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What a spreadsheet won't tell you about selling life insurance

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Spreadsheets are one of an advisor’s most useful tools. They make it easy and quick to compare life insurance products, and are also an effective way to present options to a client. Moreover, spreadsheets convey a sense of objectivity that build’s client confidence.

At the same time, spreadsheets have limitations. They don’t tell the whole story. What is left out of a spreadsheet can be the difference between doing an acceptable job for a client and a superior one. Here are seven key things that spreadsheets leave out.



1. Carrier financial ratings.

AM Best ratings might show up but overall Comdex numbers typically do not. There can be just a few dollars difference in premium between a carrier with a 68 Comdex and one with a 93 rating. It’s an indicator of company strength and can foretell the long-term viability of the carrier.

Lower Comdex carriers could more likely be acquired or merged at a future point and then the policyholder could be making payments to a different company than they originally applied with. New ownership could also negatively impact future convertibility options and, should they terminate agent contracts, the policyholder would be left to deal directly with the company.


2. Living benefits and available riders.

The “old days” of just having a Waiver of Premium and a Child Term rider are gone. Carriers seem to be falling over each other adding such attractive features as Long-Term Care riders, Chronic/Critical Illness riders, Return of Premium options and Longevity riders. Benefits like these provide assurance that a life policy will grow with the applicant and accommodate future life changes.

While few term life insurance plans offer these benefits, they should be an important consideration when seeking permanent coverage. Agents should present plans that can grow and adapt to client needs, rather than putting them in policies that handcuff them with no exit strategy, other than death or policy lapse.

Features such as grace periods and catch-up provisions can also vary by company. The more generous a company is on these, the better it is for the consumer, especially if they might be inclined to pay their premiums at the last minute.


3. If term life, conversion criteria, product restrictions.

Advisors know that term conversions are anti-selection against the insurance company, since, typically, only policy owners with a health change actually convert their policies.

Agents should look at the conversion options of the term plans that they place their clients with. Some companies will limit the amount of time you can convert the term policy to just a few years, and it could be years before the level period of term is up.  This is especially true when proposing term plans to applicants in the 60+ age range. 

Some carriers restrict their portfolio of permanent plans when policyholders convert to noncompetitive and more costly products. Others offer a small window of time to convert to their better plans, typically five years, before dusting off a much higher cost product from a shelf in the back room and forcing this on unsuspecting applicants.

Consumers are best served by term plans offering unrestricted access to permanent plans. If the base term prices a little higher, it’s worth the extra cost if the plan is converted.

Agents should point out conversion features when showing carriers on a spreadsheet.  While most applicants at the point of sale say that they have no intention of converting the policy, they also have no intention of having a health change or needing the coverage beyond the proposed level period, but life changes. Clients are best served by being shown plans with the most flexibility and consumer friendliness, and not just the lowest cost when it comes to selling term policies.

Agents should be aware of post-issue policy changes and inform affected clients who may have changes with their health.


4. If permanent life, cash values, favorable or unfavorable access to policy values.

It’s the same with permanent plans. Simply speadsheeting premium numbers doesn’t even begin to tell the story that clients deserve to hear. What benefits do they offer? Do they generate any cash value build up at the spreadsheet premium?  Can the consumer access the policy values favorably if they do?

For example, if the lowest cost carrier has a $2,000 premium but projects to have no cash value in year 10 and 20, would the consumer be better off buying this policy when Company B offers a projected 10th year cash value of $9,500 and a projected 20th year cash value of $33,000 for an additional premium of just $100?

Would they be better served with a policy that offers a Return of Premium option at the 15th or 20th year when they can access all of their premiums paid if that policy was going to cost $2,500?

Would they benefit from a higher cost plan if it offered a chronic illness rider at no additional cost at policy purchase? If they also needed long-term care, should they buy a separate standalone policy they may or may not use, or purchase the permanent plan option for $2,700 that includes a Long-Term Care rider?



5. Current service standards with specific carriers.

Spreadsheets do not provide insight into the current service levels with insurance carriers. If a lower priced company is taking two or three weeks longer to issue policies, is it not more appropriate to consider a carrier with a similar cost that can get a policy in the applicant’s hands much sooner and make it easier to place the coverage?

The length of underwriting time is inversely proportional to the likelihood of placing the coverage even when the policy is approved as applied.


6. Carrier underwriting strengths.

How difficult is the underwriting based on an applicant’s medical and financial resume? Spreadsheets do not even remotely consider the level of difficulty in getting an applicant underwritten. In fact, they are essentially ineffective when dealing with a prospect with a medical issue since companies can assess medical impairments quite differently.

Some are more stringent on the financial justification of larger cases. What benefit is the $5 million lowest cost plan, when the company says the client can only justify $3 million?

High blood pressure is a case in point. Companies vary in clinical ranges on acceptable blood pressure readings that establish the level of control an applicant has in treating this condition. Furthermore, companies differ in how they look at an applicant who takes medication, and they also weigh how long the person been treated for this impairment. A spreadsheet could show a company at the best rate when its underwriting practice is to not offer treated hypertensive prospects its top class.

See also: 8 ways people blow their life insurance medical exams

Another common issue is physical build. The 5’8”, 215 lb. 60-year-old applicant could be a preferred risk with a few companies, but a standard plus or even a standard risk with most others. This can mean a significant difference in cost if the agent just goes by the spreadsheet. The cost can swing both ways if the client is just shown a spreadsheet of standard rates because the agent doesn’t know that some companies are more aggressive on build and could possibly offer a preferred underwriting class. 

Some companies are more stringent on the financial justification of larger cases. What benefit is the $5 million lowest cost plan, when the company says the client’s net worth can only justify $3 million? For income replacement sales, Company A may allow up to 25 times the current income as an acceptable factor in determining the eligible face amount an applicant can qualify for, while Company B may only use 15 times. This can impact the face amount and hinder the sale for the agent.



7. Treatment of inforce business.

How well does the company handle its inforce business? If an advisor is selling permanent insurance, it is important to know how older products are treated from an expense and mortality cost perspective when newer products are developed.

There are companies that increase these costs when they introduce newer and more competitive products to the market. Agents could discover that an inforce illustration ten years from now could underperform compared to the original illustration, even if the interest crediting is similar. Spreadsheets would not reveal this practice that some companies utilize.

Yes, spreadsheets are a useful and valuable tool for advisors and their clients. But like any other tool, its value depends on the expertise and skill of advisors who hold it in their hands.


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