October 2007 Archives
Insurance You Don't Have To Die To Use
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One Outstanding Product Opportunity
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The lessons of life
By Allie Miller
The lessons of life:
- Work hard—a good day’s work for an honest wage.
- Save for tomorrow—there will be good times, but also tough times.
- Things of the past often repeat themselves.
- Be honest.
- Treat others fairly.
- Your legacy won’t be measured in material things.
How can selling life insurance help you live the lessons of life? All of us have heard these phrases, but how do they apply to our business? How do they apply to today’s consumer?
I believe the future for this industry can be seen by looking to the past. There has been a major shift in consumer thinking, but old fashion ideas are making a comeback. There is now a perfect product for that consumer: indexed life.
Ask yourself, of all your appointments in the last year, how many of your clients were fundamentally worried about protecting their money? Were they more afraid of the financial burdens of their death, or about not having sufficient funds for their retirement? There is a significant older-aged market, concerned about the financial burdens of their death, but I think there is a far greater number trying to just get through life and protect their earnings.
Are your clients asking for ideas on investments that could yield 15 percent to 20 percent, or more? Do you know anyone that has bought an individual stock recently? What happened to all those stock “tips” we used to hear about? Done any day trading lately? Oh, you learned that lesson? Well, so did your clients. Let’s face it, the average consumer today is more conservative.
Remember that awful day when you first heard about universal life (UL)? We heard it all, “It will never last,” “UL will ruin our business!” Slightly more than 20 years ago, that was the mind set of many agents and insurance companies. Remember how fast universal life sales grew? In a three year span, it went from $110 million in sales to more than $1 billion, and has since grown to almost $5 billion a year! Were you an early believer or a skeptic? The early believers made a fortune - not to mention a name for themselves. At the same time, they offered clients higher rates of returns then they were used to from their whole life policies. The product also stirred the agents. It gave them something fresh and new to share with their clients. Just like with anything new, agents had to be trained and it took time to embrace the UL product and to get comfortable with telling the story. Well, it’s training time again.
This article is not really directed at those of you who are currently selling indexed life, but rather those of you who have heard about indexed life but have not yet embraced it. Remember your client and apply what indexed life has to offer and you will get very excited! This product is about to experience the same fast track as the traditional UL, potentially an even faster track, as it is a far better product for today’s consumer.
If you are a traditional fixed UL agent that uses universal life for asset accumulation, think about this question: Would your client give up 2 percent to 3 percent in their guaranteed return column for the potential to earn 7 percent to 9 percent long term? If the answer is yes, then stop selling UL and get on board to sell the fastest growing product line our industry has to offer. Indexed UL offers your clients the security they want and the reasonable return they are looking for. Still not convinced? Just illustrate the best performing cash accumulation fixed UL product you know of. Now illustrate the worst performing cash accumulation indexed UL product. The IUL will win. As an actuary will tell you, the details are in the math. If history is our guide, then the future of IUL looks very bright. As history has shown over time, earning an additional 1 percent to 2 percent on your cash values really does make the case for IUL.
On the flipside, if you are a VUL agent, think about this question: Would your client give up the ability to direct premiums to specific funds in order to significantly reduce their risk without having a dramatic impact on their returns? We all saw what happened to VUL policies issued prior to 2000. Not only was there a significant reduction in cash values, but many policies blew up due to a flawed design with no built-in protection. Last year, there were almost $2 billion of VUL sales. In my opinion, the IUL would have been more suitable for a large portion of that $2 billion. The first reaction is that VUL offers much higher upside potential. However, looking historically, the best IUL products would have performed as well or better than the best VUL products.
In conclusion, work hard, but smarter. Purchase what you sell and be passionate about your business. Be honest; offer solutions. The lessons in regard to life insurance are often the same as lessons of life.