NAIFA Blog: Life Insurance

Life Insurance

September 24, 2010

NAIFA: There’s Strength in Our Numbers

GUEST BLOGGER
Terry K. Headley, LUTCF, LIC, FSS, NAIFA President

National Underwriter reporter Warren Hersch raises an important question in a new article: "How can [NAIFA] stay relevant as a force on Capitol Hill and in the states when its membership has been declining...?"

Warren was referring to our entirely transparent and voluntary disclosure of our membership total, which today hovers in the 50,000+ range. Yes, that figure represents a decline, but there is so much more to the story than raw membership numbers. NAIFA boasts a storied 120-year history, and for decades we have helped shape the legislative and regulatory landscape that has allowed our industry to thrive and that has protected the financial wellbeing of all Americans.

I can promise you we are not going away.

Today, NAIFA is as relevant as ever, and perhaps even more so. We have more members than any other organization in the industry. Our marketshare among our core constituency is 20%, higher now than when our membership total was at its peak. NAIFA's political action committee is the largest among our peers. It ranks among the top 1 percent of all 4,100 PACs registered with the Federal Election Commission. In the last election cycle, the national IFAPAC and the 50 state IFAPACs contributed approximately $3 million to federal and state candidates and committees.

Our grassroots activities are also second to none. NAIFA has a unique political advantage — we have a constituent member in every legislative district across the country who is a voter, a taxpayer, and a job creator. We have members who serve as personal legislative contacts for nearly every member of the House and Senate, as well as others who are contacts for legislators on the state level. When we go to the Hill with a constituent group of four or six NAIFA members to meet personally with a congressman or senator, you can't tell me we don’t have an impact and make a difference. Of course we make a difference. Of course NAIFA is relevant.

Yet, Mr. Hersch also makes a valid point. He notes there are an "estimated 200,000 agents who are not — and should be — NAIFA members." NAIFA represents the interests of everyone in the industry, even those who don't pay their fair share. I remain convinced that as long as we have a clear mission and execute it well, we will remain effective and influential irrespective of membership figures. Yet, just think of the resources we could bring to bear if everyone who benefited from NAIFA also contributed to our success by becoming a member, contributing to the PAC, and participating in our political involvement initiatives. On this point, Mr. Hersch and I agree: it's time for our agent community to contribute to the effort. It’s time for the freeloading to stop.

Posted at 01:45 PM in Advocacy, Life Insurance | Permalink | Comments (0) | TrackBack (0)

September 22, 2010

LIAM: Changing the Statistics Is as Easy as Taking the First Step

GUEST BLOGGER
Marvin Feldman, CLU, ChFC, RFC, President and CEO, LIFE Foundation

Have you heard that 64 percent of all men have at least some form of life insurance? We insurance agents know all too well, though, that “some” just isn’t enough in most cases. I recently had the privilege of meeting a small group of people behind that very statistic during a LIFE Foundation focus group session. It was a small group of eight male consumers, but truly a slice representative of the American male population.

Five of the eight men said they had life insurance, although a few said it was just the minimum amount obtained through their employer. The men with adequate coverage showed a unique sense of pride compared with the slumped shoulders and bowed heads of the men who had little to no coverage.

One, a father of two preteen children, explained he had life insurance, but dropped it when he found himself out of work for a year. A father of a newborn said he and his wife started talking about obtaining coverage, but he was too overwhelmed with all the options and didn’t know how to choose. Another father of three young children said he knew he should have it because his wife keeps bringing up the subject, but he simply hasn’t done anything about it.

Among this group of regular Americans, one man, Derrick, stood out in the crowd. Derrick was not only adequately and smartly insured, but he knew exactly which type of insurance product he had and what it covered. He told the group that he had recently lost his brother-in-law, who did not have life insurance, and saw the financial effect reverberate throughout his family. All of his relatives had to pitch in to keep his brother-in-law’s family in their house and put his son through school. He said after witnessing how a lack of life insurance would burden his own survivors, he decided he didn’t want to leave that kind of legacy. Not long after his brother-in-law’s death, Derrick sat down with a family friend who sold insurance, learned all the options available to him, and secured the coverage he needed.

This is what Life Insurance Awareness Month (LIAM) is all about: this industry coming together to reach out to our community members and give them the information they need to make smart insurance decisions and protect the ones they love. Consider Derrick’s story: It took a tragedy for him to take action, but he was the lucky one in that small focus group. He trusted his insurance agent family friend to help him obtain adequate financial protection for his family.

That same night, we held another focus group with insurance agents. All of the agents said they were familiar with LIAM, but only a few used it in their marketing and sales efforts. When you consider the number of people who are uninsured or underinsured and have loved ones dependent on their income, it helps us realize we have an important responsibility to fulfill.

LIAM not only provides an excellent reason to reach out to your prospects, but the LIFE Foundation and your home offices have provided you with educational and marketing resources so you can easily take advantage of this opportunity.

If you don’t already have a marketing effort under way, it is not too late. Here are several ways to quickly leverage LIAM and reach more Americans this September—and beyond.

Tap into company assets. Many insurance companies support LIAM in some fashion, so reach out to the companies with which you do business to find out what types of LIAM marketing resources and sales incentives they offer.
Take advantage of LIFE’s marketing resources. LIFE offers free web-accessible educational and marketing resources, as well as high-quality print and multimedia materials for purchase. Access all of LIFE’s resources at the LIAM Producer Toolkit at http://www.lifehappens.org/liamkit. Most of these resources can be used beyond LIAM as well.
Tell your clients that “Life Happens.” “Life Happens” gel bracelets are one of LIFE’s most popular resources. Wear several on your wrist, and give them out to clients and prospects. They’re great conversation starters: People will invariably ask, “What does ‘Life Happens’ mean?” That’s your cue to talk to them about the need to plan ahead for life’s uncertainties.
Share the seven wonders of life insurance. Life insurance can do some amazing things for families, and LIFE offers several marketing resources to help inform your clients and prospects about what LIFE calls the “7 Wonders of Life Insurance.” Access them at http://www.lifehappens.org/wonderskit.
Encourage clients to enter the “What Matters Most to Me” Contest. LIFE has created a fun Facebook application to remind Americans that life insurance can help them protect the people and things that matter most to them. If your clients use the application during LIAM, they’ll have the chance to win a five-day trip to Aruba. Details regarding the contest are here: http://www.facebook.com/lifehappens.org

We hope you won’t overlook or underestimate this opportunity to help consumers take stock of their life insurance needs and protect their loved ones through proper life insurance planning. When you consider that four in 10 adult Americans have no individual life insurance, and that many more need more coverage than they have, it’s clear have a lot of work to do as an industry. That first step begins with you.

Posted at 11:31 AM in Consumer Information, Life Insurance, The Role of the Agent | Permalink | Comments (0) | TrackBack (0)

September 01, 2010

September Is Life Insurance Awareness Month

Happy Life Insurance Awareness Month!

Every September, NAIFA, the LIFE Foundation, and dozens of other industry organizations join forces with insurance companies and agents around the country to remind Americans how important life insurance is as a part of an overall financial plan. This year, our message is more important than ever.

A new study by LIMRA reveals that 30% of U.S. households have absolutely no life insurance coverage. That leaves tens of millions of American families walking a financial tightrope with no safety net. Even more alarming: that 30% includes 11 million U.S. households with children under the age of 18. What happens to these kids if one or both parents die prematurely? Where will their next meal come from? Do they have a place to live? It's frightening to even think about.

Many of these families are aware of the problem, but they don't know where to turn for help. About 80% of the people surveyed by LIMRA do not have a personal life insurance agent or broker, and 25% say they don't know where they can get help buying insurance or reaching their financial goals. And that's the point of Life Insurance Awareness month--letting these people know that help is available.

The LIFE Foundation has much more information about Life Insurance Awareness Month, as well as resources for agents and consumers. You can also find additional resources on the Life Insurance Awareness Month Map and Resources page of the NAIFA website.

Posted at 12:47 PM in Consumer Information, Life Insurance, The Role of the Agent | Permalink | Comments (0)

August 20, 2010

The Latest Case Against STOLI

Yesterday's Wall Street Journal reports that Deutche Bank AG has sued two California insurance agents for alleged fraud and breach of contract. The suits involve efforts by the agents to sell life insurance policies on elderly people to Deutsche Bank, which would in turn pool them with hundreds of other policies and repackage them as notes, funds or securitized investments. Grimly, the investors would reap profits as the insured people began to die. The agents, who deny wrongdoing, also face felony embezzlement charges brought by the state of California, and their licenses are under review by the state insurance department.

The cases point out many of the problems with stranger-originated-life insurance (STOLI) products, and also show why NAIFA and other leading industry groups have opposed these transactions for years. Unlike legitimate life settlement transactions, in which an insured person decides to dispose of a no-longer-needed insurance policy bought in the past for legitimate purposes, STOLI policies are intended from the outset as investments for people who have no emotional or other connection to the people being insured. Why are these things so bad?

STOLI transactions violate the essential social purpose of life insurance - to provide financial protection to families or businesses.
They skirt state insurance laws, because they allow investors to buy policies the law would prohibit them from taking out on their own.
They undermine the integrity of life insurance. If life insurance is seen as an investment product rather than a financial safety net, calls for governments to tax and regulate insurance benefits as investment income could gain traction. And when STOLI deals go bad, as in the California case reported by the Journal, they threaten to give the entire industry a black eye.
These transactions sometimes prey on the elderly and their families, who may not understand all of the consequences of entering a STOLI arrangement. For instance, people cannot buy unlimited amounts of life insurance and STOLI policies can prevent them from buying policies they need for legitimate purposes. STOLI transactions also open them to potential fraud or tax liabilities.

That's not what life insurance is about.

More information is available from the STOLI Alert newsletter, a quarterly publication by NAIFA and the American Council of Life Insurers.

Posted at 10:59 AM in Life Insurance, Life Settlements, STOLI | Permalink | Comments (0)

August 06, 2010

"What Am I Missing Here?"

A not-so-flattering spotlight has been put on insurers’ use of retained-asset accounts in the wake of a Bloomberg article that focused on the mother of a soldier killed in Afghanistan who received her son’s death benefit through this practice.

As an Aug. 6 Wall Street Journal article notes, the courts have been looking at these accounts for years, and several federal judges have rejected claims that the use of retained-asset accounts suggest breach of fiduciary duty, breach of contract and unjust enrichment.

According to the Journal, judges who have dismissed lawsuits filed against insurers concluded that “beneficiaries are in virtually the same position they would be in had the insurer sent them a check, because consumers can immediately withdraw the full proceeds.”

Before dismissing a case, one judge asked, "What am I missing here?"

We agree – there’s always more to the story. See a previous post on the subject.

Posted at 11:36 AM in Life Insurance, The Role of the Agent | Permalink | Comments (0)

August 03, 2010

Retained Assets Accounts: Agents Can Answer Consumers’ Questions

As any life insurance agent knows, retained-asset accounts have been a fixture in the industry for decades. The insurance companies originally came up with the accounts (in which settlement funds remain with the company, bearing interest for the beneficiary, until the beneficiary is ready to use them) at the request of consumers. They provide a flexible way for grieving loved ones to receive their benefits at a time when finances might not be foremost in their minds. Beneficiaries always have access to their total account balances and can cash out the accounts at any time.

Retained asset accounts recently came under fire after an NPR report based on a Bloomberg.com article claimed that because of these accounts “[m]illions of Americans are being duped by life insurance companies.” On its face, the charge is very misleading. However, the report unintentionally shows how important insurance advisors are to their clients.

NPR and Bloomberg.com highlight the story of the mother of a soldier killed in Afghanistan who received her son’s death benefit as a retained asset account. Notably, her son’s coverage was through a federal government contract with a company. It is heartbreaking to hear Cindy Lohman talk about the difficulties she had trying to access the account while grieving her fallen son. We can only wonder, however, how her experience might have differed had she been working with a qualified agent rather than a bureaucracy. An agent might have easily and compassionately explained the account to her and helped her allocate her money any way she wished. This is an important part of what agents do every day.

See this fact sheet about retained asset accounts from the American Council of Life Insurers.
Read a statement by Jane L. Cline, president of the National Association of Insurance Commissioners, on the retained asset accounts “controversy.”
Here is an article from the American Thinker examining some of the issues raised by the NPR item and the Bloomberg.com article.

Posted at 09:41 AM in Life Insurance, The Role of the Agent | Permalink | Comments (2)

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