About James Clarkson

James Clarkson has been a member since December 8th 2012, and has created 4 posts from scratch.

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IPB 082: What Does the Equifax Breach Mean for Life Insurance?


Last week, Equifax, the largest credit reporting company, reported a major breach of its core database. It is by far the largest hack of its kind to date and is estimated to have impacted more than half of the U.S. population–more than 143 million people's records were accessed.

By now, most of you have heard all about this from every other news source on the planet, however, what does it mean for life insurance applications? Will there be any sort of fallout over this for life insurance?

We weigh in with our thoughts in episode 82.

IPB 081: The Death of the Life Insurance Medical Exam


In episode 81, we're talking about the newest trend emerging in the world of life insurance underwriting and that is…

The end of paramedical exams and lab tests.

Now, the exams aren't going away completely. However, after talking with several people working for companies that have been rolling this out over the last several years, the numbers are telling us that about 50% of the people who apply are able to be fully underwritten without an exam.

This trend will surely accelerate and will serve a dual purpose:

  1. A much more streamlined underwriting process that leads to policies being issued more quickly.
  2. Add millions of premium dollars to insurance companies with a lower cost to acquire those dollars.

Of course we have more to say in the podcast, listen for our full commentary.

IPB 080: Black Box Baloney


Whole life insurance is often maligned by the rest of the financial services world (those who sell registered investment products) as lacking transparency. It’s referred to as a “black box” for its lack of disclosure. Opponents say that it's not so much about how various pieces and parts are calculated, but more about the walls built around their attempt to reconcile results.

Or at least that's what they want you to believe.

In truth, it’s rather easy to compute expenses associated with whole life insurance. Life insurance illustration ledgers have been a compulsory step in the life insurance sales process since the early to mid 90’s in almost ever state and those ledgers explain a lot in terms of what the insurer is doing and plans to do with your money.

It's true that you cannot request a detailed breakdown of expenses under a whole life contract and compare it against other whole life insurance contracts.

You can easily look at ledger details and compare both guaranteed and non-guaranteed values for whole life policies to discern which ones come at a lower cost.

While some people may not want to perform analysis in this way, it’s no different than looking at a schedule of expenses to see who charges more for what. This view is simply bigger picture.

Remember this…

Expenses are relevant when making any decision, however, I would encourage you to focus on absolute value. How much money you have when you reach your destination is more important than the internal expenses you paid along the way. Whether or not something is expensive is always relative to the value it provides.

Five-Year Whole Life Insurance Company Investment Yield Trend: 2016 Edition


For five years, we have tracked the investment yield trend of whole life insurance companies and we continue to analyze this data every year because investment income is a primary driver of dividends paid to participating insurance policy holders.

Investment income is not the only contributor to any insurance company’s dividend payout. The other two factors considered each year by the board of directors is

  1.  Claims experience
  2.  Operational expense

    Claims experience plays a much larger role in affecting the overall dividend than operational expense–there simply isn’t large fluctuations in day-to-day operating expenses for companies that have existed for over a century.


We use investment performance data reported in statutory accounting reports published by all insurers domiciled in the United States to compute the five year trend of investment yield on admitted assets. This computation tells us the average change in yield on invested assets over the most recent five year period.

For example, if the result of an insurer for this analysis is -.10% per year that means the insurer has experienced a loss in investment yield of .10% (ten basis points) per year for the last five years.


The results of this analysis are as follows:

2016 Whole Life Investment Yield Trend


Negatives Across the Board

This  is the first year since we started this analysis that all insurers show a negative trend. In years past, only a few insurers achieved average growth in investment yield year-over-year with most insurers having experienced a decline on average. This result is not surprising given the current trend in interest rates across the broader U.S. economy.

Size Doesn’t Seem to Matter Much

The asset pool size of the insurer seems to have little effect on insurers 5 year trend for investment yield. The top five insurers on this list represent a broad range of asset sizes and all but one, New York Life, have experienced single digit decline year-over-year.

However, smaller asset pool sized companies to make up the entirety of the bottom 5 insurers on the list. Dividing the list in half, most of the larger insurers are found in the top 11.

This Trend is Likely to Remain

Interest rates remain low and don’t show major signs of improvement in the short term. As a result, we do not expect this trend to reverse in any major way for the next several years. Insurers will likely continue the trend of moving to somewhat riskier assets where available. This strategy will be more impactful for smaller insurers and then large ones due to sheer scale of overall assets and the impact smaller alternatives investments have on the total pool.

IPB 078: The Bondex v2.6.4.3


To continue on with the discussion of potentially rising interest rates…

We actually get into what it might mean for life insurance companies and for your life insurance policy–whether it happens to be participating whole life or universal life.

Major discussions in this episode:

  • How quickly can you expect your dividend (WL) and/or interest rate (UL) to increase if Greenspan's prediction of a whipsaw comes true?
  • Will the life insurers who were “forced” to raise expenses in their UL contracts over the last couple of years, lower these price increases as interest rates rise? (given that most of them gave the excuse of having to deal with a “prolonged period of low interest rates” to raise their prices on existing policies)



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