30 April 2013 0 Comments

The “Marketing Dedication” Factor

making a hard decisionMy last entry discussed pricing of term insurance and how it’s easy to overpay for a policy.  I ended by saying that next I’ll be covering permanent insurance pricing, but before I go there I want to spend a little time on…well, on the uncertain.

Applying a test of financial strength to the company from whom you purchase a term policy, might cause you to pay a little more than the rock-bottom price—just for the comfort factor.  There is also another factor that you may want to consider.  This additional factor does not provide you with a simple financial strength rating…and it can be very difficult to quantify, but I’ll give it a shot.  I call it “Marketing Dedication.”

“Marketing Dedication” is achieved by an insurance company that has a track record of having marketed their life insurance through one or more distribution channels.  They have developed a strong relationship with their sales force: independent brokers, career agents and or direct/marketing channels.  The company’s future depends on maintaining good relations with this sales force.  Why might this be important to you?

This can best be illustrated by two situations that occurred over the past several years.  Two insurance companies that had each been in existence for decades and with acceptably strong financial ratings, suddenly sprang out of nowhere with the hottest term premiums in the business.  Their low premiums set the competitive goal for other companies to achieve.  Then, after a few years of this sales spurt, management of these carriers decided to exit the low cost term arena and they each sold their in-force policies to a re-insurance company.  They were, for all practical purposes, out of the life insurance business.

This takeover of the policies by the reinsurance company did not affect the premiums or benefits of the policyholders.  However, with no intention of selling new life insurance to these policyholders and therefore no motivation to keep a sales force happy, the only policies available for conversion were non-competitively priced whole life.  This means that those reaching the end of their term period whose insurability has deteriorated have few good options.

You can’t be assured that a policy available for conversion will be competitive, but if the insurance company wants to keep an existing sales force happy, the chances of being offered a good conversion policy are probably better.  Learn a little more than premiums and financials about the company you are considering.  Where have they been and where do they plan to go with sales?

Coming up…back on track with permanent life insurance comparisons.

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