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"As foretold and covered many times in this newsletter, litigation involving the standard of care surrounding life insurance advice and management continues to rise. While the most recent case covered here before involved a claim of breach of fiduciary duty against an irrevocable life insurance trust (ILIT) trustee (see the ABA tele-briefing-Case Law Guidance (Finally) for Trust-Owned Life Insurance), a new case alleges breach of fiduciary duty against the agent/broker who sold the policies."
"When an insurer's rating is downgraded, the change often means that either the insurer's profitability has declined, the insurer's reserves have deteriorated, or both. The insurer's most immediate response to a downgrade in its ratings, and its most effective means for restoring profitability and recovering reserves, can be to increase policy costs for cost of insurance (COI) charges and expenses. In other words, when ratings go down, policy charges are more likely to be increased, and thus premiums are likely to (need to) go up."
"As discussed with increasing frequency in this newsletter, arbitration and litigation case involving a higher standard-of-care surrounding life insurance advice and management continues to rise. While there has been much conversation about the fiduciary duty of irrevocable life insurance trust (ILIT) trustees (e.g., see the ABA tele-briefing-Case Law Guidance (Finally) for Trust-Owned Life Insurance), more recently these legal attacks are being waged against the agent/broker who sold the policies either in the courts (e.g., Another Breach of Fiduciary Duty Involving Life Insurance ) or in arbitration proceedings (e.g., More Signs (Beyond FinReg) Pointing to a Higher Standard of Care)."
"A husband and wife, ages 69 and 64, had a life insurance portfolio that was managed by a trust company. This portfolio contained a $2.4 million Survivorship Variable Universal Life Policy. After 9 years, their portfolio objectives changed. The husband and wife had lost retirement savings in the stock market, and as a result, became more conservative investors. They wanted to change the investment allocation and portfolio objectives of their policy to no longer pay premiums while reducing market risk, they were willing to decrease the death benefit in order to not pay premiums."
"What's so scary about many of the so-called Policy Review systems or services that "advertise" a complete, independent and objective review of life insurance products? Many practitioners are still comparing illustrations of hypothetical policy values for some limited number of products as the means of determining product suitability.This practice is time-consuming (i.e., a prominent bank said it took them 4 hours to compare only a fraction of the total products available), incomplete (i.e., because such comparisons inherently include only a fraction of the total products available, the results are unreliable), and for these reasons is deemed "misleading" and prohibited by the Financial Industry Regulatory Authority (FINRA) the chief regulator for the financial services industry."
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