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Life Health > Life Insurance

Upgrade Challenge Or Upgrade Hell?

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By Linda Koco

Two men were talking. One complained to the other about how an operating system upgrade made various add-ons no longer operable.

That’s an old problem in the ever-new field of automation. But what about insurance products? When the new versions come out, what happens to the people who go with the upgrade?

It’s a question that has dogged product pros for years.

As discussed before in this space, implementing and keeping up with upgrades can be daunting–not just for the carriers but also for advisors and others in distribution. It invites confusion and sometimes error. Some call it upgrade hell.

That is not the only challenge with financial product upgrades, however.

Many newer products are requiring agents and customers to adopt a whole new mindset. People can’t just “rotor over” from version two to version three and expect three to be “just like two only better.” Version three may have new pricing, riders, death benefit features, liquidity arrangements and so on. It may entail more and/or deeper use of web services. It may have higher or lower limits. These can be client-friendly changes, but they may still require adjustments in the client’s planning. That means expectations sometimes need to change.

The fast-moving field of retirement income products provides a case in point.

In recent years, there have been so many enhancements in the retirement income world that advisors can no longer rely solely on the old standby product solutions–fixed immediate annuities, standard annuitization options, policy loans, partial withdrawals, penalty-free outs and systematic withdrawal. Now there are broader, more varied and sometimes more innovative options, so advisors need to reshape strategy and expectations. Consider:

Broader: In addition to the above insurance products, many advisors now routinely incorporate allied products into the income projections–IRAs, Keoghs, 401(k)s, index contracts, long term care policies, critical illness policies, return of premium options, life settlements and so on. Increasingly, their plans also factor in the client’s health, dental and pharmaceutical plans, as well as auto, homeowners, personal liability and business insurance coverages.

Upgrades in all of these can have significant impact on plan projections.

Multi-disciplined: This goes hand in hand with the previous point. Advisors must not only be conversant with the income features of ever-changing insurance products but also with those in allied sectors–mutual funds and other securities, banking products, reverse mortgages, and managed money accounts.

New: Here is the biggest challenge. The myriad of income features and products that are popping up today are making upgrade tracking a must-do. This is not just a matter of keeping tabs on things like guaranteed minimum income benefits and guaranteed minimum withdrawal benefits in variable annuities. It also entails following upgrades in emerging areas like return-of-premium products; combination products (life with LTC, annuity with LTC, disability income with conversion to LTC, etc.); targeted asset allocation packages (i.e., for retirement goals or total asset management); stochastic modeling; etc.

In short, tracking upgrades means tracking more products and product categories than ever before.

This is a lot for a single advisor to do. Hence, the growing importance of the products desk at brokerages, wirehouses, marketing organizations and other distribution channels. Hence, the greater reliance on expert wholesalers.

At least the advisor has someone to turn to. But what about the consumer?

Presumably, the advisor is the one who keeps the client up to speed on upgrades.

Many advisors tell me they welcome the opportunity to do just that. It’s a good chance to re-educate and to firm up expectations. It provides relationship-building time. It can lead to cross-selling.

When advisors don’t do the relevant education, however, clients may end up grousing like that man who did not like his computer upgrade. He did not know what to expect, what to do or where to go for help.

Even when the enhancements are state of the art, if customers don’t see the advantage, understand how they work and know where to go for help, the new and improved choices can backfire.

Some people I know actually have rejected upgrades (and even terminated contracts) because they felt uneasy about the enhanced features. (In a few cases, I learned the rejected items were consumer-friendly, but the people did not know that.)

Better outcomes would likely occur if consumers receive suitable education on enhancements offered and on the consequences of moving from older products (by way of upgrade, rollover or purchase) to newer versions. This sets appropriate expectations and lays the groundwork for a more positive experience.


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