Do You Benchmark?? Really??

Of course you do. The definition of Benchmark (n) is a standard by which something can be measured or judged. So anyone can benchmark and most advisors do, but how do you know if you are using a benchmark with independent, 3^rd party data?

There is at least $3 Trillion in life insurance policy cash values. According to National Association of Insurance Commissioners (NAIC) reports that 62% of the people who own life insurance do not what they have or why they bought it. There is a clear and desperate need for more information about the suitability and proper management of life insurance policy holdings.

However, for any such system/service to be considered complete, independent, and 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 3rd-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.

As reported by Kenneth J. Masters in the 11/02/09 National Underwriter magazine: "The recently decided Cochran vs. Keybank case shows that irrevocable life insurance trust beneficiaries can and do question trust management of life insurance policies, and they do seek to have the trustees held accountable for the carrier and product selections the trustees make. [See In re Stuart Cochran Irrevocable Trust, 901 N.E.2d 1128 (Indiana Court of Appeals, March 2, 2009.)]

The court did rule in favor of the trustee for life policy decisions the trustee made, but the decision also signaled that the trustee had done only the bare minimum. Given current efforts in Washington to require investment brokers and broker-dealers to operate under the fiduciary standards that now apply to registered investment advisors, it may be that future courts will not be so lenient with trustees and other fiduciaries.

Meanwhile, the Uniform Prudent Investors Act or similar state legislation has been adopted in many states, with more to come. This has exponentially increased the potential for more liability on trustees and fiduciaries in the management of trust-owned life insurance.

Such activity suggests that developing a systematic approach for carrier selection is not only a sound business practice; it will also assist insurance brokers in limiting exposure to professional liability and future errors-and-omissions claims."[1]

Cost containment, as in prior years, remains paramount for insurers. Coupled with the fact that investment income has dropped significantly due to the economic crisis and robust growth continues to prove elusive, the result is a dire need to focus on efficiencies. But, according to a Deloitte study, what has worked in the past isn't necessarily the answer today.[2] Do you know what you(r clients) are being charged? Do you review every year to monitor these charges? Do you benchmark?

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.