To best or not to best…
Mining your book of business
that is the question… Or is it?
National Association of Insurance Commissioners is continuing to draft an update to the model
suitability regulation. They are deciding whether to include an explicit “best interest” provision
which has sparked debate between different factions, but we are not convinced it matters.
Commentary on model
Kim O’Brien is a 35-year veteran of
the insurance industry specializing
in guaranteed annuities and life
insurance. She is the current CEO of
Americans for Annuity Protection
and Founder of AssessBEST, Inc.,
a sales and compliance software
system. Visit www.AAPnow.com,
for more information.
DISCLAIMER: This article is provided for educational
and informative purposes only and not for the
purpose of providing legal advice. Readers should
consult with their own legal and compliance
counsels to obtain guidance and direction with
respect to any issue or question.
Much ado about nothing?
Perhaps unlike the profound choice confronting Hamlet on whether to go on with life,
the question of whether the updated model law should include explicit versus implicit best
interest requirements may be the proverbial distinction without a difference. There are legal
and practical reasons why the fight at the NAIC over the best interest label may be much
ado about nothing and indeed might serve only to underscore reasons why we oppose any
change to the model suitability regulation that may head inexorably towards a reincarnated
Department of Labor fiduciary rule.
We question why the need for this disruptive and litigiously potent regulation when all agree
suitability is working. Any creation of a uniform standard across the wide spectrum of financial
service providers runs headlong into legitimate historical differences between insurance and
investment providers, products, and services. We contend the annuity marketplace is vibrant,
evidence of harm to consumers is dubious, and danger of unintended consequences from
tampering with long established regulatory standards is high.
Most industry trade groups surprisingly endorse the work of the NAIC working group, while
a handful of others have tried to tap the brakes. Most recently groups are debating whether
the NAIC should use the words “best interest” or stop short of using those actual words while
still adopting equivalent standards. We see the debate as mostly academic and the NAIC draft
proposal will be interpreted as “best interest” regardless of whether that term is used or not.
Since the rule calls for placing consumer interests ahead of agent interests, that unto itself
will be interpreted as best interest, for there is no sliding scale of interests between agents
and consumers and thus putting client interests first is dictating that agents adhere to a
quasi-fiduciary standard. Beyond that, the proposed rule uses other loaded phrases and lingo
inextricably tied to best interest, such as a requirement for agents to “act with reasonable
diligence, care, skill, and prudence” and make various disclosures including material conflicts
of interest. And to the extent there is doubt, the record being compiled during deliberations
over adoption of the regulation provides ample ammunition that this regulation is for the
purpose of imposing a best interest or equivalent standard upon insurance agents.
Turning insurance agents into quasi-fiduciaries
We are steadfast in our view that the NAIC should refrain from modifying the model
suitability regulation because a best interest standard, whether explicit or implicit, will
inevitably turn insurance agents into quasi-fiduciaries which is exactly what industry worked so
hard to defeat under a deeply flawed and now-discredited DOL fiduciary rule.
The NAIC proposal, no matter how well intentioned, is simply a warmed-over version of
the DOL rule that will lead to overly conservative financial decisions, reduced availability of
products, costly lawsuits, and potential reversal of otherwise sound transactions. For more on
why “not to best,” and our alternative proposal, visit www.fixedannuitychoice.com.
With over 23-years in insurance
and long-term care industries, Chris
Orestis is Executive Vice President
of GWG Holdings, and a nationally
known senior care advocate, as well
as expert on life settlements and
long-term care issues. He is a former
DC lobbyist, industry speaker, and
author. Contact Chris at
Millions of seniors every year abandon life insurance policies without understanding it is an
asset that has considerable secondary market value. On an annual basis, there is over $200
billion of in-force death benefit owned by seniors who would likely qualify to settle their
policy in the secondary market. As many as 9 out of 10 universal life policies are in danger of
being lapsed or surrendered, and the abandonment rate for term policies is also quite high.
Seniors are prone to throwing away one of the most valuable assets they own because they
don’t realize how the secondary market value could help them address the unique financial
challenges of retirement and health care brought on by aging.
These challenges are a subject too often ignored until it’s too late. The challenge for advisors
is, how to help someone use insurance-based solutions when they are an automatic decline
because of their age and health? Well, for millions of seniors the answer can be found in an
existing life insurance policy.
Life settlements has evolved over the last decade into a well-regulated, mainstream financial
tool for seniors. More advisors are coming to realize the important role this transaction can
play for their clients in circumstances where financial need intersects with advancing age and
declining health. One of the best ways to find clients who could benefit most from this solution
comes from mining your existing book of clients and aging policies. By engaging in a systematic
policy review process, you will find unrealized gold before you receive lapse or surrender notices.
Who are ideal policy review candidates?
Senior clients in declining health who are looking for financial help
with retirement and LTC costs
Policies in immediate danger of lapse or surrender and may be
abandoned if action isn’t taken
Policies without critical illness or LTC conversion riders
Underperforming UL policies
Aging Term life policies reaching conversion deadlines
LTCi policy owners on claim
By identifying which policies could be eligible for a settlement, you will rescue policies
before they are abandoned. This process creates financial solutions for your clients from
policies that have in-force for years. The policy review process then continues as an ongoing
lapse-prevention business practice, building an ongoing revenue stream and new profit center
out of old business.
Policy review value chain
Value for IMO: Deliver a no-cost business process to BGA’s
that helps generate recurring revenue and agent loyalty.
Value for BGA: Deliver a no-cost business process to agents
that will analyze and track books of business on a monthly
basis to prevent lapse or surrender of life policies, generate
recurring revenue, and leads for new sales from old clients.
Value for Agent: Deliver new value to policy owners from an
overlooked asset, create funding solutions for immediate
retirement and long-term care costs, keep renewal rates up
by preventing policies from being lapsed or surrendered,
expand new sales opportunities, and create new, recurring
Value for Policy Owner: Access the value of a policy before
they would lapse or surrender allowing them to address
retirement and long-term costs with an asset, they already
own without spending any money.