I got a company memo today, that in light of all of the companies who have gone the wrong direction in the last year, caught my eye. “Delivering on Promises”. I wasn’t even sure what it was going to be about but I was pretty sure this would be something I would want to share right away.
And I do. Savings Bank Life has taken the word promises to a whole new area of the dictionary. I’ve been pretty vocal about term conversion options to the point of West Coast Life no longer allowing me to represent them. When, without warning or announcement, West Coast Life changed their conversion option from a lifetime guarantee product to a universal life with a 10 year guarantee it caught everyone’s attention, especially those who were looking at possible conversions.
There was an assumption in the life insurance business, by agents, companies and clients that the conversion privilege offered the opportunity to convert a policy to a permanent product at any point during the conversion period. The assumption was also that the conversion would happen at the same rate class as a person was originally approved at for the term life insurance policy. On the company side of the equation there was also the fact that their conversion language usually said that policies were convertible to whatever product was available for conversion at the time the policy was converted.
OK. I used the word assumption a couple of times and I am well aware of what they say about assuming, but those assumptions were not just an assumption by clients about what a company would do. These assumptions were based a decades of companies teaching agents to tell clients that they could count on a conversion privilege that would allow them to convert all or part of their policy to a permanent policy at their original rate class. Life insurance companies have been through some rough times just like the rest of the world but they have now decided to balance the load, not by raising prices for new customers, but by playing with words and definitions and screwing their long time customers.
So what’s changed? Is anyone out there at all confused about the word permanent? How about same (as in rate class)? It turns out that the insurance companies, aided and abetted by the National Association of Insurance Commissioners, NAIC, have decided to allow the word permanent to be attached to products that don’t have a snowball’s chance of lasting 20 years, let alone forever. Remember that permanent policies, UL’s and whole life, have guaranteed values and assumed values. The companies are saying that if, on the assumed side, a policy can make it to age 100 then it is permanent even though they may only guarantee it for 10 years or 5 years or less.
Is it a permanent product? Not a chance. No way Jose’. Forget it. But the insurance commissioners are allowing it and the companies are jumping all over that loophole. The other loophole they are using on conversions is the approved rate class. You could be approved a preferred best on your term insurance policy and all the company has to do to get around their promise is to make products available that don’t have preferred best rates. In some cases the best rate they have is standard on their conversion product.
So, back to the most recent slap in the face. Savings Bank Life announced that they are keeping their promise to offer a no lapse guarantee UL for conversion. This is their description of the product, “The product design is based on current assumption interest rates, with a No-Lapse Guarantee available for the first five policy years if certain conditions are met”. Five years if certain conditions are met? Conservatively put, that is maybe as lame a promise as has ever been made. Why even offer it? Because the NAIC is allowing it!
And the good news just keeps piling up. I just got a call on Lincoln National’s new lower rates on term insurance. Best rates going, but they have a huge gotcha. If you have a 20 year term and happen to be terminally ill in the 20th year, you don’t have the option in the 21st year of paying a higher premium. In the 21st year they take away most of the death benefit. Your family could be left with pennies on the dollar for a death benefit.
Bottom line. It’s time the NAIC reign in this overt attempt to stick it to loyal customers. They are who we are supposed to go to with consumer complaints, but when they are signing off on the egregious nonsense what chance do we have with a complaint?