harles L. Ratner

In these highly competitive times for corporate-owned life insurance brokers and carriers, I would like to offer this independent advisors thoughts about what brokers and carriers, respectively, can do to win more COLI cases. Though this article assumes the involvement of an independent consultant and the use of a Request for Proposal (RFP), there should be plenty of helpful insights for cases where there is no consultant or RFP, but stiff competition among brokers and carriers.

Lets assume that you are a COLI broker. You have been asked to compete in a case where a company is exploring the use of COLI as a funding vehicle for an existing Supplemental Executive Retirement Plan (SERP) for a group of executives. You may have been involved in discussions with the company for months (or years) about funding with COLI. Or, you may be someone whom the company thought should be added to the list of competing brokers for any number of reasons. Anyway, the company lets you know that you will receive an RFP from its consultant and that you should work with the consultant in the RFP process.

You receive the RFP, along with a copy of the plan, a census and other pertinent information. You see that the RFP consists of 2 sets of guidelines: (1) general guidelines to format and facilitate your response, and (2) specific guidelines for your presentation of products and carriers.

With variations on the theme, the first set of guidelines will:

Ask you to describe the approach(es) you would recommend for using COLI to fund the plan, give support for your recommendations and describe how you would have the company deploy the COLI, i.e., whom the company would insure, how premiums would be allocated, death benefits determined, and so forth.

Tell you the type(s) of product(s) the company wants to see and any particular design parameters you should know about. In certain cases, the RFP will give you free rein to look at as many carriers as you wish. In other cases, where the company wants to avoid overlap, assure adequate coverage of the marketplace or both, the company and consultant will ask all the brokers to create a list of carriers they will investigate and then apportion the carriers on that list among the brokers.

With respect to products, the RFP may likewise give you free rein to explore and submit any type of product you choose; or the RFP may be more specific, limiting products to a certain type (traditional or variable) or to those with a certain fundamental characteristic, such as flexible premiums and investment flexibility. You may be told to limit your actual submissions to those 2 or 3 products you believe are most credibly efficient for the companys purposes. In any event, you will be asked to provide your specific reasons for recommending the carrier(s) and product(s) that you do recommend. You also will be asked to identify the other carriers and products you considered and why you concluded that those you submitted were superior to those you didnt.

Ask you to describe in detail how, in the context of the recommended funding approach, the company will gauge performance of the COLI product and how the product you recommend will achieve and sustain that targeted performance more efficiently than other products.

Ask you to provide evidence of your firms experience and expertise in administering this type of plan, examples of your enrollment materials and communication materials, and the reports you would present to the company and the participants, respectively.

The second set of guidelines sets forth how you should present products and carriers.

The RFP notes that certain sections are to be completed by you and others by the carrier. The RFP goes on to say that the company intends to review the responses, discuss them with you and the carrier, as appropriate, make some preliminary decisions, and eventually invite you (and perhaps your chosen carrier or carriers) to the company to make a formal presentation.

After the formal presentation, the company will select the broker it wants to work with and move to implementation. Keep in mind that the company, and not the consultant, makes all the decisions about brokers and products, winners and losers. Said another way, in this type of process, the company calls all the shots; the consultant just takes them.

Well, now youre in the hunt! Based on how I have seen the more responsive and resourceful brokers go about responding to the RFP, I have some suggestions (see the box on page 22).

The RFP process goes well and you are invited to the company to make a formal presentation of your carrier and product recommendations, administrative services and overall value proposition. You will have 90 minutes. Here are the things the responsive, resourceful and successful brokers do:

Be sure there is an agenda! Well, let me temper that suggestion. Brokers who are prepared to compete on a level playing fieldwith full presentations about carrier, product, compensation, administration, and so forthabsolutely want to be sure that all brokers have to follow a standardized agenda. On the other hand, if a broker does not want to compete on those terms, the last thing he wants is to be saddled with a standardized agenda. But, on the assumption that the company expects all presenters to follow an agenda, heres a sample bill of fare:

A brief introduction to your organization and your COLI experience and credentials.

A description of how the company can use COLI in this case, meaning the choices for a funding approach and the bases for deciding on the right approach.

Depending on the scope of the product inquiry, a discussion of the features, benefits and risks of various types of COLI products, the parameters for policy and carrier selection, the guidelines for policy management, and the guidelines for tracking and assessing performance of the COLI product against the targeted outcome.

Your recommendations! What you propose and why, including the carrier(s), product type and description, competitive positioning of the product(s) in their peer group, and illustrative results under given assumptions. Remember, the company will almost certainly ask the other brokers what they think of your recommended carrier and product, so you had better be able to support your recommendations.

Well, you have an agenda. Now, find out who from the company will be at the meeting and what their responsibilities are. Keep in mind that these folks are in the risk management business…their own risk management.

When you get to the meeting, assume that the people from the company want to be educated. But also assume that they want crisp, straightforward presentations on the topics covered in the RFP. They are absolutely willing to hear some salesmanship in the course of the presentation, but if the salesmanship/education equation gets out of balance, they will stop listening.

Create a presentation handout from the agenda, perhaps taking each of the agenda items and inserting bullet points under each of them.

Be careful about how many of your associates you bring to the meeting. Dont bring anyone you dont have to and definitely dont bring anyone who wont add value. And if someone is there because you know he adds value, then be sure he has a meaningful part in the presentation so the company knows he adds value.

Too often, brokers show up with 4 or 5 people, all of whom are essentially sales/marketing people. This is a mistake. First, it causes the company to wonder just how competitively the product could possibly have been priced. Second, it creates risk that the broker will not be prepared to handle the substantive areas of the agenda or respond to tough questions from the company. Third, it undermines the ability of the broker to demonstrate the depth of its resources and to put a face on those resources for the benefit of the company. Fourth, by the time all 4 or 5 are introduced, a lot of those 90 minutes are long gone.

The wise broker brings a smaller but more strategically chosen contingent to these meetings. There is the lead player, the individual who has managed the RFP process and who will be the primary contact with the company. He will orchestrate the presentation. There should also be a “product person,” whose role in the presentation is to fulfill that critical part of the prescription. Finally, there should be an administrative person, preferably the individual who would be the primary contact with the company from an administrative standpoint.

Assess carefully whether to use high-tech projection machinery and other impedimenta. Brokers most often use such gadgetry to demonstrate their systems. While systems are important, they are not what the assembled group really wants to hear about at this meeting. It may be better to have hard copy, generic examples of reporting material, discussed crisply by the administrative person.

Its show time! Check out the box on page 24 for suggestions on how to use your 90 minutes wisely.

I will close with a couple of observations, first for brokers, then for carriers. It has been my experience that virtually all brokers can make the case for COLI as a funding vehicle for nonqualified deferred compensation plans. Where I, and the buying companies, see real differences among brokers is in their ability to articulate (1) their metrics, meaning a cogent, structured approach to carrier and product selection/design, and (2) an illuminating description of how their skills in those areas will add value to the company.

As far as the carriers are concerned, its clear that many of them do a lot of work to design their COLI products to be as competitive as possible in the target markets. They also do a great job with supporting materials. But its also clear that there can be a lot lost in translation from carrier to broker to buying company. What is lost most often are the nuances of product design that can make the product more efficient than its competitors. If a carrier hasnt already done so, it might consider holding “COLI Clinics” for brokers, where the company can properly bring the product to life and describe its strong competitive positioning in todays marketplace.

As my grandmother used to say about other seemingly simple remedies, “It couldnt hurt.”

Charles L. Ratner, JD, CLU, ChFC, is national director of personal insurance counseling at Ernst & Young LLP, in Cleveland. He can be reached via e-mail at charlie.ratner@ey.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 12, 2004. Copyright 2004 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.