-by Heather Krohn FALU FLMI

If you have taken out a mortgage or obtained new automobile insurance in the last few years you have probably used an electronic signature (e-signature) platform.  An e-signature provides both extraordinary convenience and the same legal standing as a handwritten signature, as long as it complies with regulations published by the National Institute of Standards and Technology (U.S. Department of Commerce).

green CPU background

The beauty of e-signatures versus traditional wet signatures is that they can be executed portably and with ease via computers and devices.  An insured can sign a document anywhere and anytime at the touch of a button.  Most platforms are single-click and do not even require a password.  The email address is used as a mobile identification source.  Agents no longer need to mail or fax documents from place to place to obtain multiple individuals’ signatures on a single document, because the software allows the user to assign a signing order.  The document comes back to the user electronically signed and dated by all parties, so even a document that requires the insured, owner and agent to sign comes back legibly signed and in good order.    The days of faxed documents with form numbers cut off and print that’s barely able to be made out are over with the use of electronic platforms.  Anyone who has access to email and some sort of device can sign a document electronically.  The platforms are also very user-friendly.  It is as easy as uploading a document and assigning virtual tags in the appropriate places.

So why doesn’t the life insurance industry use e-signatures more than it does today?  The answer is easy, though disappointing:  Just about every insurance company has a different set of rules regarding the acceptance of e-signatures, making it very difficult to keep track of what is allowed and what is not.  No agent, working with a valued client, wants to get forms signed only to find that the carrier does not allow e-signatures on the specific form being submitted, or does not accept the e-signature vendor.  Some companies allow almost all documents to be electronically signed as long as a certificate of authentication is provided with the document.  Other companies may have very rigid workflows with strict guidelines about when e-signatures are acceptable and when they are not.  Some companies do not allow co-mingling of traditional and e-signatures on a single case, whereas others allow forms signed both ways.  Some even require additional identification checks to validate e-signatures.  This lack of industry uniformity is confusing and often frustrating, but not surprising.  Until life insurance companies adopt a common standard for e-signatures, it’s important for agents to know, or to work with intermediaries who know and keep track of, the various e-signature standards and limitations required by each life company with which they do business.

There are many vendors that provide services related to e-signatures, but one of the most commonly used, especially in the insurance world, is DocuSign.  If you are interested in learning more about e-signatures as well as carrier specifications, Windsor has gathered an extensive amount of information that we would be glad to share with you.  Windsor can also provide guidance as to when the convenience and ease of an e-signature may be appropriate.  Lastly, Windsor can provide a demonstration that is specific to DocuSign if you are interested in learning more.


Minimum Wage Retirement Planning

-by Marc Schwartz

Selling is a creative and dynamic process, at times requiring fresh thinking and a different approach to engage customers.

In the case of business owners, substantial monies are spent to attract and retain talented employees who can get the job done. However, often overlooked by business owners may be one of their better employees–the minimum wage employee. This is the lowest paid employee in the company who, if given the opportunity, has the ability to contribute significantly to a business owner’s success and well-being.

The “minimum wage employee” conversation is a creative and fresh way for you to make more sales with business owners.  Let’s walk through an example of how to put this employee to work for you and your business owner clients.

Your friend, Dave, is a 44-year old small business owner.  You’ve known Dave since college – he’s a hard worker, independent, creative, with a young family.   He’s put his time and energies into building the business and helping his spouse provide a good life for their children.  But Dave has never made much of an effort to invest toward his retirement.   Over lunch, Dave shares an odd encounter that he had the other day with a prospective employee.

“So this guy walks in to interview for a sales position that I have open right now.  And here’s what he says:

‘I’m not really here for your sales position, but I think you’ll find I can help with an opportunity you have right now, but that you don’t recognize.

‘First, here’s what I ask of you.  You agree to pay me minimum wage for the next 21 years.  That’s all.  No vacation, no sick leave, no benefits, no 401(k) match, no salary increases.  Just today’s minimum wage for 21 years, until you reach age 65.  That’s $7.25 an hour, $290 a week, about $1,255 a month, a little over $15,000 a year.  With me so far?

‘And here’s what I’ll do in return.  If you die before age 65, which we both hope won’t happen, the business stops paying me and I’ll give your spouse and children at least $300,000, tax-free.  I’ll miss you, but our deal will be done.  But if you live to age 65, I can potentially provide you with over $50,000 a year of supplemental retirement income until you reach age 85.  That’s 20 years of $50,000, or about $1,000,000.  How does that sound to you?’

Dave continues, “Of course I didn’t believe any of it, but he seemed to be serious.  So I asked, ‘How in the world are you going to do this?’ And he said, ‘Here’s how.’”



[A tip of the Windsor hat to our friends at Lincoln Financial for their inspiration and these supporting materials:]

Minimum Wage Retirement Planner Presentation

Minimum Wage Retirement Flyer

Lincoln WealthAdvantage®Indexed UL Illustration

Contact Windsor for illustrations and more information about the potential advantages of Indexed UL.

When Two Plus Two Equals Zero: Simultaneous Applications and Competing Production Sources

– by DuWayne Kilbo

You’ve met with the clients and their advisors on a few occasions and the time has come to take an application and submit underwriting information to the carriers.  However, what you hear next stops you cold:  “Our son’s friend is also in the business and we want him to shop our application as well to be sure we are getting the best offer and premium available.”


You pause and think.  For several reasons you know that it’s never a good idea to pit production sources against one another with multiple carrier submissions. It can complicate matters and often results in an inferior offer and a higher premium rate class.  Also, in large case situations it may lock out the clients from getting the coverage they want and need.

You ask yourself, how do you dissuade your clients from this course of action? What are the issues with this approach?  Isn’t competition a good thing?

Absolutely, competition is good!  It makes us all work harder to provide unique value for our customers.  However, in the life insurance industry the competitive selection process to obtain the best results and value takes place prior to carrier submission of any applications. And it starts and ends with the producer selection process.

This isn’t necessarily intuitive to our clients or to most anyone outside the life industry.  Why shouldn’t applications be shopped to the same carriers via multiple production sources?

Carrier price and ultimate client value are a function of three things:  1) the stated carrier product pricing, which includes illustrated values and pricing for preferred, standard and other rate classes; 2) the carrier’s product strength and how it aligns with the client’s goals; and, 3) the final negotiated underwriting class.   Thousands of financial professionals work through Brokerage General Agencies (BGAs).  From a carrier’s point of view, the combination of producing agent and BGA is viewed as a single “production source.”  Many BGAs and agents are equal in terms of acquiring and illustrating carrier product pricing. That’s the easy part. However, where BGAs are not equal and where great value is created is in the strength and ability to negotiate the most favorable underwriting rate class.  Certain BGAs – especially those with underwriting expertise “on staff” who can capably interface and negotiate with carrier underwriters – maintain a distinct advantage to provide exceptional offers and ultimate client value.  If an underwriting rate class can be negotiated from an otherwise standard to a preferred, product value can be significantly enhanced.  At times one can achieve 20% or more client value in terms of lower premium payment and/or improved product performance.

You may ask, won’t a carrier simply match offers if an application is submitted to them from more than one source?  The answer is yes, and this is where a potential pitfall lies. If the agent chooses a BGA that has a proven track record of strong underwriting success and negotiation skills and if the client allows the agent to access the insurance market before information is submitted by any other agent, then all is fine–there’s a good chance that the best possible offer will be negotiated.  However, if the information is first submitted to and quoted on by a carrier without benefit of strong hands-on negotiation, then the opportunity for exceptional client value passes—sometimes forever.

Why does this occur?

While the ultimate customer for a life insurance carrier is the insured or policy owner once a policy is issued, during the application process a carrier’s customer is the agent.  In view  of this and for reasons relating to concerns such as channel conflict and avoiding the “appearance” of producer preference, all carriers are very careful about keeping all production sources on a level playing field—especially when it comes to providing underwriting offers on an applicant.  Once an offer is provided, a carrier will not change their underwriting decision unless additional “meaningful” medical information (and in financial situations additional financial detail) is provided that will sway their opinion.  In most cases this hurdle is nearly impossible to overcome.

Because the producer selection process takes place prior to an application being submitted, a critical selection criterion is to choose a production source that has the skill, ability and track record to negotiate the best underwriting offer.  Essentially, the clients and their advisors must employ the agent that has the greatest opportunity for success to take control and submit the application to the insurance marketplace—before anyone else. In large face amount situations, this critical decision-making step can save an applicant tens to hundreds of thousands of dollars during the life of a policy.

In addition to negotiating the best offer in very large case situations, the client must choose an agent who is capable of putting together large total lines of coverage.  This requires a special skill set because these “Jumbo” or extremely large total line cases typically involve several different carriers as well as reinsurance. Many sets of eyes review these situations because of their bottom line impact upon carrier mortality, and several parties weigh in on the ultimate decision to issue coverage and at what price.

Why does this matter?  Can’t one simply buy what they want and need?

Yes, to a degree depending upon case detail and circumstances. However, no matter what is applied for, it must be done right.

There is a limit to the amount of coverage available for any one individual in the U.S. life insurance industry.  Anecdotal evidence for the most favorable cases suggests this to be in $330 to $350 million range, which includes most direct carrier and reinsurance capacity.  This is a significant amount of coverage, but it is very closely monitored for what an applicant may financially qualify based upon carrier underwriting guidelines, and balanced with the amount of available industry capacity.

On the largest applications, beginning in the $30 million plus area, very few carriers have the ability to retain all the risk on their own books – nor do they want to.  All carriers, including both small and large retention companies, don’t like and can’t afford quarterly mortality hiccups caused by large claims. To help manage these situations, coverage is spread out to reinsurers.  This allows the carriers to diversify their large face amount risks and smooths any mortality spikes that may occur.

So putting together the large total line case requires keen insight into what the insurance market can deliver in terms of offers and capacity.  If done right, an applicant may achieve the greatest amount of coverage they may qualify for (capped by industry capacity) and at the best rates possible.

So what does a producer need to know to successfully deliver optimal value in the large case market?

There are two things to be familiar with. The first is case control.  In the large case market, application control is critical.  This involves choosing a BGA that has the skill and ability to control the entire application process for all carriers before any applications are submitted.  Because of the complexity involved, this is no small task.

Large total line case submission requires a clear understanding of what is being applied for and with which carriers. The carriers and their reinsurers get extremely uneasy about situations where there are competing agents and applications and where the potential for case control appears compromised.  Their nervousness stems from the fact that more coverage may be issued than anticipated, with the potential for financial underwriting guidelines to be breached and/or carrier and reinsurance retention and automatic limits exceeded.  Neither of these situations is good and may cause a carrier to refuse to underwrite an applicant altogether.  Some of these situations may be unwound to the point where the carriers may once again be willing to consider a risk, but they take an inordinate amount of time and effort and often the end result is not as favorable as it could have been if handled properly at the outset.  In order to combat this situation, there needs to be complete clarity and understanding of what’s being applied for, and control must rest in the hands of a single production source with the skill and ability to manage the entire process.

The second thing to know is how to maximize capacity at the best rates possible.  As mentioned earlier, this involves having the ability to negotiate the best possible rates.  However, this also requires choosing a BGA with the knowledge and insight into carrier products, and having experience and proficiency in the areas of carrier underwriting niches, retention, automatic reinsurance limits, super pools, Jumbo limits and reinsurance relationships.  Since most carriers have a Jumbo limit of $65 million, one of the keys to any case above this amount is to negotiate the best possible offers with all carriers and then understand how to stack and order coverage to be placed.  This may require engagement from the carriers on how much they may consider given the offer provided and any limitations they may have.  Again, this is an involved and iterative process that is best left for experts.

So what should we tell the clients and their advisor when they want to bring multiple producers into the application process?

  • Competition is good.  However, competition to achieve the best possible results should begin and end with the producer selection process—prior to any applications being submitted.
  • Simultaneously submitting applications through multiple sources often has a deleterious effect and results in inferior offers, greater premiums and ultimately lower client value.
  • In large total line case submissions, the ability to control the application process is critical.  One production source must be in charge to manage the entire application and underwriting process.  This is required to negotiate the most favorable offers, maximize available coverage, and prevent carrier uncertainty about total line to be placed.
  • The critical decision point is to pick a production source partner that has the skill, ability and proven track record to drive the best results for you.

The Conversion Quandary

– By Marc Schwartz

Term life insurance sales in the US consistently represent about 70% of the total death benefit bought by consumers every year, according to the Insurance Information Institute.  And for many of those buyers, the provision to convert their term insurance into permanent life insurance somewhere down the line represents an important option.  But according to several leading term insurers, less than 5% of term life policyholders ever take advantage of this option, and those who do often are motivated by deteriorating health.  Because these clients have a mortality risk of about five times normal for their age, life insurance companies have dabbled with creating limitations on conversion options (limited time frames to convert, restricted product choices, lower maximum ages) to decrease the impact of anti-selection on pricing and margins.  Understandably, these same insurers need to balance these limitations so as not to impact sales significantly.  So what’s a company to do?

Looking for the solution of the maze

Among efforts to solve this conversion quandary, there are currently three primary camps.  First are the “wait and see” or “no change” carriers.  These carriers continue to offer conversions for the full level term period to any permanent product currently available for sale up to a maximum conversion age.  Second are the “hybrid” carriers, companies that limit the conversion in some additional way.  They might allow conversion to any permanent product currently available for sale, but only for a limited number of years — then require a conversion only product.  They may also offer a buy up option (higher price) allowing the policy owner to convert for the full level term period (up to a maximum conversion age) to any permanent product.  Third are the “conversion product only” carriers.  These carriers restrict  conversions to a specific product.

At present, most carriers continue to allow their full suite of products for conversion throughout the entire level term period.  One carrier even allows conversion beyond the level term period when annual rate adjustments occur.  However, with the spotlight on mortality as a major driver of carrier profitably today and the possibility for significant excess, underpriced mortality, a number of carriers will choose more restrictive conversion practices, such as “hybrid” or “conversion only” options.  Lastly, you might think that current term policy owners are unaffected by this issue, because their conversion provisions are contractually locked in.  But that’s not the case.  Term policy contract language typically allows the insurer to change or modify its current conversion practices even for in force blocks of term policies.

It isn’t easy to sort all this out and explain it to your prospects and clients.  Windsor’s Term Conversion Quick Guide can help you sort through the term conversion practices of various major life insurance companies, to see which best fit your clients and fairly compensate you for your time, effort and professional advice.

To learn more or to discuss specific cases and clients, call Windsor at 800.410.9890.



Accelerated Underwriting Into the Future

-by Heather Krohn FALU FLMI

Accelerated underwriting is a new and growing trend that offers important advantages over other programs allowing for an insurance qualification process that does not require examinations or fluids.  Having an approved policy in hand can occur in a few business days, rather than weeks, and product pricing is typically more favorable with many carriers offering their full suite of off-the-shelf products with no compensation haircuts.  These are all positive factors associated with accelerated programs. However, since most accelerated programs are a triage process, there are no guarantees an applicant will make it through the process without the need for exam/lab results or other traditional underwriting requirements.


There are many factors that make the accelerated programs unique.  Therefore, it is important to understand what should be done to position the accelerated process effectively with clientele (without the promise they will forgo lab/exam or other underwriting requirements).  Remember that accelerated underwriting is an opportunity only, not a guarantee.  Prescreening applicants is a must to ensure the most successful outcomes.

Principal Life was the first large insurer to introduce accelerated underwriting to the insurance market about two years ago, with much success.  Very recently there have been new accelerated entrants in the market from Lincoln National, John Hancock, LGA (Banner/William Penn), and SBLI.  It is rumored that at least three major players will be introducing similar programs in the near future, and one reinsurer has gone on record stating an additional 22 insurers are currently developing an accelerated process.  If the trend continues, eventually every insurance company will need to have an accelerated program to compete in the marketplace.

So what is accelerated underwriting and how does it work?  What are the benefits of this process and how can you increase the odds a person may qualify?

First and foremost, accelerated underwriting is defined as permitting applicants who otherwise qualify for preferred or better rate classes to be potentially underwritten without the use of traditional medical evidence such as paramedical exams and lab testing.

It is extremely important that the agent properly vet potential applicants.  Fact finding and field underwriting are imperative in order to determine if the prospect is likely to qualify for one of these accelerated programs and to set realistic expectations with the client.   Agents must understand and properly relay to their clients that these programs allow a potential opportunity for exam-free/lab-free underwriting, but it is not a guarantee.  While many programs allow insureds up to the age of 60 to apply, approval rates rapidly decline for those 50 and over, especially for men.

Face amounts vary to some degree, but most carriers offer coverage up to either $500,000 or $1 million.  There are some insurers that offer accelerated underwriting for their entire traditional product suite while others have developed special product offerings for their streamlined programs.

Becoming educated about how these accelerated underwriting programs work is necessary.  First of all, there are a variety of application methods.  While insurance companies such as Principal allow the use of their regular paper application, this is not the norm.  Most companies require some sort of electronic or drop ticket submission to access the program and this is non-negotiable.  After the application has been submitted most carriers require some sort of client tele-interview to take place.  Insurers will use the interview responses along with the MIB report, RX database check and MVR to determine if the client can be approved without further evidence.

One insurer reports that they are able to approve up to 55% of applications on an accelerated basis.  If an insured is not approved, they will be given the option to submit to additional testing such as physical measurement and labs to proceed.  Just because an insured requires full underwriting does not mean that they cannot qualify for the applied for rate class.  It just means that the carrier requires more evidence in order to get there.  There are also some programs that have random built-in holdouts.  This basically means that there will be a certain percentage of insureds that will be required to go through full underwriting for quality control purposes even though they would have qualified otherwise.  Knowing which programs are subject to this can help agents set proper expectations with their clients.

There appears to be little downside to trying one of these programs, especially if you have a healthy insured under the age of 50 applying for $1 million or less of coverage.  At best, the client qualifies for insurance with minimal and noninvasive underwriting.  At worst, the insured will have to submit to usual lab testing and examination.  As long as candidates understand that these programs are potential opportunities and not guarantees, there is nothing lost in starting with an accelerated approach.

As the industry moves towards more automation, it is important to stay informed and aware of all of the new offerings that are being made available and how they might not only benefit your clientele, but you as an agent.

If you have any questions about the specific accelerated programs, how they work, and which may be the best fit for a particular client, please contact Windsor for assistance.




Charitable Life Insurance Redefined

– by DuWayne Kilbo

Of all the progressive things the life industry has done in the past few years to advance underwriting standards and make it easier to do business, one area significantly lagging is charitable life underwriting.

In charitable situations, the maximum amount of coverage available across almost every carrier in the industry is based upon a multiplication factor—typically 10—of one’s past annual giving to a charity. So if an applicant on average has given $10,000 annually to a particular charity and desires to leverage this giving by allowing the charity to own life insurance on his life, he would qualify for a maximum $100,000 of death benefit.


Seriously…. $100,000?!?!

This hardly seems worth the time and effort required for you and your client to complete an application and go through the underwriting process.

In fact, I’m not even sure how the 10 times underwriting parameter was developed.  When quizzed, carriers are unable to articulate a good response other than to say this is the rule their underwriters have always used.

Bottom line, significant charitable life opportunities exist, but the industry is being held back by an underwriting practice that is old, outdated and needs to be revised.

Let’s consider an example of a client age 50 plus who has worked hard during her lifetime to amass a sizeable net worth, but who either doesn’t exceed the threshold for federal estate taxation, or who modestly exceeds the threshold but doesn’t want to spend the time and money required for estate planning.

The client, however, is charitably inclined and sees value in providing money for causes she believes are worthwhile. She would like to give money on a tax-deductible basis to a qualified charity to purchase life insurance on her life. She may have donated to this charity in the past, and perhaps served in some role for the charitable organization.

So why do we need to stick to an outdated 10 times rule and why can’t some portion of an individual’s net worth be used to qualify for charitable coverage—such as 50% of net worth? For example, if a person has a net worth of $10 million and has available insurability, why can’t he do $5 million of charitably owned coverage?

I asked some carriers about this example and these suggestions.

While a few responses came back as expected to the outdated 10 times rule, there were some progressive carriers willing to take into account a person’s net worth and consider a larger amount.

Of course, the devil is always in the details.  Though several carriers agreed that there could be more flexibility in charitable underwriting, they didn’t want to make a blanket statement concerning such situations.  Using a portion of net worth as a guideline would be considered on a case by case basis.  All considered 50% of net worth too high, and flexibility would be easier to come by if the person had at least some past charitable involvement or giving. The key point is that they were open to discussing and creating a workable solution for a particular case at hand.

This was inspiring!  I realized that it is possible to do something more substantial for charitable giving than was previously the case.

A key step is to discuss and work with carriers on a case by case basis as these situations arise—and well before an application is submitted.

I believe we will develop more favorable charitable underwriting standards as we continue to work with carriers and they become comfortable with newer, more thoughtful and creative charitable underwriting concepts.

It’s only a matter of time.

If you have clients who would like to explore the potential for leveraging life insurance in gifts to their favorite charities, give us a call at Windsor.  We’ll be glad to help!



At Halftime, IRS Blanked on the (Tax) Court

– By Marc Schwartz J.D. CLU, and Marty Flaxman J.D.

A recent tax court case ruling in favor of the taxpayer in an intergenerational Split Dollar arrangement has propped open a “discounting” planning door that, up to now, the IRS had tried to slam shut.  In the Estate of Clara M. Morrissette et al v. Commissioner, the tax court ruled that an intergenerational Split Dollar arrangement is covered by Split Dollar Regulations Section 1.61.22.  In plain English, the ruling establishes that single-premium life insurance policies, held in irrevocable trusts, can be taxed under the Split Dollar Economic Benefit regime, and are not required to use the Loan regime, as the IRS had insisted.   For the taxpayer this was very good news.  Here are some of the facts, courtesy of AALU’s Washington Report (WRN 16.05.10_1) from 10 May, 2016.

Gavel With American Banknote And Book

“Three dynasty trusts were established on behalf of the decedent, one for each of her sons. In 2006, six non-equity economic benefit so-called intergenerational split-dollar arrangements were created between Clara Morrissette’s revocable trust and each of the dynasty trusts. Her revocable trust advanced a total of $29.9 million as one-time single premiums to the dynasty trusts to enable them to purchase insurance on the lives of each of her three sons.  Clara died in 2009 with the arrangements still in place.

“The estate valued the amounts receivable by the revocable trusts from the dynasty trusts at $7.497 million. The IRS argued the arrangement was a gift at inception for the full $29.9 million dollar amount of the advances. That determination resulted in a gift tax deficiency of $13.8 million and a penalty of $2.7 million. The estate disputed the deficiency by filing a petition in Tax Court.

“The estate filed a partial summary judgment motion with the Tax Court confirming that the arrangements were in fact economic benefit split-dollar arrangements under Treasury Regulations Section 1.61-22, and the court entered a summary judgment in favor of the estate.

The IRS’s argument was essentially preemptive.  “The IRS has been arguing for most of a decade that single premium split-dollar arrangements could not use the economic benefit regime of the Regulations, but instead had to use the loan regime, because they provided ‘other benefits,’ or alternatively that the single premium payments ‘prepaid’ all future economic benefits provided under the arrangement, or that since future premiums had been prepaid, the arrangements were, in effect, reverse split-dollar arrangements, and under Notice 2002-59, term costs could not be used to measure the benefit to the donee trust.

“If the loan regime applied, since no interest was provided, the arrangement was a gift term loan under the Regulations, with the discounted present value of all of the imputed interest treated as a gift in the first year of the arrangement; if the single premium prepaid future economic benefits, they were all gifts in the first year of the arrangement.”

The tax court disagreed with the Service’s position and ruled in favor of the taxpayer.  But the tax court pointed out very early in its opinion that it was ruling only on the applicability of the Split Dollar regulations to the arrangements, and not on the discounted gift valuation by the taxpayer’s estate.   The appropriateness of that discounted valuation, which is really at the heart of the dispute, has yet to be decided.  If, however, that future decision comes down in favor of the taxpayer, “this technique may become a major means of transferring significant amounts of family wealth at greatly reduced tax costs.” (op. cit. AALU Washington Report)

In the meantime, the Morrisette case, as it stands today, provides an effective way to pay substantial premiums using intergenerational Split Dollar arrangements without incurring large gift tax liabilities and is very likely something of interest you can discuss with your centers of influence.

We’ll keep you apprised of what happens next on the discounted valuation issue.  Stay tuned.