Among the many changes in today’s life insurance market, none is more significant than that in the large case market. Underwriting guidelines, reinsurance markets, carrier capacity, and special advanced planning and product support all play a large part in this ever-evolving and competitive marketplace.
Producers in the large case market must constantly monitor these changes and adapt to best serve their clients. This article reviews new developments in the market for large cases–those with target premiums of $250,000 and higher–and highlights a critical process in closing large cases successfully.
Implicit in closing large cases is the ability to navigate through an often complex underwriting process. For that reason, it is important for the producer to contact an experienced senior underwriter to discuss preliminary medical and financial information. Inevitably, special medical situations will arise and certain impairments will be uncovered. The producer must develop as much of the medical assessment ahead of time so as not to risk limiting the ability of the client to obtain the desired coverage and the company’s ability to offer that coverage.
A carrier’s retention must also be factored into the large case process. With the reinsurance market changing, carriers are expected to retain much of the risk. In working with a carrier that has large retention and auto-binding limits, the producer may be able to obtain an offer without additional involvement in the reinsurance marketplace.
Those carriers with lower single life and second-to-die retention amounts may not be equipped to offer competitive underwriting and premium quotes, as they may need automatic or facultative reinsurance treaties. These carrier limitations may severely impact the availability of underwriting offers. Producers should consider working with carriers that have a minimum of $20 million of retention on single life cases and $25 million on second-to-die cases.
Certain producer groups have special case units, which are particularly helpful in the large case arena. These groups typically are staffed with their own experienced underwriters who have existing relationships with carrier underwriting departments.
Advanced sales support
Given the large face amounts involved in large cases, nearly all prospective transactions require advanced planning support. In an ever-changing tax and political landscape, producers need assistance with concepts ranging from basic wealth transfer to those involving the most sophisticated planning techniques. Even more helpful is an arrangement where the advanced sales team works directly with the underwriting and illustration teams to ensure cases move smoothly through the process.
Producer groups that have developed working relationships with carriers’ advanced markets teams have proven extremely helpful to producers. While some carriers specialize in the nonqualified deferred compensation market, others may have expertise in premium financing, split dollar or other advanced estate planning strategies. Working with a dedicated team that understands these strengths saves the producer valuable time and energy.
It seems that all too frequently we are introduced to a new product claiming to “serve the large case marketplace.” Producers need to ask important questions, however, as to whether the carrier and its product really are suited to this market. Examples include:
o Has the carrier demonstrated a commitment to the market, or is this an “experiment?”
o Has the carrier sold a block of business in the past?