Life Insurance Riders Have Value, Rough Seas Or Not

The roughest “rider” introduction I’ve ever done occurred during an agent’s convention in the middle of the Atlantic Ocean. The seas reached 25 to 30 feet, and my introduction slides wobbled all over the screen.

Completing that presentation was a challenge, but as things turned out, the rider was a hit with customers and it sold for years. It helped sell a lot of base policies, too, because it gave agents a reason to revisit old customers and an annual reason to see the new customers.

In a sense, that story sums up the full value of life insurance riders. When they meet customer needs, riders become key policy adjuncts–even when they have bumpy rollouts.

Times have changed and so have riders. But the above reasons are still strong arguments for life insurance companies and agents to offer riders.

What about today’s market? In the second quarter of 2005, I did a rider survey with several large life insurance companies, comparing riders they offer now with those listed in previous surveys in 2004 and 2001.

The results show that, despite the market flattening that occurred early in this century, there is still a vast variety of riders.

The old standby riders still top the list, though. These are: waiver of premium for disability; spouse and child; and level term, in that order.

But new riders keep appearing. Some that caught my eye this year were cost-of-living riders for disability income policies and cost-of-living riders for long term care policies.

Coming into prominence are new riders to prevent lapse of universal life insurance at old ages–the so-called secondary guarantee riders. Also noteworthy are the variable annuity riders that provide guaranteed minimum annuity payments. Both of these riders result from the current, very intense interest in old-age mortality.

It’s impossible to discuss life insurance riders without mentioning the chassis products to which they are attached. These chassis products all need to be redesigned radically by the end of 2007. This “2001 CSO Changeover,” as the life insurance industry calls it, will bring life insurance products up to date with the new Commissioners Standard Ordinary mortality tables.

This change has been a long time coming, and the industry’s hope is that the transition will have smooth sailing, despite the rough seas some developers may encounter as they retool.

Riders will not be the focus of this changeover, but there is no question that their unique advantages (see chart) will be instrumental in strengthening the new offerings that will emerge.