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Using Products In New Ways To Serve Unmet Client Needs

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New York

Using products in new ways to serve client needs is a topic that was threaded through a number of sessions during the annual meeting of the National Association for Variable Annuities here.

For instance, the use of variable life insurance as an alternative to long term care insurance was discussed by Norse Blazzard, a principal of Blazzard, Grodd & Hasenauer, P.C., Fort Lauderdale, Fla. It is a product concept that is being developed by Cary Lackenbach, president of Actuarial Strategies Inc.

Registered reps are more likely to sell variable annuities than they are to sell variable universal life insurance because they do not always understand VUL underwriting and they are concerned about having to give bad news if a client fails medical tests. Also, these reps, particularly in bank channels, can sell annuities and complete the transaction on the spot, he added.

And, while Blazzard noted that VAs are valuable because they offer living benefit guarantees, he also explained that Lackenbach’s work illustrates how VUL policies that are not modified endowment contracts can be used to draw a post-retirement income stream using policy loans.

Implosion of a contract can be avoided by creating an overloan provision that is usually established through a life insurance rider, he added. The overloan provision when triggered creates a form of nonforfeiture status, according to a slide accompanying the presentation.

The loan itself can be used to fund long term care needs without the restrictions that LTC policies can have before benefits are triggered, he explains.

Two companies are selling the products in restricted channels, he added. Blazzard said that a multiple use for a product is unusual. “As an industry, we are woefully inept in coming up with products to meet these multiple goals,” he noted.

Speakers also discussed how variable annuities also can be used in different ways such as including them in qualified plans. While such plans already have tax-deferred benefits, other benefits such as income and living benefits that will help address longevity risk must be looked at, says Brandon Buckingham, director of qualified plans with John Hancock Venture Annuities, Boston.

The theme was repeated by Thomas Streiff, senior vice president and director of product solutions with UBS Financial Services Inc., New York. Streiff says that initially his firm neither encouraged nor discouraged sales of annuities in IRAs but now is encouraging them. He said he had been asked whether it would be better to just leave that type of sale since it is not central to his firm’s business. In some ways, it would be better for the firm, according to Streiff, but it would not be better for the client. “We don’t have a problem selling the client the right thing.” And, in the right circumstances, he explained, it can be the right product.

NAVA meeting hears some out-of-the-box thinking