Life Guarantees Heat Up

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Many people have never heard about whole life insurance or its guarantees, says Bruce Schlappi, president of Renaissance Financial Group, Blue Springs, Mo.

To them, guaranteed long-term life insurance protection is a “brand new concept.” But its a concept many people like, once they learn about it, he says.

So, the question life marketers are asking today is how to bring consumers up to speed on life policy guarantees, be they traditional WL guarantees or the newer guarantees in universal life and variable universal life policies.

They are asking, because the marketplace mood has been changing. “Before year 2000, most industry attention focused on the new Triple-X regulations and the resulting flight to longevity, at least for level term insurance,” recalls Robert A. Miller, vice president-MGA distribution at CNA, Nashville, Tenn.

Meanwhile, most UL marketers focused on cash value buildup, he says.

But now, say industry sources, recession and a new war have caused the industry to make a sharp U-turn, as more and more consumers seek “safe money solutions.” Listen:

• “Definitely, the demand is up for guarantees in life policies,” says Lawrence Tronek, president of W. T. Scott Company, a Coral Gables, Fla. brokerage general agency of Principal Financial Group.
• “Absolutely, weve seen increased interest in life products with guarantees,” says Mark Hoelfer, executive vice president of Brokers Clearing House, LTD, West Des Moines, Iowa.
• “People may not always use the word guarantee when they talk to us about what they want, but they definitely are asking for relative stability,” says Thomas Endersbe, a senior advisor with American Express Financial Advisors, Minneapolis.

Company executives see the change, too. Take Patrick McCormick, the senior vice president of sales and distribution for SAFECO Life & Investments, Redmond, Wash. “Weve noticed a huge shift away from getting a return on principle,” he says. “Now, people want a return of their principle. They want security.”

As a result, marketers are not only dusting off their guarantee products and/or upgrading them; many are also exploring how to work with guarantees, both in the field and at the home office.

That last mission is critical, say some executives, because not only are many consumers uninformed about guarantees, as Schlappi says, but so are many insurance professionals. Some practitioners have, in fact, never before sold products with guarantees. Others have done so, but only sporadically. And still others have never worked with the newer types of guarantees (such as lifetime death benefit guarantees in certain ULs).

So, then, what to do?

Agents need to build good solid relationships with their customers, contends Schlappi, because the agent is the one “who sits there, and walks the client through the stressful issues that have made them want safe-money options. Agents need to be able to run the bases with clients on this.”

A whole generation of people–those now in their 40s to 60–were raised on “buy term and invest the rest,” Schlappi points out. But relatively few did that, he says, and those who did and who invested consistently have now learned “there are periods when investment values dont hold up.”

These individuals are now looking for a safety net, he says. So he presents WL, with dividends and paid up additions, as the safe-money optionin fact, as the foundation of their long-term financial plan.

He does point out that dividends can and do fluctuate, but he also illustrates various scenarios to show the effects of different dividends. When clients see there is a solid cash build up, even on a conservative basis, with the death benefit guarantee and waiver of premium, Schlappi says they are impressed.

Home offices, as well as producers, have a responsibility to see to it that guarantees are understood clearly, says Gregory Linde, vice president–product management and service at Principal Financial Group, Des Moines, Iowa.

For instance, the home office should see to it that product materials clearly explain the features and provide full disclosure, he says. And producers should be sure the buyer understands clearly.

Needs-based selling and reliance on the “trusted advisor” concept go a long way towards helping that happen, he maintains. For that reason, Principal favors a “consultative” approach, with advisors talking to clients about needs, goals and options and doing updates as circumstances change.

This is especially important when working with UL products that offer flexible guarantee options, Linde maintains. He cites his companys new Principal Universal Life policy as an example.

This UL offers not only a five-year built-in no-lapse guarantee, but also an optional 20-year death benefit guarantee and an optional death benefit guarantee to age 100 or policy maturity (which, when combined with the built-in extended coverage rider, makes lifetime no-lapse protection possible). It also lets buyers who dont pay the premium for one of the longer guarantees to “catch up” later on, by paying the extra premium plus 4% interest.

Such designs enable buyers to have both guarantees and choice, Linde says, observing that research shows this is what consumers want. But this also means marketers have a responsibility to design, distribute and explain the features in a way customers can understand, he says, adding he is confident this is happening.

CNA, which also has a UL with a flexible death benefit guarantee, believes producers can easily explain the design.