Product Trends From The Fields Point Of View
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"People dont want life insurance. They want to be educated" about their financial needs, says Todd McDonald, an agent in Albany, N.Y.
"We have a good old hard conversation with the client, look them in the eyes, and then they say, yes, we need it."
A career agent with MassMutual who is president of The Commonwealth Benefit Group LLC in Albany and Boston, McDonald says life insurance was a key product trend for his agency in 2004. In fact, his firms life sales have grown by 30% a year since 2000, even though the industrys total life sales have flatlined and even dropped in some sectors over the same period.
McDonald is among several experts contacted by National Underwriter to give a field perspective on product trends for 2004 and the year ahead.
In 2004, life sales were affected by a trend in the surety bond world, says McDonald, who has many clients in construction and materials supply and who therefore need to obtain surety bonds. The companies issuing the bonds generally have become more conservative, he says, citing greater losses (reflecting rising insolvencies) and more industry consolidation as key reasons.
As a result, the surety firms want to be more comfortable with the risks they are taking in issuing bonds, he says. Specifically, they are looking for client firms to have life insurance that has guarantees, he says.
Guarantees have become increasingly important in succession planning, estate planning and key person life insurance, according to McDonald.
Life policies that build high early guaranteed cash values (say, 90% of premium in year one) are becoming important, too, he says. "The CPAs and surety companies love it, because the guaranteed cash value is booked as an asset in year one: Its part of a general back-to-basics trend that McDonald believes will continue and get stronger in 2005."
Significantly, despite continuing uncertainty regarding the permanence of the estate tax repeal after 2010, "none of my clients are deferring their estate planning decisions," says McDonald. He says most are skeptical that the tax will go away, and "most want to be conservative in their approaches."
Gary Pendleton, president and owner of Pendleton Financial Consulting Inc., Raleigh, N.C., says 20-year level term insurance was a big seller in his firm in 2004. He prefers selling term first"to take care of the clients needs right away"and then going back later on to start converting it to permanent insurance.
In 2004, Pendleton also sold "plain-old universal lifewith secondary guarantees, if the client wants to pay for itand a fair amount of variable UL."
"Were seeing that a lot of people really like nonqualified deferred compensation plans and buy-sell agreements," Pendleton adds. He uses not only life insurance for the buy-sell agreements but also disability buy-sell insurance. "I dont know of any other agents who are offering the disability buy-sell," he says, "but when I offer it, about 50% of the clients buy."
