Just left NASB (warning to other future naive noobs)

[DayTimer]

Which never comes up in real life.

@Thedude is saying that it should come up whenever a policy is replaced by a certificate or if a certificate if offered rather than a policy. If it never comes up, then that is only because the agent isn't bringing it up. The argument that it never comes up may actually support the dude's position that is should be brought up because the consumer has no idea. Thus it becomes the agent's responsibility to let the customer know exactly what the agent is selling, right?

So there are two questions:

1) Is there an ethical responsibility to let the client know they are acquiring a certificate of insurance rather than a policy?

and

2) If there is such an ethical responsibility that should be explicitly brought to the client's attention, what would constitute a proper explanation of the differences to satisfy the ethical responsibility the agent has to the client?

 

[Baseball7]

This is the dumbest argument ever there's no difference and trying to explain to a final expense client is basically guaranteeing yourself a lost sale. I think you have spent too much time selling rich people insurance david that you forgot how final expense works.

 

[BibH]

I agree most fe clients have zero ability to comprehend the difference between a certificate issued by fraternal and a policy issued by an insurance company backed by the state guarantee fund . Although its highly highly unlikely a fraternal adds an assessment to a policy which is paid out on death it is possible . As far as i know only one fraternal has ever done that . I recall Rouse listing a company once . I would hope for the integrity of the insurance industry that if a big fraternal like RNA or Foresters got in trouble somebody would buy the policy's out and honor the full death benefit .Death benefits are like having your money in a bank . There's never a thought you'd lose a dime in a bank just like if your Life policy is over 2 yrs old its automatic its paid .

 

[shonceman]

This is the dumbest argument ever there's no difference and trying to explain to a final expense client is basically guaranteeing yourself a lost sale. I think you have spent too much time selling rich people insurance david that you forgot how final expense works.

I disagree that there's no difference. There are clear differences. The debate has always seemed to be about whether those differences should matter.

I have never sold or offered a fraternal until recently. In the last few months, I contracted with Sons of Norway, mainly because of their GI product's rates being considerably lower than Gerber or AIG.

I wrote a few, then remembered a main objection to fraternals being that, under a certificate, rates can be increased or the members can be assessed if claims are higher than planned for. I went through 3 or 4 cases where I felt I should explain that possibility, then offer them the choice of the certificate at lower rates vs the policy at higher rates but better guarantees. Every one of them chose the higher priced policy.

Because this was going to keep happening, I called SON sales support and asked about that. I was told that the language in the certificate guarantees no rate increases. But he didn't know how to answer the assessment question because he had never heard of that.

I'm not planning on replacing the fraternal certificates I run across, because (as I mentioned before) I don't usually replace coverage that's been in force for any length of time. But, like @DayTimer, I would like to hear from @Thedude (and anyone else) about explaining the difference to a client. If there are differences that clients should consider, I feel ethically bound to share them for full disclosure. But I'd also like to avoid unhooking the sale.

 

[rousemark]

I agree most fe clients have zero ability to comprehend the difference between a certificate issued by fraternal and a policy issued by an insurance company backed by the state guarantee fund . Although its highly highly unlikely a fraternal adds an assessment to a policy which is paid out on death it is possible . As far as i know only one fraternal has ever done that . I recall Rouse listing a company once . I would hope for the integrity of the insurance industry that if a big fraternal like RNA or Foresters got in trouble somebody would buy the policy's out and honor the full death benefit .Death benefits are like having your money in a bank . There's never a thought you'd lose a dime in a bank just like if your Life policy is over 2 yrs old its automatic its paid .

There are no policies to buy out. As for and assessments have been levied by fraternals in the past and when the fraternal was aquired by another the assessment was allowed to stand. There have been others other than ACA over the years.

Dropbox - Royal Arcunum Letter ACA.pdf - Simplify your life

 

[rousemark]

I disagree that there's no difference. There are clear differences. The debate has always seemed to be about whether those differences should matter.

I have never sold or offered a fraternal until recently. In the last few months, I contracted with Sons of Norway, mainly because of their GI product's rates being considerably lower than Gerber or AIG.

I wrote a few, then remembered a main objection to fraternals being that, under a certificate, rates can be increased or the members can be assessed if claims are higher than planned for. I went through 3 or 4 cases where I felt I should explain that possibility, then offer them the choice of the certificate at lower rates vs the policy at higher rates but better guarantees. Every one of them chose the higher priced policy.

Because this was going to keep happening, I called SON sales support and asked about that. I was told that the language in the certificate guarantees no rate increases. But he didn't know how to answer the assessment question because he had never heard of that.

I'm not planning on replacing the fraternal certificates I run across, because (as I mentioned before) I don't usually replace coverage that's been in force for any length of time. But, like @DayTimer, I would like to hear from @Thedude (and anyone else) about explaining the difference to a client. If there are differences that clients should consider, I feel ethically bound to share them for full disclosure. But I'd also like to avoid unhooking the sale.

Can't believe a CS rep with a fraternal would not know about the possibility of assessments. The rates are guaranteed but it would be hard to explain to someone that received an assessment that they didn't get a rate increase.

 

[Life Hawk]

You sound as if you're asking about writing a new policy on someone who has a lapsed policy. That's not a replacement.

Tell that to Trans. I've had to provide replacement paper work over an old lapsed policy to provide new coverage before. Some internal thing that never made a hill of beans sense to me.

 

[shonceman]

Can't believe a CS rep with a fraternal would not know about the possibility of assessments. The rates are guaranteed but it would be hard to explain to someone that received an assessment that they didn't get a rate increase.

I suppose the argument is that they've never done anything like that in their 125 year history.

 

[rousemark]

I suppose the argument is that they've never done anything like that in their 125 year history.

And, prior to 1991, in its 146 year history, Mutual Benefit Life insurance Company, the "Tiffany" of insurance companies had never been placed into receivership and dissolved.

 

[DayTimer]

I think you have spent too much time selling rich people insurance david that you forgot how final expense works.

No need to descend to condescension. There is no reason that this forum can't sustain a civil and factual discussion. FWIW, most, and I would argue, all of my FE clients are quite capable of understanding the concept of assessment when explained clearly.

If there are differences that clients should consider, I feel ethically bound to share them for full disclosure. But I'd also like to avoid unhooking the sale

I know you agree with me that "unhooking the sale," should not be the determining factor as to whether or not to speak of these differences to the consumer. In fact, if there are ethical reasons to disclose the difference, the losing the sale of risk of confusion is not a consideration at all.

I do carry KSKJ and RNA, and I always explain the difference as I understand it, and very often, as you yourself have experienced, clients choose the higher priced alternative. I did write three KSKJ this week and all three were able to understand exactly what was explained to them. And when I deliver the policies I point out the clause (on page 6 I believe it is found) where it discusses the possibility of assessment. Can't remember the exact page as I haven't delivered a KSKJ policy in over a year - but it is in there.

So, the question remains open: Are the differences between a policy taken out with an insurer where the policy owners have recourse to the protections provided by receivership and the state guaranty associations and a certificate of insurance issued by a fraternal without those same protections of significant hazard to render the agent ethically bound to disclose those difference?

To say "but doing so might cost me the sale" is not an answer to the question.


I remember tat @Thedude has been the most vocal critic of fraternal organizations and certificates, and I would like to hear from him on this matter. What would satisfy him in terms of disclosure to the consumer?