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Life Health > Health Insurance > Life Insurance Strategies

Tweak The Tweaks

By Linda Koco

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Tweaking products sounds so innocent.

The tweaker will say, “The insurance company has just made a housekeeping change, that’s all.”

The listener nods understandingly.

After all, maybe it’s “just” a change that brings policy language into line with similar products at the company; or a new name that follows a merger with (or takeover of business from) another carrier; or a feature that extends a benefit by a day or a dollar.

No need to race to the back room to do a tweak-over of the tweaks in the contract, right?

Wrong. Those little tweaks can make a big difference, not only in pricing but also in benefit to the client. Some may very well be innocent, but others might pack a wallop, both good and bad.

Here are some tweaks that have surfaced this year along with some what-to-dos:

o Upgrade to the 2001 Commissioners Standard Ordinary Table. That’s mandatory, so tweaking to life products is expected. But what some life companies are doing is pulling the older products altogether and rolling out new ones. The newbies have more than pricing changes; some have new or revised underwriting classes; updated or missing riders; revised face amount ranges; and more. And a few are including “income” options or strategies–more than simple reminders about policy loan privileges.

Suggestion: Find out what exactly has changed from the old tried-and-true. As for those income options/strategies, it will pay to chart the differences as they come in, for what is billed as an “income feature” in one product might really be a death benefit feature, while another could be a strategy for outing the cash value in another policy.

o New wrinkles. This is common in health care policies, both individual and group. At renewal time, the carriers shave limits, features and add-ons; they bump up deductibles, premiums and underwriting qualifications; to offset that, they may offer little extras that may or may not have value to the customer. Much of this is being done in response to the recession and health care cost escalation. No one promotes these as big sweeping changes, but many times that’s what they are.

Suggestion: Flesh out the changes, positive and negative, before ever talking to the customer about them. Have alternatives or gap-fillers in mind to recommend, if needed.

o Scale-backs on guarantees. In the variable annuity market, some carriers have stopped offering the guaranteed minimum withdrawal benefit, while others are curtailing the feature to be more sustainable for risk management purposes. In fixed products, some carriers are reducing percentages on first-year interest guarantees, while others offer very attractive rate guarantees for one, two or three years but only for sizeable purchase payments.

Suggestion: Dissect the changes, and be sure the presentation and materials given to the client are current.

o Packaging. That refers to grouping types of products together in one sale. It’s like the new “combination” polices (life with long term care or annuity with long term care) but not the same. In both the group and individual markets, separate policy types are being grouped and sold together–life and disability, for instance. Sometimes, the products are tweaked in small ways (even, sometimes, just the name and product number), but the sales literature is new, emphasizing the benefits of the “package” buy.

Suggestion: Review all products in the “package” and the underwriting requirements too. Could be there’s an advantage for the client, but do-it-yourself packaging might work as well (or better).

o Allocation styles. These are under review and some are reportedly changing to address growing public concern–rightly or wrongly placed–about the viability of such programs.

Suggestion: Check out how today’s allocation profiles or programs compare to last year’s. Research expert opinion on the new changes. Customers deserve to know.

All of this is Common Sense 101. Professional advisors say they routinely assess new offerings, no matter what.

Unfortunately, in today’s turbulent economy, some market makers are presenting substantive changes as little tweaks, glossing over areas that could prove problematic for customers and fluffing up changes that are of little consequence.

It can be tempting to buy the tweak story, especially since everyone knows that intensive product development is on the back burner until the recession recedes. Even veteran skeptics may get sucked into the spiel.

But although some “little changes” make little difference or even make things “a little better,” accepting tweak-talk at face value is risky. It’s better to ask questions first and respond later.

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