May 23, 2013 by Pat Lanigan
This month is a Q&A double header with answers provided by Sheryl Moore, President and CEO at Moore Market Intelligence and authority on indexed annuity products.
Pat: Does any one index crediting strategy outperform any others in the long haul? What about in volatile times like we are experiencing now?
Sheryl: No, the option seller is going to price the options (which are the instrument that provides the index-linked interest on IUL), so that his risk is relative, regardless of index, crediting method, or pricing lever used to limit the indexed interest (cap/participation rate/spread). In our pricing transaction, we take [5%] of the policyholder’s premium and use it to buy options. Today, based on interest rates, market volatility, and option costs, our option seller might tell us that our [5%] will buy an S&P 500 annual point-to-point cap of 12%. However, if the market spikes, one month from now that same 3% may afford our policyholders a cap of 17%. (After all, what is the likelihood that the index will go up 17% when it is already at a historically high level?) This is why the indices that have historically performed the best are going to have lower caps than an index that is mediocre. Sure, some crediting methods and indices will perform better than others in certain environments. However, over a long period of time, they will all perform about the same.
Pat: Over the long haul, does it really matter which IUL product I sell? (excluding riders, ect)
Sheryl: YES. When we price universal life, we price it for one of three objectives: extended no-lapse guarantee (NLG), cash accumulation, or premium-to-endow (most amount of insurance for the least amount of premium). Believe it or not, we do have IUL products that are priced for all three of these objectives; not just cash accumulation. In fact, one of the most competitive NLG products in the insurance industry is an indexed life insurance product!
Agents selling indexed life need to identify their client’s insurance needs and properly identify a product that meets the necessary product objective. From there, the agent needs to do their due diligence on the underwriting insurance company, and evaluate how they will treat their clients’ policies once the contracts are inforce. From there, the agent is positioned to compare products among their qualifying companies in terms of performance, cost, and benefits. Although it can be difficult to compare these products apples-to-apples, I suggest first comparing all of the product features independently of the indexed crediting. Then, compare caps/participation rates/spreads on like crediting methods. And above all, do NOT rely on the illustrated rate that is defaulted in the carrier’s software as an indication of which product is “best” for the client!
Check out the BLMG Q&A blog post each month for more answers to your questions! If you’d like to submit a question or share your thoughts, click on the title of this blog post and comment in the section at the bottom of that page.
May 16, 2013 by Courtney Redfern
Even if you haven’t taken the time to crunch the numbers, you probably know that it costs less to keep your existing clients than to acquire new ones. This is why most business owners are looking for ways to generate additional business from their existing database.
How can you do that?
Connect with them. Learn about them. Discover their challenges and help provide solutions.
To get the ball rolling, you need to learn more about your clients. Start by creating 3-6 profiles that fit your existing client base. Because you work with different types of clients, you’ll want to group them by similar traits, qualities, and motivations. This can help you provide a more personalized experience according to their needs.
In each profile, you’ll list demographic information, identify current challenges, and acknowledge future wants. By participating in this exercise, you’ll get more familiar with your clients and start to think about their current struggles. You’ll also discover potential solutions you can offer to clients. And, ultimately, you’ll be able to provide your clients with the right message at the right time.
In the sample profile, you learn more about Joe through his traits and characteristics. You can also think about his pain points and connect them with possible solutions.
Start creating your own client profiles. Access a client profile template here.
May 9, 2013 by Randy Timm
It’s a fact that Americans are living longer. As a result, more Americans are facing health concerns as they age. In fact, 70% of individuals will require long-term care services at some point in their life.1
Despite the increased number of people in need of long-term care services, only 10% of aging Americans own private long-term care insurance.2 TWhy his small percentage could be because people don’t want to pay a premium for coverage they may never use.
To help address this concern, Aviva USA recently released the new TargetBenefitSM Annuity with optional TargetPaySM and TargetPaySM Plus income riders. Both riders offer a Confinement Income Benefit3 that will triple the income benefit for up to 60 months in the event your client is confined to a qualifying care facility.
Here’s how it works.
John and Mary, both 70, have been retired for several years. Recently, they attended a dinner with their long-time friends, the Johnsons. During dinner, John and Mary discovered that the Johnsons had purchased a fixed indexed annuity to help supplement their retirement income. Their fixed indexed annuity helped provide them with several benefits, including income payments for life.
The next morning John and Mary discussed what they learned from the Johnsons. They found that each was interested in learning more. That day, John made an appointment to visit with their financial professional, Frank.
During their office visit, Frank asks John and Mary several questions about their current situation. Frank learns that they have $500,000 to purchase an annuity. He also learns that one of their key objectives is to create an immediate stream of income.
Together, they discuss potential options. John and Mary decide to purchase the TargetBenefit10SM fixed indexed annuity. They also elect to add the TargetPaySM Income Benefit Rider to the annuity for an additional cost. At the time they turn on joint income under the terms of the rider, John and Mary receive annual income payments in the amount of $25,640.4
John and Mary continue to receive their annual payments for the next three years. Unfortunately, in the fourth contract year, John becomes ill and must enter a nursing home to receive skilled care. After John has been admitted to the nursing home, Mary calls Frank to discuss their finances. Frank reminds Mary that they have access to a Confinement Income Benefit through the TargetPaySM Income Benefit Rider they elected to add to their TargetBenefitSM fixed indexed annuity. After 180 days of confinement within a 250 consecutive day period, Mary can submit proof of confinement to receive an increased benefit.
John’s condition does not get better and he remains under skilled care in the nursing home for the necessary 180-day period. Mary submits proof of John’s confinement. Shortly after, John and Mary’s annual joint payout increases by three times to $76,920. Mary uses this money to offset the nursing home expenses she incurs over the next three years (36 months), until John passes away.
After John’s death, Mary’s annual lifetime income payment returns to $25,640 and is guaranteed for the remainder of her life.
You can download a sample Statement of Benefits here. To learn how you can offer TargetBenefitSM fixed indexed annuity and TargetPaySM Income Benefit Rider to your clients, call Sales Support at 800.362.1097.
1 U.S. Department of Health and Human Services. (n.d.). Longtermcare.gov. Retrieved from http://longtermcare.gov/the-basics/who-needs-care/
2the National Bureau of Economic Research: The Market for Long-Term Care Insurance. Retrieved from http://www.nber.org/bah/winter05/w10989.html
3 Once released from the qualified care facility, the rider income will adjust back to the original level. The Confinement Income Benefit will cease upon reaching the Extended Income Guarantee Phase or after a period of 60 months, whichever occurs first. The Confinement Income Benefit is not available in all states.
4Assuming no excess withdrawals are taken.
TargetBenefit 10 Annuity [TBS10 (09/12)], TargetBenefit 10 Select [TBS10 (09/12) NB], TargetPay Income Benefit Rider [TBSIRF (09/12)], TargetPay Plus Income Benefit Rider [TBSIRI (09/12)] or state variations are issued by Aviva Life and Annuity Company, West Des Moines, IA. Product features, limitations and availability vary by state; see the Certificate of Disclosure for details.
Annuities are not FDIC insured; guarantees provided by annuities are subject to the financial strength of the issuing insurance company.
May 2, 2013 by Rebecca Prescott
I think about Starbucks a lot.
I can’t tell you that it’s only because I love their coffee. It’s not that simple.
I’m in love with the Starbucks brand, and the experience that comes with. Everything about the brand gets high praise from me: Packaging, merchandising, service standards, customer-rewards programs, human resources policies, their use of music, philanthropic endeavors and yes, even the coffee itself.
My friends might call it an obsession. But my love for the Starbucks brand has helped in my career; it’s helped me understand how a company can use its brand to cultivate and maintain customer loyalty. And Starbucks, like other companies that I respect, does it by offering an experience.
This blog kicks off a series of posts that I’ll be providing in the next few months about the importance of developing your brand. I’ll be talking about taking a brand inventory; developing a strategy; ways to increase recognition; and how to promote your brand.
But before we move on, let’s talk about the word itself.
There are thousands of definitions of the word brand. Here’s one that I particularly like from Alina Wheeler’s “Designing Brand Identity” (Second edition, 2006):
“The brand is the promise, the big idea, and the expectations that reside in each customer’s mind about a product, service or company.”
I’m particularly fascinated with the word “promise.” A promise sets the stage for a customer in their decision-making process. If they like and trust your brand, they’ll make a purchase. If they don’t, they’ll buy from someone else. And in my little corner of the universe, it’s the experience that keeps me coming back.
Here’s a scenario to consider: I’m standing on the corner of a major metropolitan city and have the choice of Starbucks and another coffee shop in the same square-mile area. I’ll walk to the Starbucks every time. Why? I know that when I walk out, they will have done their best to meet my needs. I know that if my drink doesn’t taste right, they’ll make another one no questions asked. It will be familiar and comfortable.
They have hooked me to the point where if I’m pressed to make a decision on how to spend money on coffee, I’ll choose Starbucks.
This can apply to financial professionals. You may not be a billion dollar coffee empire, but your brand can contribute to your failures and successes.
In the next installment of this series, I’ll take you through some steps to take a solid inventory of your current brand, and then set you free to do the same.