James Christie | Policy Reviews – A Process to Follow

In my time in the life insurance marketplace I have seen thousands of policy reviews. It continues to be one of the most fruitful options available to producers looking to do what is right for their clients while also running their business.  They can be time consuming, but they can also be very lucrative. It is important to have a process to follow to not only be efficient with your time, but also have a structure in place that makes sure you are doing your due diligence every time you go through a policy review with a client. I have been asked numerous times over the years and a handful of times recently, so I have written out the process below for how I review life insurance policies and help a client determine if an exchange is in their best interest.

  1. Request in-force Policy Ledgers
    • Obtain in-force ledgers, minimum of “as-is”, “as-sold”, and “minimum premium to carry”
    • I recommend using an in-force request form
      • There are many of these available in the marketplace. Use one without a carrier name on it and that allows the in force to be requested by the client and go back to the client or to you directly, or both
      • The key here is to find a way to reduce the risk of a red flag going up at the other carrier. All carriers have a retention unit, and the request of information from an external party usually triggers action. The form can help reduce the chances of that happening.
    • Identify what you would like to see in the in-force request – be very specific
      • Example: whole life – natural premium offset, no additional premiums (use paid-up additions), alt designs with lower dividend rates, etc.
  2. Identify Client’s Objectives for Insurance
    • Work to obtain client objectives from the purchase of the original policy
      • Why did they purchase the insurance?
      • Many clients may not know, but you should be able to gather this information based on what the in-force ledgers tell you and what the current product is.
    • Obtain the clients current objectives and goals
      • Do they still align? Are they different?
    • Use fact finding sheets if needed to obtain the necessary information
  3. Analyze in-force Ledgers
    • Determine the product and the primary drivers of that product
      • Many resources are available for this. Contact home office for support or your local wholesaler with that carrier. There are many third-party resources to help you obtain this information as well.
    • Identify the crediting/dividend rate at issue and what it is currently
    • Review any riders that are on the policy
      • Is there an added cost associated with those riders?
      • Do the riders still meet the client’s objectives?
    • Review the death benefit option
      • If increasing, does that meet the client’s objectives or should you look at an in force with a level death benefit to reduce the policy costs for example
    • Identify funding pattern
      • If not a full pay – is the pattern guaranteed? Could alternative pay patterns be used to make the current policy perform better?
      • This is a great time to really analyze what types of guarantees are built into the product. Premiums and the death benefit should be reviewed here.
    • Are there loans on the policy?
      • Does the carrier allow for a loan rollover with a 1035 exchange?
      • Is a loan rescue an option?
      • Is there a tax concern?
      • Is there a lapse concern due to loans?
        • Specifically pay attention to this on whole life policies where many clients don’t even know they have a loan because it was put in place as a non-forfeiture option.
    • Based on all the above, do the current policy projections align with the client’s current objectives for the insurance?
      • Even if the current setup does not align, are there alternatives with the current policy that could be put in place to make the current insurance work for the client?
  4. Carrier Financials
    • Review carrier financials
    • Look for ratings, carrier size, net yield on mean invested assets, bond maturity, etc.
    • Comdex can also be important to review. Not for a detailed summary but a simple composite of how that carrier compares to all of the others that are in the Comdex calculation.
      • Be careful not to get stuck on this number, there are many instances where the Comdex can be out of alignment due to the carrier being rated by less rating agencies than others in the formula.
    • Provide financials with final analysis
  5. Tax Concerns, Estate Planning and Trusts
    • It is important to not only understand the insurance that was originally put in place, but also any planning that was done in regard to things such as estate planning, business insurance, trusts, etc.
    • It would be prudent to have a third party available to you to discuss any tax ramifications of making a change with the insurance if more in depth planning has been done for this client. This person can also be an asset if you make the exchange, as some similar planning will likely need to be done.
  6. Identify a New Solution (if warranted)
    • Is there a product or design that might meet the client’s objectives more efficiently that is currently available in the marketplace?
    • What is the health of the clients?
      • It is important to get a general feel for if they are insurable, but underwriting has changed a lot and if the policy is old you may be able to get better ratings even if the insured is significantly older than when they first applied.
    • Provide multiple designs to directly compare to the existing insurance
    • Provide any alt designs that may be considered and along talking points about why this different approach may be in the client’s best interest.
  7. Report Findings
    • Complete a review of the client’s existing insurance and provide a report that easily relays your findings to your client. The good, the bad, the ugly. It is important to be unbiased here, go where the facts lead you.
    • Provide policy specs if available and needed. Most clients don’t ask to go this deep, but it is important to have then since most of us will not be familiar with these older products.
    • Provide a summary of what the new options are that are available in the marketplace.
      • Start with the designs that show the direct comparison to what they originally purchase. Discuss what the potential benefits could be of making a change if the information leads you that way.
      • Provide a simple analysis of any alternative designs you have prepared to show how a new option may be a better approach moving forward.
    • This is a big decision, the easier the information is laid out, the better the outcome.
    • Have all necessary paperwork ready and available to start the process with the new product, this will be the best opportunity as the review will be fresh in your client’s mind.
    • If not making a change, have all of the necessary documents ready to make changes to their existing insurance. Policy change forms, etc.

I have followed this process for years and have had teams do the same with great success. There are always going to be variables that are outside of this process that can impact success, but you deal with those as they come.  As I mentioned above, it is important to have a repeatable process in place when doing policy reviews. It reduces the time you spend and more importantly, makes sure that every client gets the same experience, attention, and advice that they deserve.