RISCARIO INSIDER

September 24, 2011

RATE HIKES: IS YOUR ADVISOR SLEEPING ON THE JOB?

Is this the start of a bad trend? September is the official Life Insurance Awareness Month with ambassador Lamar Odom. October is the unofficial jack-up-the-rates month. This also happened last year.

Scope

Premium rates for guaranteed life insurance products, which already have increased by 8%-10% this year [2011], recently have been boosted by up to 12% by some insurers. Another wave of premium hikes is expected to hit next spring [2012].
— Investment Executive, Sep 23, 2011

Life insurance premiums are going up again for permanent plans with level insurance rates which are typically guaranteed for life. The reasons are the same as last year plus a desire to increase ROIs. According to industry watcher, Byren Innes “any publicly traded carrier will jump at a chance to pad its margins”. External factors make ideal scapegoats.

Once again, the instigator is Manulife. The new rates take effect at 5:01 PM on October 14, 2011.

On average, the level COI [Cost Of Insurance] rate increases are as follows [at Manulife]: 9% on InnoVision; 12% on Security UL; and 7% on Limited Pay UL. The largest increase is among clients aged 35 to 45, with an increase of 20% to 25%.”
— Advisor.ca, Sep 23, 2011

Once again, other companies will likely copy.

Dilemma

At times like these, the behaviour of salespeople is fascinating to watch because of the conflict they face. Commissions are based on the premiums you pay. As rates increase, total commission dollars usually do too.

That's makes smokers lucrative prospects. They know they must pay more than nonsmokers. They know they may not get approved. If they have a genuine need for insurance, they want to buy. Price is less important.

Act Now?

If you're a prospect for new coverage, your advisor is probably pushing you to buy now before the increases. Even if you're considering a company which has not announced rate hikes, do you want to risk paying more next week?

Insurance is considered sold, not bought: more supply than demand. To motivate you to buy, salespeople like enticing strategies which make insurance look like a no-lose, too-good-to-be-true deal. Here are the top five strategies . The problem is that there's no real urgency for you to act. A price hike might be, when coupled with the usual closing techniques.

If you're being sold an appealing strategy when you don’t have a clear need for insurance, higher rates hurt. Your salesperson has motives to push you to buy now.

Wait?

If you are already a client and have no imminent plans to buy more insurance, you may get ignored. It's more lucrative for your advisor to close new sales.

An Exception

What if you are planning to convert term life insurance to permanent coverage? You'll be stuck with the higher rates while your salesperson gets rewarded with more commission dollars. There's no incentive for him or her to spend time with you now.

Here, you benefit by calling your advisor. Just be wary of attempts to top up your coverage unless you need more.

Your Best Course

If you need more permanent life insurance, buying before the newest round of rate hikes will save you money. Also, new products may be worse in less visible ways such as weaker guarantees.

Case study: Coke Classic deviated from the original recipe by replacing expensive pure sugar with cheaper high-fructose corn syrup. You probably can't taste the difference but you're not getting "the real thing". If the population gets super-sized too, that's a nice side benefit. Bigger people can consume even more.

Insurance policies can take a couple of months to get approved. Your premiums are generally based on the date you apply, rather than when you get accepted. You can’t lose by acting now.

Did You Know?

If you're getting proper after-sales service, you'll already know about the upcoming rate hikes, even if they don't affect you. A newsletter or email is quick and cheap to send.

Podcast 136 (5:41)

direct download | Internet Archive page | iTunes

PS Not all rates are increasing but that doesn’t mean any are going down …

September 17, 2011

LIFE LESSONS FROM A 50 YEAR OLD

Last month, Dad turned 75. This week, I'm 50 and finally feel I understand my purpose in life.

So much has happened since 1961. Man landed on the moon. The Berlin Wall fell. Compact discs replaced vinyl records and cassette tapes. Computers became personal and affordable. Air conditioning changed from a luxury to a necessity. GPS navigation reduced arguments on family road trips. Phones became mobile and smart. What a wonderful, wonderful, wonderful time to be alive.

The greatest marvel is the Internet, which was born in 1957. We now have instant access to nearly anything and anyone from almost anywhere. Often free. What a liberator!

Childhood

As a child, I had a lingering fear of nuclear war between the Americans and Russians. What if annihilation started by accident? We’d be just as dead. I wasn't terrified to the point of losing sleep but I was concerned. The 1985 song Russians by Sting was reassuring but I wish I heard it in the 1960s. If you were born after the fall of the Berlin Wall, you may not understand the Cold War era and might be more worried about terrorism.

Overall, childhood was great. I walked to school and played with friends outdoors. We didn't worry about knives or guns at school but we played with toy weapons. I read the Hardy Boy mysteries. My favourite TV show was the police drama Hawaii-Five-O which aired Friday nights at 10 PM. I was in agony when the schedule briefly changed to Thursdays because there was no way my parents would let me stay up that late with school the next day.

There were so many marvels. Life kept getting better. I excelled at my studies and looked forward to a rosy future despite the rocky economy.

Family

Someone who'll help me see things in a different light.
All the things I detest I will almost like
--- Depeche Mode, Somebody (1984)

I grew up in London, Ontario where my parents gave me an excellent foundation. I didn't want to live alone but didn't know if I'd ever find someone who could understand me. Sharmila did. We've been married since 1988. Having an anchor and companion makes life rewarding.

Our son, Jeevan, was born in 1994. Parenthood brings challenges but mostly rewards. He goes to university next year and might leave home for the first time. That would be an emotional experience.

40 in Sept 2001

Turning 40 is meant to be a milestone. My birthday was mere days after 9/11 and the end of innocence. I didn't feel like celebrating during that numbing time.

I was focused on my career since life at home was running smoothly. For security, I especially wanted skills which were

portable: useful in other companies (e.g., communication, management, leadership)
complementary: not overlapping what others did

That's still a great strategy.

I was Actuary, Individual Insurance at National Life, insurer for the wealthy. I reported to the company's sole Senior Vice President, Rene Trudeau. I also had dotted line responsibilities to General Manager, Individual Division, Prem Agrawal. Both listened to me and helped me grow. They reported to the President, Vince Tonna. I had considerable leeway, 10 staff, and a corner office (a childhood dream) with an excellent view towards Queen's Park.

The Wrong Wall

My boss was going to retire and I figured I'd get a portion of his role, a company car (another childhood dream), and live happily ever after.

In 2004, the parent company started dismantling my company. My 10 staff were gone and I was reporting to an assistant vice president in Quebec City.

What a boot to the head!

To paraphrase Stephen Covey, I was climbing the ladder of success only to find it leaning on the wrong building. I realized there was no security in the corporate world. Your future depends on the whims of upper management and investors. How do you build a solid future on a shaky foundation?

Security comes from bringing in revenue. I switched to helping top advisors with advanced marketing until I got booted out in November 2009. By then I built the skills to help you directly.

50 CANDLES

Turning 50 is a big but pleasant transition. I now feel I understand why I'm here on this planet.

The corporate world teaches well but stifles change. Even if you make the decisions, you face compromises in quality and timelines. The advisor world is disappointing because of the conflict between what's right and what's lucrative. That leads problems in deciding who you can trust. Among the wealthy — the best served segment — 33% lack confidence in their advisors. That creates a tremendous opportunity.

Since childhood, I've wondered how I could make the world better in my own small lost-in-the-rounding way. I knew I had more to offer but didn't access to the right tools.

New Tools

Nowadays, we can do so much with so little. We don't need to own factories, maintain web servers, rent offices or hire permanent staff. What do you need beyond what you already have: your computer, your mobile phone and Internet access?

That's so empowering. With social media, we can even beat much larger organizations because we can make personal connections with real people. The gap between thinking and doing is minuscule. What we don't know, we can learn online just-in-time or outsource.

I’ve written assorted posts about careers to help you see the immense possibilities if you seize opportunity. You don’t need talent or permission. You need to start and keep going. If you need a boot to the head, read Linchpin by Seth Godin with an open mind.

Next 50 years

There are no free rides.No one said it'd be easy.
The old man told me this, my son.I'm telling it to you.
— John Mellencamp, Minutes to Memories (1985)

I've seen too many people — especially in the corporate world — who start coasting when they reach their 50s (sometimes earlier). They feel entitled to slow down. They aren't embarrassed to say their smartphone is "too hard" to learn. These sages know what won't work because they've "seen it all before". They look rolly polly and drink a little too much (when on an expense account). They need help with the same things month after month. They're wary of LinkedIn and still don't understand Twitter. They start dying little by little, piece by piece.

I plan to keep doing what I’m doing: learning, caring and sharing. You’re invited to the party.

Podcast 135 (9:02)

direct download | Internet Archive page | iTunes

PS When's your next milestone birthday?