BEWARE: Policy Comparisons/Audits/Evaluations!!!

What’s so scary about many of the so-called Policy Comparison, Policy Audit and/or Policy Evaluation systems or services that “advertise” a complete, independent and objective review of life insurance products?  Could it be that many are neither complete, nor independent, nor objective, and in fact, are instead considered “misleading” by the chief regulatory authority of the financial services industry – FINRA? 

With at least $3 Trillion in life insurance policy cash values from which few know what they/their clients are actually being charged and/or what they/their clients are getting in the way of investment performance, there is a clear and desperate need for more information about the suitability and proper management of life insurance policy holdings.  These many so-called Policy Comparison, Policy Audit and/or Policy Evaluation systems/services are marketed to address this need. 

However, for any such system/service to be considered A) complete, B) independent, and C) objective, we believe it would have to A) be comprised of all required or customary characteristics (e.g., as defined by FINRA or the Prudent Investor Act), B) include reference to 3^rd-party data/research beyond the influence or control of the preparer (e.g., like measuring investment performance against a widely accepted benchmark such the S&P 500 or other applicable benchmarks), and C) be based on facts without influence of personal feelings, limitations, or bias. 

To understand which of these providers actually offer complete, independent, and objective information about life insurance product pricing, performance and suitability, let’s examine the different types of systems and services.  While there are many different providers of Policy Comparison, Policy Audit and/or Policy Evaluation systems/services, all providers generally fall into three categories, namely:

1)     those offered by life insurance product manufacturers/distributors like Ash Brokerage, Crump f/k/a BISYS-Potomac, National Financial Partners (NFP), and/or individual agents/brokers,

2)     those offered by third-party administrators (TPAs) like Investment Scorecard, Resource Insurance Consultants, and TrustBuilder, and

3)     those offered by publishers life insurance pricing and performance research for a fee like Ebix, Morningstar and THEInsuranceAdvisor.COM. 

Policy Comparison, Policy Audit and/or Policy Evaluation systems/services offered by manufacturers, distributors, agents and/or brokers generally involve comparison of illustrations of hypothetical policy values for some limited number of products.  Because such “illustrations” are a comingling of undisclosed policy charges and unsubstantiated performance assumptions, and do not separately measure policy expenses (as required under Section 7 of the Prudent Investor Act) separate from the reasonableness of performance expectations (as required under Section 2 of the Prudent Investor Act), they are clearly not comprised of all required or customary characteristics, and are thus not complete. 

Also, because product manufacturers, distributors and/or agents/brokers generally include only those products that they are licensed to sell, their Policy Comparison, Policy Audit and/or Policy Evaluation systems/services are clearly biased by their personal feelings for, and limitations among certain insurers, and thus not objective.  While referencing 3^rd-party data/research for average pricing and performance of peer-group product alternatives could add independence and objectivity to such Policy Comparison, Policy Audit and/or Policy Evaluation systems/services, most such systems/services have thus far not incorporated such 3^rd-party data/research. 

Similarly, the Policy Comparison, Policy Audit and/or Policy Evaluation systems/services offered by TPAs often include so-called apples-to-apples comparisons of illustrations of hypothetical policy values for unspecified other available products of some limited number of insurers.  As such, these TPA systems/services also lack completeness that results from the comingling of data that generally-accepted prudent practices require be measured separately, lack reference to independent 3^rd-party measures for average price and performance, and lack objectivity due to the artificial limitations on the number of insurers included in their sample population. 

On the other hand, THEInsuranceAdvisor.COM research is derived from various independent sources to include thousands of actual insurance company pricing representations for hundreds of different products and actual performance data for invested assets underlying policy cash value, and reveals the overall suitability of a given life insurance product relative its peer-group and based on 5 of the major factors of suitability as to 1) financial strength and claims-paying ability, 2) actual cost-competitiveness (i.e., measured separately from performance assumptions), 3) pricing stability, 4) cash value liquidity, and 5) actual historical performance of invested assets underlying policy cash values. 

So what’s so scary about Policy Comparison, Policy Audit and/or Policy Evaluation systems or services?  That depends.  Relying on Policy Comparison, Policy Audit and/or Policy Evaluation system or service that may be “advertised” as complete, and independent and objective, but which are not and can result in flawed  decisions, faulty recommendations, opinions that could be considered fraud, and breach of fiduciary duty.  That’s what’s scary about certain Policy Comparison, Policy Audit and/or Policy Evaluation systems and services. 

On the other hand, THEInsuranceAdvisor.COM provides the empirical pricing and performance research essential to any complete investigation of life insurance policy suitability (as defined by FINRA or the Prudent Investor Act) and which can then lead to independent and objective suitability determinations.  While due care is an emerging field, and while there is room for a difference of opinion in some areas, THEInsuranceAdvisor.COM goes well beyond overly-simplified comparisons of comingled and hypothetical policy values to better protect and/or compete against those misleading Policy Comparison, Policy Audit and/or Policy Evaluation systems or services. 

Use the Confidential Policy Evaluator (CPE) Research Reports to determine the appropriateness of pricing, the reasonableness of performance expectations for invested assets underlying policy cash values, and overall suitability for you(r) clients' policies based on the 5 factors of suitability.  Click here and get up to 3 Confidential Policy Evaluator (CPE) research reports under our NO-RISK trial subscription.