James Christie | Flip the Script – Solve for the Rate

The IUL marketplace is backwards, matter of fact, it is upside down. Frankly, the way products are being sold right now feels like we are a bunch of mouth-breathers. As I spoke about in the first post of this series, the over-whelming majority of IUL is being illustrated using defaults given to you by the carrier. I have reviewed thousands of illustrations over the last decade from essentially every carrier in the IUL space and from all distribution channels. They are all basically the same.  Money in vs. money out.  The income stream is what is being sold as the single point of importance, much like a defined benefits plan or an annuity.  I get it, it makes sense, but candidly it’s flawed for so many reasons.

The number shown on that illustration is what you will be judged by and there are so many factors not in your control. I continue to be astounded that producers would want to put themselves in this position. Again. We have seen this story before, many times in our industry. Vanishing premium whole life, universal life in the 80’s, variable universal life in the 90’s, I think you get the point. All of these products were sold the same way. They were sold with the end in mind with very little consideration given for the main components of how they were illustrated.

IUL is the same, has been since the first policy was sold in 1997 and still holds true in today’s leveraged IUL marketplace.  Every single policy sold really has 3 main components.

  • Premium
  • Rate Assumed
  • Outcome

Each of these plays an important role in whether or not you meet or exceed the expectations of your clients.  Funny thing is, we only focus on the outcome.  I guess you could say we talk about the premium as well, but frankly it is only in the context of how much money the client has to put in versus the type of outcome we could show them.  The rate assumption is either completely ignored or is treated like an objection we have to overcome and I completely understand why.  It’s hard, it takes time, and we want to get on to the next case. It’s the path of least resistance and if it has worked in the past, why not continue to roll with it, even if we know that in the past the results have been less than favorable? I.E. the example above.

Another thing I hear is, “Well, I have to sell it this way because my competitor down the road will show the client anyways and I will lose the case.” Frankly this is nonsense, life insurance is not a commodity. You are not a commodity. I can defend against this in 2 minutes with my client.

“Mr/Mrs. Client. What I am showing you here is different from what anyone else will show you because I approach this with your goals in mind. Just remember that anything they show you I could match and if that is something you ultimately want to do, we can. Although I am going to give you many reasons why I do not think it is the right approach.” Reverse sell against it. Boom. Done.

One of the reasons I feel as though this continues to go on is because no one has provided a simple, repeatable process to go about this differently. We take the defaults from the carrier illustration system, third party quote engines, and carrier marketing materials and use them because they make our lives easier.  But do they? Or do they put us in a position with our clients to over promise and under deliver?

It doesn’t have to be this way. You can be different.

One of the most overlooked aspects during the sale is the synapse between the three components I mentioned above. The premium, the rate assumption, and the outcome.  Every single client should understand that each of these components interacts and affects the others.  You can’t do that if you only focus on the outcome. But when we sell using the income stream as the single value proposition and commoditize the product, we create an unrealistic expectation with our clients.

So, here is a new way to approach selling IUL. Don’t sell the number on the spreadsheet, sell the dynamic financial tool that life insurance and specifically IUL is. Do some planning and set goals.  Instead of asking, “how much are you willing to put in?” like the Rich Man Roth idea ask them how much supplemental income do they need?  Or better yet, do some planning and help them figure that out and show them how IUL could be an incredibly valuable asset for their future.  IUL is meant to supplement a retirement income stream and be a part of their overall financial plan.  When we sell it as a money in, money out proposition is separates it from the rest of the portfolio.  This is part of the problem with the life industry as a whole.  It doesn’t look or feel like any of their other assets, and we exacerbate this narrative with the way that we sell it. 

It doesn’t have to be this way, here’s how you do it.

  1. Find 2-3 products you feel comfortable selling – stick with those products, don’t chase the spreadsheet. Product, process, and people matter during the sale
  2. Find out the income that they need or want and how much they are willing and able to pay consistently
  3. Determine the rate/rates needed to achieve the desired outcome – solve in the software
  4. Research the probability of success with those rates – be careful, lots of fake news on this in the marketplace
  5. Run variations to show the impact of more/less premium, higher/lower rate, bigger/smaller outcome
  6. Settle on the right product and the agreed upon approach
  7. Write a policy purpose statement (click here for a sample to use)
  8. Meet annually to discuss and react – choose a carrier with a good post issue policy management platform

It’s pretty simple, flip the script and solve for the rate. This approach includes all the components of how you sell currently but instead of solving for the income, you simply solve for the rate needed to achieve the desired outcome given the amount of premium they are willing and able to pay. Most illustration software will allow you to do this pretty easily. 

Now granted you are still solving for a flat rate, which we know won’t happen in the real world.  But given the options we currently have at this time with the state of the model regulations and AG49, this is at least a great place to start because this instantly creates the connection of the three components for the clients and puts you in a position to be judged off of something you have some control over. At the very least, it sets you up to be in a position to really show the value of IUL as a flexible premium dynamic financial tool.

I was at a meeting and heard Bill Bachrach speak. He mentioned that every single client he works with starts the same conversation.  They decide on goals and manage to those goals.  He doesn’t want to be judged off of things he can’t control, like what happens in the market. So, he asks his client’s two questions.

“What if for the next 20 years, I missed the market every single year but we met your goals, would you be happy?”

“What if for the next 20 years, I beat the market every single year but we missed your goals, would you be happy?”

I thought this was brilliant and I love the use of the word “happy”.  Be judged against goals, not against performance. The reality is the way we sell today isn’t about goals, it is ALL about performance and we are setting ourselves up to be judged off of something we have no control over.  Especially in IUL where you also have carrier discretion of non-guaranteed elements to deal with, not just market performance.

Candidly, this is a lot to take in at once, but this is an opportunity to set yourself up for success and also be different from your competitors. The reality is, you can’t think yourself into action but you can act yourself into thinking.

So, what’s the first step? Do something. Change the way you illustrate these products. Decide with your clients the outcome they are looking to achieve and the premium they are willing to pay and solve for the rate.

One thing you may be thinking by using this method is that your sales could be smaller or you will get paid less.  In my experience this isn’t the case because client’s typically have lofty goals and if sold right you can really show the full value of IUL as a dynamic financial tool and not just an income stream.  I will discuss this in future posts and believe it or not this method should actually lead to higher revenue.  Never mind the benefit of less nosebleeds after the sale.

In the next article, I will discuss how to analyze and dissect the current defaults in the marketplace. So if you are reading this and saying to yourself, “This is too much, I’m going to just keep doing what I do now”, this article will at least show you some of the potential pitfalls of the various defaults embedded into a sale today and how to actively protect yourself against poor post sale experiences with your clients.

Maybe I am alone on this soapbox, but hopefully I need to make some room for others. Who knows, maybe some carriers see this and realize they need to make a change. Wishful thinking potentially, but stranger things have happened.