Underwater ULs from the 80s...why don't insurers call up these clients?

[Aaron JM]

Just helped a 68 year old who had a 125k UL from the early 80s. Vanishing premium, blah blah blah.

Well her quarterly payment was about to quadruple. and within 9 years her CV would be at 0.

Her cash value must have plateaued and startled dwindling at least a couple years ago. Paid $18k in total premiums. CV was $11,500 when I showed up.

Why doesn't Mass Mutual (and the others) have agents calling these clients to alert them the policy is going underwater? This is ridiculously bad service.

Don't get me wrong, I'm an independent agent and I'm not necessarily signing up for this job...but somebody as Mass needs to set up an alert system. Once a UL from the 80s starts going negative, an agent looks into the case.

Anyone know why they don't do this?

 

[Allen Trent]

Just helped a 68 year old who had a 125k UL from the early 80s. Vanishing premium, blah blah blah.

Well her quarterly payment was about to quadruple. and within 9 years her CV would be at 0.

Her cash value must have plateaued and startled dwindling at least a couple years ago. Paid $18k in total premiums. CV was $11,500 when I showed up.

Why doesn't Mass Mutual (and the others) have agents calling these clients to alert them the policy is going underwater? This is ridiculously bad service.

Don't get me wrong, I'm an independent agent and I'm not necessarily signing up for this job...but somebody as Mass needs to set up an alert system. Once a UL from the 80s starts going negative, an agent looks into the case.

Anyone know why they don't do this?

Most carriers have warnings to client and agent, but the carriers also don’t generally pay an agent new commissions to re-write internal cases.

Keep in mind, most carriers are also not happy with the overall performance of that UL & have guaranteed interest rates that are almost as high as what they can invest the money to make. So, the ART COI are where they can continue to make money on those old ULs. Crashing Old ULs are one of the few profit centers for a carrier in todays low low interest rate environment, so it is a tightrope. Very similar to carriers not running out & reminding clients their term conversion is expiring. issuing new policies today without any underwriting is not as profitable, if profitable at all, compared to new UW products priced today

Lastly, be careful replacing & beg the client to be 150% honest on the new life application. I have seen at least a half dozen denied life cases in the last decade for policies that replaced ULs. In all cases I saw, the old policy would have still been active had the UL not been touched because they died before it ran out. Or in some cases, the client goes with a much, much lower face on the new policy & dies soon after. In 1 case, the carrier allowed the UL client to take a paid up policy with the cash value. Client died 6 months later & kids found old anniversary statement showing $100k & were pissed that it was only paying $15k

Document a ton on older age replacements as it is a roll of the dice of whether they will die too soon or outlive the remaining term coverage of the crashing UL

 

[rousemark]

They do notify.. The client gets an annual statement. It is their responsibility to read it..

 

[Newby]

Most carriers have warnings to client and agent, but the carriers also don’t generally pay an agent new commissions to re-write internal cases.

Keep in mind, most carriers are also not happy with the overall performance of that UL & have guaranteed interest rates that are almost as high as what they can invest the money to make. So, the ART COI are where they can continue to make money on those old ULs. Crashing Old ULs are one of the few profit centers for a carrier in todays low low interest rate environment, so it is a tightrope. Very similar to carriers not running out & reminding clients their term conversion is expiring. issuing new policies today without any underwriting is not as profitable, if profitable at all, compared to new UW products priced today

Lastly, be careful replacing & beg the client to be 150% honest on the new life application. I have seen at least a half dozen denied life cases in the last decade for policies that replaced ULs. In all cases I saw, the old policy would have still been active had the UL not been touched because they died before it ran out. Or in some cases, the client goes with a much, much lower face on the new policy & dies soon after. In 1 case, the carrier allowed the UL client to take a paid up policy with the cash value. Client died 6 months later & kids found old anniversary statement showing $100k & were pissed that it was only paying $15k

Document a ton on older age replacements as it is a roll of the dice of whether they will die too soon or outlive the remaining term coverage of the crashing UL

You can always look backwards after a death and make better decisions that they should have done earlier. That's not how an insurance agent needs to think. They just need to present it as it is. Mrs. Smith your policy will pay $100,000 as long as you promise to die in the next 4 years. Or you can take $20,000 for that premium that will pay out no matter how long you live.
As long as you do that I wouldn't feel responsible if she went with the $20,000 and dies within 4-years. Because no one could know that. And she would have been much worse off if she didn't change and then out lived the 4-years.
I told a man that I wouldn't take the accidental rider on a TranAmerica FE policy one night. He was leaning toward getting it but I feel that accidental is like buying lottery tickets so I influenced him to not take it. Within a month he was run over by a train. Should I feel guilty? No. I gave him good advice. But he hit the lottery. I wouldn't advise you to buy a bunch of lottery tickets just because I had a neighbor who won $500,000 on one (true story).
Just explain the facts that they can understand. Give your honest advice as to what you would do. Sleep well at night.

 

[DHK]

The companies are the ones who did this... not the agent. As a result of all these illustration wars... we have had illustration standards since 1997. (I had no idea.)

From HS 323: Individual life insurance

 

[scagnt83]

These people receive a ton of letters telling them the policy needs additional premium or modification.

Carriers do reach out to agents and have them call to follow up on these, that is how I made a good bit of my income in year 2 and 3 of my insurance career.

Its on the client to read the letter or pick up the phone. Its on the client to acknowledge the situation when brought to light. Many ignore all the letters they get from the carrier. This is what happens when they do.

 

[scagnt83]

Her cash value must have plateaued and startled dwindling at least a couple years ago. Paid $18k in total premiums. CV was $11,500 when I showed up.

$450 per year, for 40 years, to get a $125k DB and $11k in cash. Is actually a pretty damn good deal.

She could walk right now and only have paid $7k total for 40 years of a $125k DB.

I assume you looked at ways to save the existing policy before attempting to write a new policy... because it is extremely likely that modifying the existing policy would be the right thing to do based on the numbers you gave.

 

[rousemark]

You can always look backwards after a death and make better decisions that they should have done earlier. That's not how an insurance agent needs to think. They just need to present it as it is. Mrs. Smith your policy will pay $100,000 as long as you promise to die in the next 4 years. Or you can take $20,000 for that premium that will pay out no matter how long you live.
As long as you do that I wouldn't feel responsible if she went with the $20,000 and dies within 4-years. Because no one could know that. And she would have been much worse off if she didn't change and then out lived the 4-years.
I told a man that I wouldn't take the accidental rider on a TranAmerica FE policy one night. He was leaning toward getting it but I feel that accidental is like buying lottery tickets so I influenced him to not take it. Within a month he was run over by a train. Should I feel guilty? No. I gave him good advice. But he hit the lottery. I wouldn't advise you to buy a bunch of lottery tickets just because I had a neighbor who won $500,000 on one (true story).
Just explain the facts that they can understand. Give your honest advice as to what you would do. Sleep well at night.

Accidental Death Benefit is based on actuarial standards the same as the death benefit. That is the reason the premium is lower, the risk is not as great but the "odds" are the same.

 

[Newby]

Accidental Death Benefit is based on actuarial standards the same as the death benefit. That is the reason the premium is lower, the risk is not as great but the "odds" are the same.

Yes but no one NEEDS more coverage just because they dies of an accident. If you need $50,000 then buy $50,000 of real insurance. Don’t buy $25,000 and $25,000 accidental. That just gives people a false sense of security.
Buying accidental coverage is not really protecting anyone. Because you are probably going to die of a heart attack, stroke or cancer. Or maybe COVID.
If people want accidental policy I’ll sell it to him. But I’m gonna make sure they think of it as lottery tickets not life insurance.

 

[Thomas Scialla]

My first dip into the business included a very short stint as a captive agent at Prudential. I spent almost all of my time running appointments with orphaned VUL clients who's policies were imploding. Seeing how these things were sold made me pretty sick. They were college funding devices. They were retirement savings accounts. They were this and that. Its like no one knew they were buying frigging insurance. I'm glad that I was able to pair up with an independent guy and get out of that mess, because seeing all of these people realize that their dreams were gone was like watching babies drown.