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September 07, 2009 at 08:00 PM
It’s a tough economy and life insurance professionals are asking lots of questions about selling in this 
climate. Here are my answers.
Question: Many life companies have had ratings downgrades. How can I handle presenting life products from a company that has been affected by this?
Answer: First, agents have always sold policies issued by insurance companies that did not have the best ratings. So, in that sense, nothing has changed.
Sometimes a change in ratings, especially a pattern of change, can signal a possible problem. Other times a change may just indicate a change in how the ratings agencies do their work.
The old saw in the insurance industry is that there has never been a death claim that went unpaid because of the financial condition of an insurer.
Yes, stock prices of insurers have been battered by the markets; two insurers have taken Troubled Asset Relief Program money; and sales are reportedly off by 20% to 30% at companies. But as far as we know, as I write this, there are no insolvent insurers; otherwise they would be taken over by the regulators. So far, insurers still appear to have the cash flow to pay their obligations.
Agents should continue to evaluate companies as they did before, with a healthy dose of common sense. Look for products that fit the customer’s needs. Some products are usually better than others for a particular customer depending on age, cash value needs, and overall objectives. Look for a company that knows how to underwrite the market for which the policy is offered. Accurate underwriting is a good predictor of financial success.
Don’t assume that the cheapest price is the best deal. An insurer has to make money to be financially stable.
The bottom line: Review the available information and proceed knowledgeably and sensibly.
It’s impossible to be conversant on the pros and cons of all the companies. But, an agent should be familiar with the pros and cons of at least several companies that offer a suitable product for a customer. That way the customer can be assured that a reasonable effort has been made to recommend a product that is appropriate for the customer’s needs, while also considering the financial health of the insurer.
Question: What considerations may arise from selling level term policies with conversion options? Many peers are doing this now because 1) term is less expensive than permanent, and 2) customers who want and need permanent insurance can convert later on when finances are better. It’s also a way to sell something rather than nothing in these very difficult days.
Answer: The general rule is that a customer always is better off with coverage than without coverage. This has not changed.
The question of suitability is important. But, to determine suitability, an agent may have to disclose alternatives that are marginal, in addition to those that are realistic for the customer. So, when permanent insurance may be a possible alternative, the agent should discuss permanent insurance as an alternative–even if the agent knows that permanent insurance may not be a realistic alternative based upon the customer’s finances.
Nevertheless, the permanent alternative should be discussed. That way the customer better understands the choices.
Sometimes agents ask my firm questions about what would be the best solution for a particular customer. The agents want to tell the customer what should be done.
