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Life Health > Life Insurance

Change It Up

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The phrase that heads this column is today’s fad word for flexibility.

It’s a marvel how fast the expression has taken root in popular speech. Why, then, doesn’t it show up in life and health products and promotions?

Failure to mirror popular jargon is no great sin, of course. But it probably does impact the way the public, especially younger adults in their 20s and 30s, perceive insurance–i.e., if the insurance talk is the “same old, same old,” the younger set may write it off–and also the allied products–as being “so yesterday.”

That’s why consultants keep urging business people to tune in to Generations X and Y. If you don’t “get with the program,” they warn, you may “get lost.”

But can the staid old insurance sector respond to the change-it-up crowd? Most definitely. Consider:

At policy design, the advisor can choose various riders to change up the base policy, and/or check off from multiple built-in policy options concerning limits, terms, etc. This is so in life, disability, long term care insurance and also annuities.

Even the time-honored guaranteed insurability option in life insurance is a change-it-up kind of feature. So is the internal benefit acceleration feature in many modern life policies.

Transformational and hybrid policies enable customers to have a policy that addresses one risk at one stage of life and another exposure at another stage. Such policies are relatively few in number right now, but more are on the way. Examples include: Life policies that offer long term care benefits, and so-called “longevity” policies that enable people to buy an income option now that springs into play many years later, if the person lives that long.

The voluntary market has change-it-up at its very core. Employees can buy basic coverage (or perhaps the employer pays for it), and then purchase additional amounts, or buy-ups, later on, even yearly.

Policy loans and withdrawal provisions enable people to change their minds many years after purchasing the contract. They can put their money in and take it back out, subject to terms provided.

The increasingly popular return-of-premium policy features have a similar effect–people can pay for coverage yearly and then get their money back after so many years. So do life settlements; if an older policy owner doesn’t want or need a life policy anymore, the owner can change-it-up by surrendering the policy or selling it in the life settlement marketplace.

In annuities, the death benefit and many other guarantees can be elected, or not, and some can be dropped or stopped later on as well. So too with no-lapse guarantees in universal life policies–i.e., the guarantee stays if the owner makes the required payments, but falls off if the owner doesn’t. Some ULs let the owners restore the guarantee within a limited period too.

Long term care insurance has restoration features as well. Here, policy owners who have received benefits can have their benefit pool restored to original levels–if they stop being on claim for a specified period.

Clearly, the insurance industry has what it takes to compete in a change-it-up world. But does it have the willingness to position itself that way?

Some industry pros don’t cotton to it one bit. They don’t want to make their products sound as if they were designed by teenagers, after all. They want to project a been-there-forever image, and change-it-up doesn’t fit. Others are uneasy about focusing on flexibility. They worry that this can cause confusion that may later result in lawsuits filed by policy owners who have either forgotten how policy changes work, or misinterpreted what they remember.

But others believe the industry can, and should, align products and messages with the times. If change-it-up is today’s favored word for flexibility, well, then, “when in Rome, do as the Romans do.” They believe it is to everyone’s advantage to show how their flexible policy features correspond.

Make no mistake: Changeability is definitely a front-burner issue, especially for the younger generations. For instance, many young adults fully expect to have 7-10+ jobs before retirement, say demographers. Many expect to change locations several times, too. And careers. And even spouses. It is no fluke, then, that “change-it-up” has become their mantra.

Individuals anticipating a life of high changeability are not likely to be interested in, say, a fixed annuity that credits just one interest rate for life, a variable insurance policy that offers only 5 funds for its lifetime, or a life policy that fixes face amount and premium forever. They will gravitate to products, companies and advisors that address the realities of their very fluid lifestyle.

Since the industry already has products that do that, why not go the next step and promote it head on?


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