Protection Products

John Hancock Long-Term Care Rate Increases


Protection

In December, John Hancock will begin petitioning State Departments of Insurance for in-force long term (LTC) care rate increases.

John Hancock anticipates an average increase of approximately 30% across most of its LTC business. The approval process could be as short as six months, or take as long as a couple of years. The increases will only be implemented in a particular state once they are permitted to do so.

John Hancock plans to offer benefit adjustment options to help insureds mitigate the impact of the rate increase. We anticipate plans to offer at least two premium neutral options: the shared cost option and reduced inflation landing spots.

Many of you have already dealt with LTC in-force premium increases. You understand the strain and confusion a premium change can bring to your clients. Ash Brokerage can help. We can provide the resources to help evaluate the options presented to your clients. There are many factors that should be taken into consideration before a decision is finalized.

  • What is the current age of your client
  • What is their current benefit level
  • What policy benefits do they currently have?

John Hancock will offer a limited number of options, but you may find additional options by contacting John Hancock directly.

The Ash Brokerage LTC team is prepared to help you and your client navigate the increase options. When the notification arrives, please let us help answer the questions and evaluate the options. Contact the Ash LTC team for help.

Principle-Based Reserving and 2017 CSO


Protection

Effective Jan 1, 2017, state insurance commissioners agreed to make two significant changes to the way carriers are required to price and reserve for life insurance products.

While these changes were technically effective in 2017, states provided insurance companies three years to comply, or until Jan. 1, 2020. As is often the case, insurance companies have delayed implementation to maximize the benefits of the current regulatory framework, but now the time to make changes is arriving.

For the remainder of 2019, there will be a flurry of product reprices as carriers scramble to comply with these new guidelines by the end of the year. Before we can understand what’s to come, let’s dive into what is changing and what it means to you.

 

Principle-Based Reserving

As insurance products have evolved over the last several decades, the regulatory framework for proper reserving has often lagged. Universal life products and universal life with “secondary guarantees” have grown significantly in market share over the last few decades and this has challenged regulators to create a framework to ensure policy promises are sound and secure. Principle-based reserving (PBR) is the latest attempt to ensure that carriers are adequately capitalized on the insurance business they are putting in place. Specific to the rationale for PBR, the National Association of Insurance Commissioners (NAIC) stated the following:

PBR is a significant change in underlying laws and regulations to solve a problem created by our current regulatory framework. The issue lies with laws and guidance on how a life insurer is required to book its reserves. Insurers set aside funds, known as reserves, to pay insurance claims when they become due.

Prior to PBR, static formulas and assumptions were used to determine these reserves as prescribed by state laws and regulations. However, sometimes this rule-based approach leaves an insurer with excessive reserves for certain insurance products and inadequate reserves for others. The solution is to "right-size" reserve calculations by replacing a rule-based approach with a principle-based approach.

The overall pricing impact of PBR changes have appeared to be relatively minimal. The carriers that have already released pricing on 2020 compliant products have made relatively small tweaks to pricing, with modest cost reductions in some areas and increases in others. Technically speaking, the PBR changes are not requiring the carriers to reprice their products but will be a significant factor in how they price products today and beyond.

2017 Commissioners Standard Ordinary Table (CSO)

When carriers are pricing product and regulators are setting reserve requirements, mortality assumptions must be made based on a standard. These mortality tables are updated periodically. The last update was the adoption of the 2001 CSO. For policies effective in 2020 and beyond, the NAIC will require carriers to comply with the 2017 CSO. The 2017 CSO will reflect a more robust data set for mortality and will generally reflect overall increases in life expectancy. The new mortality tables will certainly play into the PBR discussion as it relates to the way in which companies reserve for policies. Furthermore, the major impact of the 2017 CSO adoption is that all products must be repriced to comply with the 2017 CSO rather than the current 2001 CSO.

MEC Limitations

As the 2017 CSO is adopted, it will have notable pricing and product performance impact on Modified Endowment Contract (MEC) limitations. Every insurance contract has a methodology to comply with Internal Revenue Code Sections 7702 and 7702A, which, among other things, determines how much premium can be paid into a contract without creating a MEC. The calculations for compliance with these tests are based on mortality assumptions. Shorter mortality assumptions allow for a higher non-MEC premium, while longer assumptions allow lower non-MEC premiums. When carriers adopt the 2017 CSO, life expectancy assumptions will be generally longer, which will lower the amount of premium that can be paid into a contract without creating a MEC.

To use an overly simplified example, a 50-year-old male acquiring $1,000,000 of coverage in a product on the old mortality tables could fund a policy with an annual premium of approximately $56,000 for a period of seven years. On the new mortality tables, that same client would be limited to funding his policy with only about $47,000 annually over seven years. Because the non-MEC funding level will be less, the net amount at risk in the contract will increase and cash accumulation products will likely be adversely affected. It remains to be seen if carriers will be able to offer lower cost of insurance charges or other value to offset this impact.

Moving Forward

Because all non-compliant policies must be placed no later than Dec. 31, 2019, carriers will be rolling out new product pricing throughout the year. Many carriers are waiting as long as possible to make this transition and are not disclosing their pricing until the transition period. There could also be additional repricing in early 2020 for carriers to maintain their competitive positioning relative to peers.

Producers should be aware of product pricing changes, transition deadlines and new pricing impacts on any active cases. There will certainly be some clients that will significantly benefit from the old pricing, which may not last much longer. This is especially true for those considering a cash accumulation policy funded to the MEC limit.

Key Takeaways

  • Many current policies will be repriced with placement deadlines of Dec. 31, 2019.
  • Cash accumulation policies will have lower non-MEC premium limits, potentially reducing efficiency.
  • Watch for communication regarding transition deadlines and to get clients to act to lock in the best value.

PBR CSO 2017 MEC Principle-Based Reserving Life Insurance Pricing

Prudential Moves to e-Delivery


Protection

We’re making it easier to get your clients' policy faster. Starting with applications submitted on July 1, we will require eligible* Prudential policies written through Ash Brokerage to use e-Delivery. 


Unlike delivery through PDF, Prudential uses a true e-Delivery system, using DocFast to collect signatures. We've piloted it for a year — and the process works. Once you've reviewed and electronically signed the app, your client receives a link to review and electronically sign. 

It's better for you — ensuring an accurate and efficient delivery. More importantly, it's better for your clients — with a cycle time up to nine days faster.  Your case manager will make sure you have the details when an app comes in, but here's what you should know:

  • Complete the Prudential e-Consent form (ORD 115309) in your application packet
  • If you submit an eligible application without this form, or if the form is incomplete, the form can be submitted any time prior to the policy being issued
  • The insured will need to answer "yes" to e-Delivery when completing the telephone interview or express worksheet

Questions? Ash Answers — reach out to your case manager at (800) 589-3000 for details. And by the way, Ash Brokerage has already saved 36 trees this year by switching to e-delivery! 



*E-delivery is only available on for single, individual-owned policies. Other exclusions include replacement policies in New York or Illinois, survivorship policies or policies issued on juveniles. Ask your case manager for more.


Go Digital. Get More.

Prudential joins several other carriers that have already streamlined the insurance delivery business. By using our full offering of electronic tools, you’ll:

Check!   Reduce your overhead costs
No printing or mailing required

Check!   Allow clients to engage on their terms
Take delivery on the go

Check!   Improve cycle times and placement ratios
Close more cases and get your commissions faster


Commitment to Service

I promise you this: A computer will never replace our care and commitment to you. We’re here to help you build your business and protect your clients’ lives. Because whatever the question, whatever the need, Ash Answers.

  

The Risks of Waiting for DI Coverage


Protection

I don’t know about you, but I’m a master procrastinator! If it can wait, then chances are good that I’m pushing it off. The fact is, it’s possible your clients are procrastinators too. Often, it’s not that they mean to be – life happens. Things come up. But if they wait too long to get disability insurance, they’re putting a lot at risk.

Aside from the risk of becoming ill or injured, a lot could happen to your clients:

  1. Longevity – they older they are, the higher their premiums will be
  2. Their occupation could change, resulting in higher premiums or declined coverage
  3. Their health could change – certain conditions could also result in higher premiums or declined coverage

The best time to buy disability insurance is when a person is young and healthy. However, most often, people don’t think about it until something has changed with their medical history – by then it might be too late. It’s up to you to plant the seed early by showing your clients why they need coverage.


Ask Questions – Today

Don’t wait. Here are some questions to ask at your next client meeting:

  • How would your family be impacted if something were to happen to you today, and you were no longer able to work?
  • Do you know anyone who has suffered a disability? If so, how did they make it through financially?




See It ThroughYour clients worked hard to build their financial future (and so did you). But once it’s gone, it’s too late. It’s our job to make sure that everything works when your clients can’t. To make sure their foundation is protected.

Don’t end the conversation before checking the last box. Check out these resources to SEE IT THROUGH – to create a solid financial foundation for paychecks, made possible.

Sign Up Now  



 



About the Author


Meghan_Cormany.jpg


Meghan Cormany, DIA, DIF
Sales Development Specialist - DI
Office: (260) 478-0674
Cell: (260) 417-9638
meghan.cormany@ashbrokerage.com

Schedule a Call

Meghan Cormany helps advisors add value and protection for their clients through disability insurance. As a sales development specialist, she provides sales concepts, training and solutions to help integrate DI into existing planning conversations. Meghan has been an integral part of the Ash DI team since 2008 and is a leader in disability sales.

What’s the Deal with Social Security Disability?


Protection

If your clients bring up Social Security as a fallback option for disability insurance, make sure they truly understand what they’re getting into. Take a few minutes to educate your clients on what Social Security is really bringing to the table.

Social Security Disability has a very strict definition of disability:

“inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairments which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.”

The approval rate for a Social Security Disability claims is low – only around 35% of initial claims each year are approved.1 Often, people seeking disability relief under Social Security have to hire legal representation to facilitate their claim. That route is usually taken after multiple denials.

Also, the average monthly benefit from Social Security is around $1,300 per month, or $15,600 per year.1 For perspective, those figures barely put single-person households over the poverty line calculations for 2019. For families of two or more, relying solely on Social Security benefits would put families into serious financial straits. Check out the table for details.

Can your clients continue to sustain their lifestyle on that income?

Educate With Examples

Here are some things you can do to make it hit home:

  • Have your clients check their personal Social Security benefits online.
  • Ask the important questions – could they live on a small fraction of their current income?
  • Make sure they are aware of the steps necessary to be approved for Social Security Disability, as well as the wait time associated with a claim.
  • Compare SSDI to an individual DI policy – definitions and benefits.




See It ThroughYour clients worked hard to build their financial future (and so did you). But once it’s gone, it’s too late. It’s our job to make sure that everything works when your clients can’t. To make sure their foundation is protected.

Don’t end the conversation before checking the last box. Check out these resources to SEE IT THROUGH – to create a solid financial foundation for paychecks, made possible.

Sign Up Now  



1 Source: Council for Disability Awareness, “The basics of the Social Security Disability Income Program.” October 2018: http://blog.disabilitycanhappen.org/the-basics-of-the-social-security-disability-income-program/

 



About the Author


Meghan_Cormany.jpg


Meghan Cormany, DIA, DIF
Sales Development Specialist - DI
Office: (260) 478-0674
Cell: (260) 417-9638
meghan.cormany@ashbrokerage.com

Schedule a Call

Meghan Cormany helps advisors add value and protection for their clients through disability insurance. As a sales development specialist, she provides sales concepts, training and solutions to help integrate DI into existing planning conversations. Meghan has been an integral part of the Ash DI team since 2008 and is a leader in disability sales.