Life-Insurance-Review

Paul Sanfilippo
Brokerage Director

Contact Paul:
 Phone: (800) 823-4852 x8760
 E-mail: psanfilippo@pinneyinsurance.com
 View Paul’s Biography

For financial professional use only. Not for client presentation.

Disclaimer:
This material was not intended or written to be used, and cannot
be used, to avoid penalties imposed under the Internal Revenue
Code. This material was written to support the promotion or
marketing of the products, services, and/or concepts addressed in
this material. Anyone to whom this material is promoted, marketed,
or recommended should consult with and rely solely on their own
independent advisors regarding their particular situation and the
concepts presented here.


Introducing…
The Policy
Assessment


Policy Assessment Agenda
• The role of life insurance
• Consumer Considerations:
Why? Then & Now, Change
• Technical Reason Problems Occur
• Industry Problem
• Product Enhancement
• Advisor/Agent Concerns
• Rules & Regulations
• Uniform Prudent Investor Act “UPIA”


Policy Assessment Agenda
• Ruling & Appeals
• Insurance Valuation Services “IVS”
• Client Interview
• The Process:
Goals, Presenting, Examine, Determine
• The Trusted Advisor
• Case Design
• The Kit
• 2 Clients you need to Consider
• Next steps


Why are Life Insurance Policies Purchased?
• Provide survivor income
• Ensure that debts are paid
• Provide education for your children
• Protect your business
• Reward key employees
• Supplement retirement income
• Preserve your assets
• Minimize Taxes
• Create a legacy


As Consumer’s Lives Change,
So should their Policies
• What worked for them then,
may not work for them now
• The course of time may change
each client’s needs
• Are your client’s needs being met?


What Changes can Affect a Policy?
• New family members?
• New career?
• Financial adjustment?
(More or Less Income?)
• Health Changes?
(Quit smoking, lost weight?)
• Bought a new home?

These in addition to any other life changes
will require a policy review to ensure your
client’s needs are being met sufficiently.

Top 10 Reasons Consumers
Need a Policy Review
1. Insurance Policy has not been
reviewed in the last three years.
2. Financial goals may have changed
3. Life insurance needs have
increased or decreased
4. Ownership is structure has changed
5. Beneficiary designations


Top 10 Reasons Consumers
Need a Policy Review
6. Family or business situation
has changed
7. Health has changed
(may qualifying for a better rating)
8. Is the policy cost-effective?
9. Loans, withdrawals, or other policy
changes have affected the policy’s
performance
10. Payment of premiums have been
inconsistent


The Industry Created the Problem!
• Glass Steagall Act 1933
• 30 yrs. of Deregulation
toward Repeal
• Establishment of the
Gramm-Leach-Bliley Act
• Demutualization of
Mutual to Stock Companies
• Mergers and Acquisitions


The Industry Created
the Problem!
• Created Fierce competition
• Commission Squeeze
• Improved Technology
created efficiency
• MGA, BGA, IMO, FMO Growth
• Online Retailers of term
Insurance
• Social Media “31%”


The Problem Forced Innovative Solutions!
The changes in the Industry forced
innovation of better Products:
• Historically low investment returns
• Interest Rates have declined
• Underlying Investments have
not performed
• Mortality tables have changed
significantly


The Problem Forced Innovative Solutions!
• Increased Life Expectancy
due to Healthier Habits
• Lower expenses result in
higher death benefits
• Lower Expense result in
lower premium outlays
• Easiest to see in term insurance


Why should you Care?
• Policies may not perform as expected
“Bad investment Decisions”
• Clients objectives may not be met
• Negligence in Administration,
Design & Disclosure
• Litigation for those who are
“part of the process” including:
• Life Insurance Agent
• Attorney
• CPA
• Trustee
• Advisor

Rules & Regulations to Follow
Uniform Prudent Investor Act
• Provides a safe harbor for those
acting in a fiduciary capacity.
• “Invest and manage trust assets as
a prudent investor would…
exercise reasonable care, skill,
and caution”


Rules & Regulations to Follow
Code of Federal Regulations
Title 12 Sec. 9.6
• Mandates requirements for
national banks dealing with
trusts assets, including life
insurance
• Reviews: Pre-acceptance,
post-acceptance, ongoing annual

Investment Policy Statement (IPS)
• Creation


Uniform Prudent Investors Rule
• 1994 UPIA establishes standards for trustees managing
in managing trust assets
• More than 45 states have adopted this Act
• Investment cannot be determined
on a stand-alone-basis include ILIT’s
• ILIT trustee’s are fiduciaries act in the best interest of
the trust’s beneficiaries
• Must Diversify, Monitor, & Review
• Risk and Return must be considered
• May delegate responsibilities (Skilled vs. Unskilled)
• 5 states –DE, WV, ND, WY, PA


Stuart Cochran ILIT (901 N.E2d 1128 March 2, 2009 IN)
• 1987 ILIT purchases a DB of $4,753,539
• 1999 policy is exchanged for two VUL polices od $8,000,000
• After major loses in 2003, Trustee hires outside, independent
consultant to review policy
• Consultant recommended further monitoring, due to potential
lapse prior to mortality
• Selling Agent proposes surrendering policy and purchasing a new
policy of $2,536,000 & the consultant agreed
• Trustee Surrenders the policy ($108,000 charge)
• Insured dies soon after at age 53 and receives DB of 2.5 Million
• ILIT Beneficiaries sue trustee for breach of fiduciary duty
• Judgment for Trustee (PRUDENT) and ILIT beneficiaries Appeal

Keys to the decision
1. The trustee hired an independent, outside
consultant
2. The consultant provided advice and the trustee
followed it.
3. The trustee “examined the viability of the policy
and at least one other option
4. UPIA Statute “Hindsight should not be used to
judge the actions of the trustee; only the facts
existing on the date of the decision are relevant.”
5. Opinion provides guidance of minimum standards
of conduct and fiduciary duty.


Insurance Valuation Services “IVS”
• Insurance Valuation Company providing a
complete turnkey solution to help you manage
the complexities of Life insurance.
• Comprised of Attorney’s, Tax Professionals and
Analysts.
• Provides a totally objective and unbiased
service
• Services allow you to focus on growing your
business and strengthening the relationship
with your clients


• Insurance Valuation Company providing a
complete turnkey solution to help you manage
the complexities of Life insurance.
• Comprised of Attorney’s, Tax Professionals and
Analysts.
• Provides a totally objective and unbiased
service
• Services allow you to focus on growing your
business and strengthening the relationship
with your clients.


• No Contract
• Typical Pricing in the market place • 1 policy minimum
• Policy Review - A stand-alone, non-biased Policy • $250Paid in
Review that is delivered to you electronically. Advance

• Portfolio Report - Executive Portfolio Report that • No Contract
includes a Market Analysis • No policy
minimum/maximum
• Policy Remediation - in-depth policy analysis, review • $150 - $500
of goals, objectives in-depth policy analysis, review Invoiced
of goals, objectives and suitability, request additional Separately
illustrations, create and distribute disclosure
• No Contract
statements, acknowledgement forms and market • 1 case minimum
analysis. Draft correspondence & conduct telephone • $500
briefings • Standard
Remediation
• Complimentary service to PINNEY Insurance Agents Package

For financial professional use only. Not for client
presentation.

The Client Interview
• Why do you own this amount
of insurance?
• Why did you buy this type of
insurance?
• What was the primary purpose for
buying this insurance?
(supplementing retirement, family
security, college funding, tax planning)
• How much insurance will be
in-force when needed?


The Client Interview
• Do you have the appropriate type
and amount of insurance to meet
your primary goal?
(Cash accumulation vehicle or Death
benefit — maximum death benefit)
• Retaining term beyond
conversion period:
- Does this make good economic sense?
- What happens if your underwriting
status changes?
- Can you re-qualify for the lower rates?
- Is the need for coverage temporary
or longer term? For financial professional use only. Not for client presentation.

Goals of the Process
• Educate the Policy Owner(s) about
life insurance and their policy.
• Evaluate the Policy Owner(s) the present
situation of the policy and the Performance
of the policy going forward.
• Present to the Policy Owner(s) the
possible alternatives in the marketplace
that can provide enhanced features
and benefits.


Presenting A Process
• Review changes in life insurance needs
• Presentation
• Logical
• Easy to understand
• Provides:
– Real Numbers
– Real Analysis
– Real Alternatives


The Assessment Will Examine
• Policy performance
• Policy design and function
• Funding of the policy
• Financial health of life insurance
carrier
• Health status of insured
• New underwriting and medical exam
• New contestability and suicide
clause periods


The Assessment Will Examine
• Lower cost guarantees
• Surrender charges
• Outstanding loans
• New surrender charge period
may lower cash values


The Assessment Will Determine if:
• A Policy is performing
• If existing policy is performing as expected or
better, and needs have not changed.
• You are finished for now, and
• Continue to review periodically to be sure policy is
on course.
• A Policy is not performing
• If existing policy is not performing as expected, or
if needs have changed:
• Determine a premium increase or decrease
required to reach the goal.
• Work with the client to correct the situation


The Assessment Will Determine if:
• You should Consider alternatives
• If appropriate, consider other solutions.
• Review additional insurance coverage
options with your client.
• Explain why additional coverage may be
suitable. Share illustrations with the client to
help them make the decision.


Trust, Integrity & Diligence
• Conducting an insurance review
will build client trust
• Having a system that is clear, easy to
understand, and educates will restore
faith in a clients ability to meet their
objectives
• Implementing a process unilaterally
provides a high standard of suitability
and fiduciary control.


Case Scenerio
• George Client and Jean Client a Male,
age 65 and Female, age 66 own
a Survivor Life Insurance Policy
• Policy was originally obtained in 1993.
• Their current health appears to be
Standard Non‐smoker and Standard
Non‐smoker based on information
provided on the Policy Assessment
worksheet.
• An Pre-underwriting review was
conducted using insurance company
published underwriting criteria.

Case Scenerio
• Your stated policy objectives were used in
the compilation of this report.
• When you completed the brief data sheet
at the beginning of the Policy Assessment process,
you stated the two most important factors to
consider during our evaluation were:
• Primary Objective: Add / Increase Benefits
• Secondary Objective: Cost / Premium Reduction
• All recommendations provided are intended to maximize one
or both of these goals and to help you achieve your desired
outcome in the most effective and efficient manner.


Case Scenerio Conclusion
• Based on the comparative premiums,
underwriting, financial stability
• Primary goal of Add/Increase Benefits
based on current premiums, the
New Carriers Survivor Life policy for
$4,511,376 at a premium of $20,000
• Secondary Objective: Cost / Premium
Reduction $0 outlay, the New Carrier
Survivor Life Policy for $3,027,828
• Current policy requires an increase
in premium to $37,276 to maintain
coverage on a guaranteed basis to age 100.

Case Scenerio Conclusion
• Recommendations:
Move into UW with New Carrier
• Assume all additional underwriting
requirements are within the New Carriers
"Standard Nonsmoker“ health class.
• Assumes a 1035 exchange of $661,623.
• Current policy has a Cash Surrender
value of $661,623.


The PA Kit Includes:
• Advisor Brochure
• Client Brochure
• Client Work Sheet
• Authorization to Release of IFPL
• Marketing Letters
• Fax Cover Sheet
• Folder (Optional)


The Client Brochure:
• You can count on Change
• What is a Policy Assessment
• How It Works
• The Process
• The Potential Outcomes
• Why Perform an Assessment?
• What does it analyze?
• Insurance Valuation Services

• View Sample (Online)


The Advisor Brochure:
• The Problem
• What is a PA
• Piece of Mind
• Examples of Potential Issues
• How it Works



The Worksheet:
• Printable OR Fillable
• Client Information
• Policy Objectives
• Medical History
• Ownership Information
• Authorization to Release

• View Samples: (Online)
1. Printable
2. Fillable


Sample Report:
• Purpose of Assessment
(Evaluate Changes)
• Who Conducted the Assessment
(IVS)
• Executive Summary
(Recommendations)
• Special Considerations
• Client & Policy Overview
(Objectives & Ownership)



Sample Report:
• Policy Performance Assessment
 Current Funding Commitment
 Guaranteed & Non-Guaranteed
Assumptions
 In-force Ledgers and
Market analysis
• Summary of Alternatives
(Primary & Secondary)
• Financial Stability Review (Carrier)
• Conclusion & Recommendations
(Options, Next Steps)


Ask yourself 2 Questions
• What is your best written case?
• This is a fiduciary tool to ensure that his policy is
meeting the intended objectives.
• It is also an advocacy process that can lead to
referral conversation.
• Who is your worst client?
• Is this the client that would be the most
likely to sue you?
• Do you want to have some compliance
between you and this situation?


Both of these 2 situations
could be your
first 2 Policy Assessments


Next Steps…
• Schedule meeting to meet with
your client
• Gather information needed
• Authorization letter signed
• Pinney/IVS will develop the
presentation
• Schedule meeting to review


Important Contact Information
 CLQ www.WholesaleInsurance.net
 EZLife Sales www.EZLifeSales.com
 Sales Tools www.PinneyInsurance.com
 Pinney Platforms www.PinneyPlatforms.com

800-823-4852 x8760


Thank you!


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