There are things that worry me. 

Take variable annuities — will the customer service representative that my customer phones for help know how the third iteration of Midnight Life Insurance Company’s income benefit works 20 years down the road? My customer will be 89 and hopefully still cogent, but will the customer service rep — a person who must deal with maybe 10 or more design variations — be able to provide the right information? This problem could apply in the cases of both variable and fixed indexed annuities

Personal experience #1: A customer of mine who was the president of a substantial company in Minneapolis died, leaving behind, among other things, a variable annuity owned by his trust. (I discourage the practice of trust ownership of annuities, feeling that a good variable annuity with a thoughtful beneficiary designation is a creditor-proof trust in its own right, but, like many financial planners, I don’t always win the ownership argument.)

We had trouble finding the trust company to get an officer’s signature so that the variable annuity company could pay the death benefit. The trust was through a bank and trust company in Minneapolis that had gone through something like 13 mergers and, at the end, was owned by one of the big three national banks. In short, after one of my team worked for four months, we found the final bank/trust company and, after some hassle (no one wanted to be responsible), got them to sign off. 

Personal experience #2: A joint and survivor annuity sold in the early 1990s, with a large insurer, promised joint lifetime payments, but the payments stopped at the first death. Had I not been told by the widow that the payments had stopped, the company would have gotten away with paying out less than 20 percent of the purchase price.  

Personal experience #3: Recently, a buyout policy’s ownership changed because an insurance company, in the ’90s, truncated owner names, making two owners into one. This mistake continued through two mergers and would have gone on forever had not one of the owners come to visit me. 

Keep in mind that I am primarily an investment planner and don’t do all that much insurance. All this is food for thought. Have you run into situations like this? If so, please e-mail details to richardhoe@richardhoe.com

Have a fantastic week and try to bulletproof things for your customers as much as possible. 

 

For more from Richard Hoe, see:

Scribble

How to invest like an Ivy League endowment

Swarthmore