The Flying Rake's Lesson

That was the shortcut–using a "convincing" illustration to induce clients to buy. It looked fantastic, but wasn't guaranteed. However, the sale just sped on by that little, but very important, fact.

The illustration software and those running the illustrations were equally complicit in these sales. So, in a way, were the buyers, in that they bought into the too-good-to-be-true projections.

"Oh, but that was long ago," you say. True enough. The UL world is on more solid footing now, thanks to many changes including the new secondary guarantees.

Still, in recessionary economies such as today's, new shortcuts may appear that lead to new turmoil, if not with UL then with other product lines.

Changes are afoot right now that could go that way–or not–depending on how they are handled. For instance, variable annuity insurers are stripping out or cutting back on their very popular guaranteed withdrawal features. Traditional fixed annuity insurers are taking their traditional fixed interest rate guarantees as close to the floor as possible. Fixed indexed annuity companies are re-jiggering products to look more like traditional fixed annuities. Life companies are cutting here and there to create more "affordable" plans, and long term care companies are not far behind. Disability companies are lowering the maximum issue amounts.

Such changes are not bad in and of themselves. In fact, mindful streamlining and cost-management are good business practices. They become shortcuts that work.

But developers and advisors who handle these new leaner products need to guard against turning them into–or letting them be turned into–shortcuts that hurt.

For instance, companies and advisors need to cultivate realistic expectations in the minds of customers about what the new leaner products will and will not do. Setting appropriate expectations will go a long way toward successful outcomes.

As the UL story makes clear, focusing sales on "convincing" price points and "most attractive" projections can make for short-term gain but long-term trouble.

I was lucky. When the flying rake hit me, I was wearing sunglasses that cushioned the blow. But when those old UL contracts blew up in the face of the life insurance industry, there was no barrier to protect the business from the huge public outcry.

That day in the garden, I was also foolish. I should have taken the time to make sure that my shortcut would work. So, too, should the insurance industry.