large scale replacements of your own clients-

Feb 23, 2019

  1. SpruceBruce
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    SpruceBruce Expert

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    I previously sold simplified issue policies in the mortgage protection market. Not doing that now. Looks like nearly all of my term clients would benefit by me replacing the policies with fully underwritten ones with a different carrier. My only concern is the reaction I may endure with the current carriers- 2 of them. I suspect in a short time they would cancel my contract for cause. This of course looks bad when you apply for any new contracts and could be a problem in the future. My logic tells me to write them and request that my contract be terminated, before they do it. We are talking about 60-90 replacements with 2 carriers. If I self terminate before they do, can they still contact the Dept of insurance in my my state and report they are terminating with cause. I have no experience in this are, looking for guidance..
     
  2. glgamerica
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    glgamerica Super Genius

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    I'm not sure that replacement of an existing life insurance policy is even grounds for "cause" to terminate a contract. Replacement isn't illegal if you comply with the regulations. My guess is that it's likely the replacement department won't even talk to the contracting department but who knows for sure.

    You could have an issue if you have advanced commission on those policies or had some other agreement in place where you might have agreed not to do that eg, non solicitation agreement.

    If you are going to replace a policy, make sure it's in the best interest of the policyholder and you follow the rules of replacement in the state you are doing business in. I'd also make sure the new policies are in force before you cancel the old ones since it's full underwriting.

    If you aren't going to do business with that company anymore and don't need the contract then I suppose you could always terminate it yourself as you suggested.

    Maybe others can chime in if they have had an issue to better help you out.
     
  3. LGilmore
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    LGilmore Guru

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    Might want to review your contract before you do anything. Insurance carriers hate agents who go elsewhere and try to pull away existing business. You could end up spending all your new commissions in defense in court. Look through the old stuff here. There was an agent who rubbed the former company's nose in how many clients he was pulling off.

    They pretty much drove him out of business, by the cost of defense. Remember who has the deeper pockets and who gets the replacement notice with your name on it.

    If you're going to replace your prior business with a new carrier, do it slowly. Do not draw attention to yourself. It can be expensive it you do.

    Remember it is not a matter of who is right or not, it's a matter of who has more money and who can last in court. The best plan is do it slowly that you don't hit their radar. Insurance companies have a habit of making examples so other agents don't get the same idea.
     
    LGilmore, Feb 23, 2019
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  4. Baseball7
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    Dont do it find new clients
     
  5. SpruceBruce
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    L-Gilmore-
    My contracts say I can be terminated with cause for inducing any client to replace the business. I am not on advances and do not owe either money. In all cases I am looking at adding more years of coverage, for close to same cost, or increasing their face amount, usually both.We are talking about a substantially better deal for clients- what I would put in the No Brainer' category. Obviously these replacement will cause the carriers to terminate my contracts with cause. But what if I am the one who request cancelling of the contracts in advance of their actions. ... I am an independent agent, looking out to better peoples lives. The better we really help folks to solve their problems the better we do also.
     
  6. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    This is not legal or compliance advice.

    My old MassMutual career contract had a "non-solicit" or "replacement" agreement in place regarding replacing policies only after 2 years after leaving the agency.

    If you terminate your selling contract with the company first, give it some time before considering replacement - for business/commission reasons.
     
    DHK, Feb 23, 2019
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  7. SpruceBruce
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    I do not have a non-compete clause in these 2 contracts. Just a-"if you replace we will
    terminate clause."
     
  8. rousemark
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    rousemark Still Here!

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    That is a non compete clause... It also proabky says that if you replace after termination then you may be subject to their not paying any future renewals on the business you have not replaced.. On danger with wholesale replacement is along the way you may misstate something and then may find yourself having to defend against charges by the DOI .. It is never a good idea to roll your entire life book.. You roll a case and a new contestable period begins.. What happens when the new company refuses to pay a death claim that the old company would have paid?
     
  9. SpruceBruce
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    No doubt I must be careful to ask every question and let them know a new contestable period starts over. That is always a issue when someone starts a new policy. If client's health is good and I ask each client every health question. There should be no problems. I will of course do replacement forms and leave client with sales material including quotes and summary of accelerated death benefits. You raise a good point on contestability. It will be vital that I not misstate anything. Life has some risk all we can do is do our best to minimize them. The way I see it. done properly and carefully, the clients and their families will benefit and so will mine.
     
  10. rousemark
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    Just remember when that contestable claim is not paid, what you told the client doesn't matter... Generally there are only two witnesses to what what was said and one of them is dead... The other's testimony is suspect as being self serving.. This is one case where you are guilty until proven innocent..
     
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