up to $1 million in coverage for a no medical exam policy this year.

Another growing trend is to offer clients the quick and instant issue no-exam life insurance options. This past year, we have seen several new companies enter this market.

The applications are completely digital and underwriting decisions are offered within 24 hours. However, make sure your clients are aware that for these products, the insurance company will pull their motor vehicle report, medical insurance bureau, and pharmacy report. The pharmacy report will show all medications prescribed over the past five years. For clients who are looking for the ultimate convenience, instant issue policies are a great option.

The no-medical exam life insurance market is growing, so if you have not added no medical exam life insurance policies to your product offering, 2015 is the year to do it.

Cautionary note: While no-medical exam policies can offer clients quick approvals, they can also result in quick declines. Make sure you know the underwriting guidelines for each carrier before applying. Any adverse health codes that lead to a decline are stored in the Medical Information Bureau (MIB) database.

While MIB does not store data on the actual outcome of your previous applications, their services can alert underwriters to any errors, omissions or misrepresentations made on a new application. This mitigates an insurer’s risk exposure and, in doing so, keeps prices low. The codes associated with a declined policy stay on your record and can make it difficult secure insurance from another company.

2. Technology-Driven Price Drops

Competition among insurers has been increasing every year. According to a 2013 study performed by LIMRA and The Life Foundation, 80 percent of consumers research products online before purchasing a life insurance policy. With so many websites offering price comparison engines, listing all the available life insurance companies in order by premium amount, companies are now competing head to head on cost.

This is especially true in the term life insurance market, where there are fewer moving parts to the policies. Let clients who have older policies know that, since the mid-1990s, policy rates are lower by up to 70 percent.

Direct competition is only one factor in this trend. Other trends are (1) technology-enabled reductions in administrative costs that are passed on to consumers; (2) longer life expectancies.

In the term life insurance market, people living longer translates to profits for the insurers. Life insurance claims rates are decreasing for insurance carriers, resulting in lower rates for consumers.

Clients with older policies should re-examine whether they can achieve cost savings, especially if they are in good health.

Cautionary note: When consumers search online for life insurance rates, most often the preferred plus health-class is displayed. It is important to let customers know that not everybody gets the low rates of this classification. And, depending on the client’s unique health situation and history, the company with the lowest displayed rate may not be the best option.

3. New Living Benefits

New hybrid life insurance policies offering living benefits riders have seen double-digit growth in recent years. These policies offer unique riders that allow the insured to use the death benefit while they are still living.

We have already seen the accelerated death benefit rider that offers access to a policy's death benefit when the insured is terminally ill. Now, we have options to add chronic care and critical illness riders to policies that aim to aid in long-term care and medical expenses arising from sudden illnesses.

The chronic illness rider allows you to use the policy's death benefit if you are unable to perform two of the six daily living requirements: bathing, continence, dressing, eating, toileting, and transferring. The benefit is similar to that of a stand-alone long-term care policy.

The critical illness rider also allows the insured to use the death benefit of their policy in the case of critical health conditions such as cancer, heart attack, stroke, a major organ transplant, end-stage renal failure, ALS, blindness, or paralysis of two or more limbs.

These are just two examples of the types of riders life insurance companies are adding to hybrid policies. Given the growing popularity of these policies, we can expect to see more.

From an agent’s perspective, the riders offer a great way to provide long term care benefits to clients without having to sell a separate policy. Additionally, clients like being able to take advantage of their life policies while they are still living.

Cautionary note: Make sure to examine the differences among carriers’ living benefit/hybrid life policies. States regulators are still examining the fine print of these policies, o expect these products to continue to evolve.

4. Painless policy procurement

2015 should be great year for lessening the piles of paperwork required for policies. Traditional paper applications are still available, though insurance carriers are finally moving towards more digital options. Many of the top carriers are offering drop-ticket applications, wherein the application is primarily entered online, then completed by a paramedical examiner.

No-medical exam policies are even easier with online application options. This is great news for the once-antiquated insurance industry. Agents can now provide clients policies and almost completely avoid traditional snail-mail. All this means faster policy procurement to customers.

This year will see huge decreases in total underwriting times for those who take advantage of the new technologies. Get yourself a nice scanner and a fast Internet connection to enjoy all the new time-saving tools now available.

Cautionary note: The utilization of technology entails more security issues. Make sure your computer is properly protected with anti-virus software, and that you are connecting to the Internet on secure networks.

5. No Need to meet face-to-face

Previously, producers were required to witness client signatures and meet the insured in person. While some companies still mandate this, most insurers now allow for applications to be completed over the phone using digital and voice signatures. This is a huge time-saver: It also avoids commuting and putting miles on our automobiles.

It is now easier than ever to schedule the time to take an application. In 2015, we will see more agents doing so over the phone. This is especially true for simple products like term life insurance.

According to a recent LIMRA report, 50 percent of consumers prefer buying life insurance without a face-to-face meeting. This is a win-win for agents and consumers, especially for the technology-savvy younger generations. If you have tech-savvy clients, be sure to offer this new option as it can mean a new sales channel for your practice.

Cautionary note: Just because a policy is taken over the phone does not make the application less official. Make sure to fully qualify clients before submitting business to avoid having them declined or rated. Also, be sure to note the application was taken without meeting the client on the agent report. It is always best to be transparent when dealing with insurance companies.

Most of the industry changes underway aim to make the purchase of life insurance less cumbersome. To take advantage of them, brush up on your computer and technical skills. Life insurance is just one part of financial planning. And the most valuable assets an agent can have are knowledge, experience, and strong ethics. Best of luck to you in 2015!

 

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