August 10, 2017

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)


August 3, 2017

IPB 077: The Perilous Bondex



Former Federal Reserve Chairman, Alan Greenspan, believes the next bubble to burst will not be in the equity markets…it will be a normalizing of yields in the bond market as inflation ticks up.

During a Bloomberg interview, Greenspan said…

“By any measure, real long-term interest rates are much too low and therefore unsustainable”

And he went on to say…

When they move higher they are likely to move reasonably fast. We are experiencing a bubble, not in stock prices but in bond prices. This is not discounted in the marketplace”

Greenspan also warned that we are headed toward a “stagflation” that we haven't seen since the 1970's.

But what does any of this have to do with life insurance?

As we all know, life insurance companies are large buyers of bonds and have been long-suffering over the last several years as their bond portfolios mature and they're forced to buy bonds with much lower yields.

Come back next week to hear our take on what it all means for life insurance companies.

July 27, 2017

IPB 076: The Consequences of Outliving Your Life Insurance


Did you know that it's possible to outlive your permanent life insurance?

That entire sentence is discombobulating. When does permanent not really mean permanent?

Recently, a pending court case was brought to our attention on Joseph Belth's blog (former publisher of the Insurance Forum) that raises some interesting debate. You should really take a few minutes to read the entire blog post if this sort of thing interests you, it's worth a quick read.

The long and short is that a gentleman and his wife (Mr. and Mrs. Lebbin) formed an irrevocable life insurance trust (ILIT). They made their two children the trustees, gifted money to the trust each year and the proceeds were used to purchase two separate survivorship and/or second-to-die universal life policies from Transamerica. Mrs. Lebbin is deceased which leaves Mr. Lebbin as the insured.

All seems normal. However, Mr. Lebbin is approaching his 100th birthday and the policies were designed to endow (mature) at age 100. Thus he will receive the net cash value (of unknown value to us).

Mr. Lebbin would like for Transamerica to extend his maturity beyond 100. Transamerica has decided not to do that.

And so begins the lawsuit.

Listen to the episode to hear what we have to say about it.

July 20, 2017

IPB 075: Stay for the 401k?

In episode 75, our discussion revolves around a suggestion that comes from this article over at Fox Business. In particular, the article points out that many larger and well-known employers are aggressively raising their matching contributions for their employees in the company 401k plan.

The article goes on to suggest that companies believe this is an effective means of retaining talent and helping workers accumulate enough money to retire–making way for younger employees.

We think that all sounds great. More money from the company you work for toward your retirement is generally a good thing.

But…do people really stay with a company because of the matching contribution in the 401k? Not likely.

We've both been in the business of talking personal finances with people for a number of years and never heard anyone mention their sweet 401k as a reason they stayed at a job. The best retention tool seems to be actually paying people more.


July 6, 2017

IPB 074: Whole Life Insurance Litigation


Recent settlements have been reached between policyholders and a couple of mutual life insurance companies. Turns out an obscure bit of insurance regulation from 100 years ago might get you an extra $22 that you weren't expecting.

We've been asked a few times about these lawsuits over dividend underpayment, so we'd share our perspective on the issue in episode 74.

June 29, 2017

IPB 073: Don’t Worry About the Economy…We Got This


Recent comments from Fed Chairman, Janet Yellen, indicate that she thinks we'll never see another financial crisis like we saw in 2008. She's probably right but is that really a profound observation?

June 22, 2017

IPB 072: How Do You Define “Best Interest”?


Well, the day of reckoning has come and gone. The new Department of Labor's new Fiduciary Rule is largely in effect across the financial services industry.

Discussion over the rule and its implications have been debated over the last couple of years with a fair degree of intensity. Still it seems that the smoke screen has worked.

The new rule expands the definition of a fiduciary as it relates to giving investment advice regarding retirement accounts.

We're not trying to explain the rule in today's episode…as far as I can tell from attending several informational webinars/meetings regarding the implications of the rule there's no agreement or real understanding of what it means for advisers.

Big surprise, right?

We aren't all that concerned with procedural issues (disclosures, paperwork etc.) as much as we're concerned about how this new rule warps the definition of “best interest” and what it really means to act in the capacity of a fiduciary.

Our issue isn't really about a rule change, that's just what's visible. What's more troubling is that policymakers are attempting to fix a perceived problem that they don't really understand. A new rule will not fix the problem.

According to information published by the Insurance Research Council, almost 13% of all automobile accidents in the U.S. are caused by people who have no insurance. Yet, it's illegal to drive without insurance in almost every state.

I got some breaking news for you…some people do bad things and writing new rules won't change it.

The new rule implies that what's in your client's best interest has an absolute right or wrong. And before you think it…yes, fraud is always wrong.

But…what's in my clients best interest is highly subjective and that has not changed–rule or no rule.

June 8, 2017

IPB 071: Nationwide Sued for Increasing Cost of Insurance

How premiums flow with universal life insurance


Are increasing COI charges really a problem with universal life insurance? Or could it be that competence in understanding policy design (from the outset) and management is actually more important?

Today we're discussing an ongoing lawsuit between a family and Nationwide regarding a couple of variable universal life policies that are owned by an ILIT (irrevocable life insurance trust).

June 1, 2017

IPB 070: Question and Answer-Round 2

Episode 70 marks only our second FAQ episode since we started the Insurance Pro Blog Podcast. But it proves that we do indeed love the questions that we get from our audience, so keep'em coming our way. We'll do our best to get to them in our upcoming Q&A episodes.

We were planning to answer three questions today. Alas, our attempts at brevity fell short and so we only answered two questions.

Here's what we tackled in episode 70:

1. Is the waiver of premium rider worth the cost and what does it really do for you if you become disabled?


2. How do you distinguish a “good advisor” from all the rest? The financial services industry views an advisor/agent/producer as top notch if they generate more revenue than everyone else. But…is that the metric you (the client) should be using?

And seriously, keep the questions coming our way, we may address your questions in a future broadcast or mash them up with other questions if we believe it provides a better context for understanding.

May 18, 2017

IPB 069: Look Harder Before You LEAP


Today's episode revolves around a discussion of the LEAP system and how it contributed to the revocation of an insurance agent's license.

An agent in Ohio had his insurance license revoked after using the LEAP system to sell life insurance as an investment. Now, this happened back in April 2016, so I wouldn't consider it breaking news, however, it's still a discussion worth having.

At the core of our episode…is LEAP the real problem (as depicted) or did the agent lose his license because the policies he sold were structured incorrectly?

The headlines and structure of the case documents themselves would lead you to believe that LEAP is the core of the problem but we're not so sure about that. You have to read between the lines on this one and look harder at the actual numbers revealed in the case to reverse engineer what REALLY happened.

Download the document from the Ohio Department of Insurance

Please note: This episode is not intended to disparage the use of LEAP or any other methodology for selling life insurance. We believe the actual problem in this case is that the former agent represented the life insurance as functioning one way and delivered something completely different.

In fact, if you want to better understand how this sort of thing actually happens, I encourage you to read a piece we published several years ago, The Third Dimension of Cash Value Life Insurance. It will shed some light on how this sort of thing happens.


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