Most of us in the life insurance business tend to believe the sale of specialty products, such as impaired risk life policies, is reserved to traditional life insurance agents. That may need to change.
The prevailing view has been that these products require specialized underwriting, the ability to negotiate rates and a detailed knowledge of the workings of the life insurance processexpertise that stockbrokers, bank insurance sales people, and others do not possess.
The problem with that is, an insurance sales person at a stock brokerage firm or bank is just as likely to come upon a customer with a special need as is a traditional life insurance agent. In fact, in view of the volume of customers many of these sales people encounter daily, they may be even more likely to come across such customers.
As an industry, life insurance has traditionally kept its technical secrets to itself, attempting to avoid permitting access to some of the more esoteric elements of the life insurance process to those who are not well-established members of the life insurance community.
Yet, in the last decade, there has been a continuing shift of life insurance sales away from traditional distribution outlets. Whether we like the entry of non-traditional distribution outlets into the business or not, we still have an obligation to the consuming public to make sure its needs are well served–regardless of where the sales of our products take place.
Therefore, perhaps it is time for insurers that specialize in issuing impaired risk life products to open up the sales door to the newer entrants.
We realize that impaired risk products are complex to understand and require additional effort to put into place. Nevertheless, these products, and the underwriting process they require, are not at all beyond the capacity of any of the sales people who are currently selling the more traditional products.
We need merely to open the process to the entire scope of life insurance distributors and to create the training mechanisms necessary for the products and the process to be understood and implemented.
A small number of stock brokerage firms and bank insurance operations are already engaged in placing impaired risk and other specialized life insurance products, according to our information. Unfortunately, weve learned that this handful of distributors is, as yet, unable to cover the entire needs of their customers without receiving additional help in understanding and implementing these types of products.
Many non-traditional distributors have fully professional insurance specialists who can help point-of-sale personnel understand and implement these products. But before they can do so, they need help from insurers to simplify and more readily understand what is needed to satisfy customer needs in impaired risk situations.
Such assistance, once offered, will enable these non-traditional sales people to recognize the needs and be more able to satisfy them.
We often look back fondly to the days when we began in the life insurance industry. The mantra then was to analyze customer needs for financial security if the customer lived, died, became disabled, or retired.
This type of analysis required reviewing the entire financial health of the individual, not merely settling for a quick sale of the product of the moment.
Our concern today is that if insurance sales people do not have access to the complete spectrum of life insurance products and the training to recognize needs and implement them, they cannot complete this type of needs analysis, no matter how well intentioned they may be.
Our understanding is that few insurers specializing in impaired risk coverages have as yet established programs to wholesale their products to non-traditional distributors. It may be that management at some of the non-traditional distribution outlets are playing a role in this, by resisting exposing staff to new products and concepts that might distract from selling the “product of the moment.”
Yet, to meet all the needs of customers, there must be changes in the perception of how life products are sold and which ones are emphasized.
In the past, we have written about the need to offer not merely impaired risk life insurance coverages, but also impaired risk annuities. The impaired risk annuity business has been fairly well limited to the structured settlement business. Yet, the current growth in the sale of payout annuities will require all of us to take a fresh look at designing annuity products that truly meet the financial needs of retirees.
Underwriting annuity payouts is an interesting art form that only a few insurers currently possess the skill to master. But the crisis in the Social Security system will require the industry to take a fresh look at these types of products as well as at more traditional forms of impaired risk life insurance products.
If the industry can stimulate recognition of the need for impaired risk products throughout all elements of the life insurance distribution system, this will help fulfill the industrys obligation to the consuming public.
It will also enhance the industrys image with legislators and consumers. As lawmakers begin to review solutions to the Social Security crisis, the business will be perceived as part of the solution, not part of the problem.
Norse N. Blazzard, JD, CLU, and Judith A. Hasenauer, JD, CLU, are principals in the Westport, Conn. and Ft. Lauderdale, Fla. law firm of Blazzard, Grodd & Hasenauer, P.C. E-mail at Norse.Blazzard@BGHPC.com.
Reproduced from National Underwriter Life & Health/Financial Services Edition, November 12, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.