After gardening for several hours in the hot sun, I decided to call it a day. Rather than bending down to pick up my rake, I decided to take a shortcut–by just stepping on the metal prongs so the rake would flip up into my waiting hand.
Well, it didn’t flip up. It flew–right past my hand and onto the side of my head.
Lesson learned: Shortcuts don’t always work. Sometimes they turn into flying rakes that hit you in the head.
That’s apropos to insurance product development, sales–and foibles. One need look no further than the story of universal life insurance for an example, remembering UL sales in the 1980s, and how the contracts blew up later on due to ill-advised shortcuts.
Let’s listen to a review of that story by Mark Armstrong, president of insurance services for ValMark Securities Inc., Akron, Ohio. A panelist at this year’s Million Dollar Round Table annual in Indianapolis, Armstrong summed it up this way:
“Over the past 30 years, our clients have been disappointed by the performance of both whole life and universal life policies they purchased.
“The disappointment arose from the misunderstanding and misuse of illustrations. Unprofessional and inexperienced agents would compete for cases based on attractive illustrated values. Nothing was guaranteed, but the illustrations–both whole life and universal life–looked very convincing to clients.
“As a result, many clients bought from the agent who showed them the most attractive illustration. In effect, the biggest and most convincing liar won the case.
“As interest rates decreased, the most aggressive illustrations crashed hardest and performed miserably. Over time, clients and advisors lost interest in anything that was not guaranteed. So did agents, who felt they had been burned by carriers promising results they would not deliver.
“For this reason, independent agents began to focus on the best guarantees rather than the best currently assumed results.”
In Armstrong’s recap, the key words are “convincing” and “most attractive.” As in, the illustrations “looked very convincing;” and clients bought from agents showing the “most attractive” illustration.