Every so often the life insurance industry creates a concept or product line that is revolutionary.
Some examples include deposit term, return of premium, universal life, whole life, mortgage insurance and variable universal life. And there are several others.
Now, another one is ready to turn heads.
Remember back when universal life first came out? It seemed everyone said: “It’s a fad.” “People will never buy this, they want guarantees.” “It will be short-lived.” And, “companies don’t create products.”
If you were in the business then, what did you think? Where was your firm? Did you see UL’s potential?
The industry now knows the skeptics were wrong about UL. It became a big deal.
Now, the next big deal is here and it’s about to leave the dock. That product is equity-indexed universal life insurance, for reasons discussed below.
Are you ready? Do you have the product knowledge to capture a market and forever change your firm’s identity?
What would it take to convince you to get on board with such a product? The product currently accounts for less than 2% of all life insurance sales and it currently is represented only by a handful of companies. Does that stir any interest?
Let’s turn that around a bit. What if the product was about to be launched by A+ and A-rated companies that are budgeting millions of dollars for marketing new products? What if industry experts have begun predicting that, in the next five years, this product could easily replace 70% of all traditional universal life sales and approach 20-25% of all life sales? Would you take a look then?
The answer should be yes, because EIUL is one of the industry’s best achievements.
The original versions of EIUL insurance have been around for a decade now. Southland Life was one of the first pioneers. Since then, many companies have tried, and some now have made a name for themselves marketing this product. All have contributed to the learning curve.
The timeline seems about equal to that for universal life when it first gained market acceptance. This time, however, companies will react quicker–and some already are doing so.
The main driver is the consumer. Consumers are looking for higher yields and guarantees, so the market is about to heat up.
This is the time to ask: What are consumers who choose to purchase a cash accumulation life insurance product looking for? What are their expectations? What do they want back from their purchase? Are their expectations the same today as they were, say, just a few years ago in the mid-1990s?
Here is what I see. Clients who are 35 to 60 years old want a product that is cash friendly and provides protection. They simply want to know that if they put a dollar into their policy, that dollar will always be there and will grow at a reasonable rate of return.
They would like to beat the returns of bank certificates of deposit, money market funds and even the 10-year Treasury note. But they also insist that they not go backward.
They have heard about, and maybe even experienced, the wild ride of 20%+ returns in the 1990s, but more than likely they also experienced the 25-30% downswing in the market. They have fewer dollars today or at least they are more at risk than they once were.
They might even recall a grandparent’s lecture/advice about saving money: “It takes a long, long time” and “Don’t expect to get rich overnight.”
With those mindsets, it doesn’t surprise me that variable universal life sales are flat or turning down. And it won’t surprise me at all to see EIUL sales going up. See the chart for the reasons why.
Allie Miller is chief executive officer of AMZ Financial, Waukee, Iowa. His e-mail address is email@example.com.
Clients who are 35 to 60 years old want a product that is cash friendly and provides protection
Why EIUL Has What People Want
1)EIUL is a universal life product that is indexed to a major index (S&P Dow or NASDAQ).
2)It offers the potential for higher returns than traditional UL products.
3)It has guarantees, ranging by company and product from 0%-5%.
4)It can be cash friendly. Some have no surrender charges on excess premiums.
5)It is generally simple to understand. There are several different crediting methods.
6)It is likely to get, over time, a higher yield without the risks or expenses of variable life, based on historic averages.
7)It gives producers a product that is unique to market and to use in recruiting.
8)It is currently being sold by very few agents (though that could easily change).
9)It pays fair renewals and some EIUL firms pay trailers.
10)It deters other firms from talking to your agents.
Source: Allie Miller, AMZ Financial, Waukee, Iowa