Delivering The Deep Dive Into Price Comparisons

By Ron Sussman

We live in an age of instant gratification. If you’re looking to buy anything from a car, to a television to dish soap, you are a few keystrokes and a click away from an in-depth comparison of options and prices.

It’s reasonable, too, for our policyholder clients to expect this exhaustiveness when their agent promises them a review of their options for replacing underperforming or overly pricey policies.

But while customers have iPhone expectations, many agents still deliver rotary-phone service.

Presenting price comparisons – the technique known as “spreadsheeting” — has been an industry cornerstone since the earliest computer-generated sales illustrations. The rationale is sound: Agents provide added value; clients are thrilled to lower payments. But are clients getting the deep dive that they expect?

In recent years, while the concept of spreadsheeting has not changed, it has taken on a newly robust moniker of “policy audit” – a characterization that stands only to mislead. While I recognize the intent of these “auditors” — to position their service in a way that would signify thorough research and instill confidence — I take exception to the notion that spreadsheeting provides a level of disclosure and analytics rising to the lofty label of “audit.”

A quick check of the thesaurus yields the following synonyms for the word audit: “analysis,” “examination,” “investigation,” “review,” “scrutiny” and “verification.” With these synonyms as a benchmark, it becomes clear that the policy comparison spreadsheets distributed by most life brokerage agencies are at best a cursory market analysis and at worst predatory sales schemes.

Built-in Bias

Experienced life insurance professionals may feel they have tools to close the gaps between what appears on a simple spreadsheet and what is truly suitable for their clients. But for those on the periphery of the life insurance business, such as property/casualty agents, accountants, attorneys and others, the shallow dive of spreadsheeting may be more liability than asset. Spreadsheeting poses risks in four distinct ways:

Limited markets. Because general agents work only with a portion of the available market, policy spreadsheet comparisons are, by nature, limited; they paint only part of the picture of a policyholder’s options. Comparisons by general agents often are restricted to carriers with whom they are contracted, potentially excluding a plethora of viable options. While this does not always preclude a positive outcome for a client, the customer may be missing valuable financial and policy data. In most cases, agents do not disclose to clients that they are being shown only a fraction of available options.

Putting the client second. Likewise, some agents skew their recommendations toward products with higher compensation, which benefit the salesperson, not the client. It isn’t unusual for a brokerage general agent to try to encourage business for one specific carrier where he or she has either a better commission or bonus structure.

Policy bias. If the agent providing the comparison is not securities licensed, variable products will not be included in the comparison. Policy bias also happens when an agent has an inclination toward specific products. For example, if indexed products are the only target, low-cost alternatives based on overly optimistic interest rates could arbitrarily become the recommendation. Policy bias occurs all too frequently in the insurance sales process, particularly among captive agents, for whom whole life is a hammer and every client a nail.

Shortsightedness. A market analysis, by necessity, highlights price above all else. But this leaves clients with three unanswered questions crucial to their service.

• Can they qualify for the rates their agent illustrated?

• Is their current coverage suitable for their family and life circumstances?

• How financially secure is the carrier compared to its peers?

Analysis, Scrutiny and Verification

How much analysis goes into product spreadsheeting? Our brokerage division has been providing what we call “market surveys” since 1991. As with most general agencies, our design staff is free to select policies they determine to be “competitive” with the in-force coverage. They also perform a modicum of due diligence about a client’s needs in the form of a conversation with the agent. In most cases the goal is as simple as, “My client wants to pay less for the same amount of coverage.” I suspect our experience mirrors that of most general agencies: The level of basic information gathering does not rise to the level of analysis, scrutiny or verification.

To be properly analyzed, scrutinized and verified – and merit the term “audit” – the auditor must obtain the following information:

• A copy of the policy in question

• A variety of in-force data from the carrier

• Tax basis data from the carrier

• A premium payment history – could missed, late or partial payments affect the expected performance?

• Ownership and beneficiary data – is the policy properly positioned to accomplish what the owner desires?

• Financial suitability information – does the policy/ownership structure meet the stated need?

• Current medical information – what good is a market analysis if the client cannot obtain the stated rate category?

• Current and valid data regarding the insurance company’s financial picture. A composite rating score, such as COMDEX, is not valid and carries no practical predictive value. Professional trustees in particular require much more in-depth financial information to satisfy their legal requirements as fiduciary.

The reason that simple spreadsheeting has become ubiquitous is that it takes very little effort and often leads to a sale regardless of its veracity. Performing a compliant, customer-focused and defensible audit is, to many who proclaim to be “auditors,” sadly cost-prohibitive or expertise-prohibited.

Providing access to a professional fiduciary level audit with actionable implementation plans brings great value to a client. Moreover, recommending to clients a true, unbiased, comprehensive policy audit is a non-threatening way to enhance client acquisition, retention and compliance. You will have their best interests at heart. You are most likely to save them money.

In addition, you will be positioned for deeper collaboration and stronger future relationships.

Ron Sussman is founder and chief executive officer of PolicyAudits.com and CPI Companies. He counsels high-net-worth individuals through risk management analysis and life insurance planning strategies. Ron may be contacted at [email protected].