How do FE insurers (carriers) make money?

[WinoBlues]

but they seem to have a pretty effective business prevention department (to borrow a phrase from @jdeasy) , so maybe they'll be ok!

Hahaha that is what it seems like.

A guy that I have a couple of contracts through has been emailed bombing out about the great GI plan. with no details of course. I usually delete those. I finally bit and it was SON. Which from this forum I assumed.

He has someone send me contracting and no comp schedule <snicker>. Finally got that and it was something like 65%/3.9 and GI 36/3.5. Brotha Pleease! I would have only sent my GIs that fit nowhere else to them anyway, but Really?!?

 

[goillini52]

Hahaha that is what it seems like.

A guy that I have a couple of contracts through has been emailed bombing out about the great GI plan. with no details of course. I usually delete those. I finally bit and it was SON. Which from this forum I assumed.

He has someone send me contracting and no comp schedule <snicker>. Finally got that and it was something like 65%/3.9 and GI 36/3.5. Brotha Pleease! I would have only sent my GIs that fit nowhere else to them anyway, but Really?!?

Should've been 90%/5.5% and 50%/5% on GI. Nice guy.

 

[WinoBlues]

Should've been 90%/5.5% and 50%/5% on GI. Nice guy.

Yeah, I saw/ asked here. Was not that interested in them other than for some GI that I could not place elsewhere.

 

[rousemark]

Yep, but the only problem with Eddie Grills is that he thought there was only one company that you ever needed, and that was Settler's. Much like Bontell, clueless to the real world.

Eddie wan't necessarily clueless, he was just totally loyal to his company. There was a time when they still had the Huff Cook products to go with Settlers, a guy could have just about gotten by with one company.. One of the neat things about the Huff Cook WL product was the only non forfeiture option it had was reduced paid up insurance making it immune from consideration when calculating welfare or nursing home benefits. Didn't have to fool with trying to put the coverage in a trust to accomplish that.

 

[goillini52]

Yeah, I saw/ asked here. Was not that interested in them other than for some GI that I could not place elsewhere.

That's all I'm going to use them for...GI.

 

[Todd King]

Eddie wan't necessarily clueless, he was just totally loyal to his company. There was a time when they still had the Huff Cook products to go with Settlers, a guy could have just about gotten by with one company.. One of the neat things about the Huff Cook WL product was the only non forfeiture option it had was reduced paid up insurance making it immune from consideration when calculating welfare or nursing home benefits. Didn't have to fool with trying to put the coverage in a trust to accomplish that.

Well, I didn't really know of him in the Huff-Cook days like you did, but even after that he thought Settler's was the only thing you would ever need since they went all the way down to age 15 days. This is where I say he was clueless. He sure ran his business like there was only one company and he tried to get his agents to buy into his philosophy. I wonder where that philosophy of his stands today! LOL

 

[rousemark]

Well, I didn't really know of him in the Huff-Cook days like you did, but even after that he thought Settler's was the only thing you would ever need since they went all the way down to age 15 days. This is where I say he was clueless. He sure ran his business like there was only one company and he tried to get his agents to buy into his philosophy. I wonder where that philosophy of his stands today! LOL

I got a recruiting email from him a few months ago. Looks as if the only company he is licensed with is Columbian so I guess he took his one company philosophy to them..

 

[shonceman]

I got a recruiting email from him a few months ago. Looks as if the only company he is licensed with is Columbian so I guess he took his one company philosophy to them..

Eddie's still in the business? Strikes me kind of funny if he went to Columbian. Before Bontell, Settlers had brought in Tony Cositore, who used to be the VP over the home service division at Columbian. They got Mike Munn from Columbian shortly after. Haven't got a clue as to why those guys ended up leaving Settlers.

 

[rousemark]

Eddie's still in the business? Strikes me kind of funny if he went to Columbian. Before Bontell, Settlers had brought in Tony Cositore, who used to be the VP over the home service division at Columbian. They got Mike Munn from Columbian shortly after. Haven't got a clue as to why those guys ended up leaving Settlers.

I believe Eddie retired from Settlers before it closed..

 

[kingsizexx]

I understand the basic actuarial theory and realize insurance companies invest premiums.

But the mental math for FE as an insurance carrier doesn't work for me. Just curious.

• The product is sold to seniors, and often seniors in poor health, so it's not like term or whole life where there's a long runway of premiums, or where you have younger/healthier people balancing out the pool
• They effectively get zero premiums the first 12-18 months. This is assuming the typical IMO is on a 150%-ish of FYC contract. In fact, the carrier often advances the first 9 months, which is even worse from a time value of money perspective. And of course in later years, they're still paying out some small percentage as residuals.
• The premium is typically fixed, so any kind of inflation reduces returns
• If it's GI and the insured dies during the graded benefit period, they're still returning all the premium (PLUS having paid it out as commission) plus some interest rate, and possibly the entire death benefit if it's accidental or >2 years (though GI pays less of a commission)
• If the insured dies at, say, 2 years, they have at best 6 months' premiums (if for example the premium is $50/mo, they have $300 in revenue , verses a $25K payout). Even at five years, they only have 3.5 years' premium ($2100). Sure, there's their investment returns in there, but even if they're making 15% annually (a dream in today's interest landscape) they are still deep in the red.

So the only way I can see it being profitable is if

• there is a high lapse/cancel rate so that they never pay out...though that doesn't make sense to me, because if a customer lapses after a few months, they (a) have to pay out any premiums as commissions so they have zero revenue to show, and (2) they also have the cost of processing the account internally. So it'd have to be a high lapse/cancel rate at > 18 months
• FE is mixed in with other insurance products and insurance companies make their return on the whole...though I would think every product line would need to contribute profitably regardless
• people pay on FE policies a long time...this is the only thing I can figure. Do people really stay on FE policies for 5, 10, 15 years?

Just curious. I know they have smart actuaries and math wizards so it must be profitable. Not planning on on starting my own FE insurance company LOL

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