Ohio National and Constellation

[DHK]

Get this:

Apparently Ohio National sent out a letter to POLICYHOLDERS this week talking about how much "Mutual Matters"!

(Ugh.)

 

[scagnt83]

I would then wonder how much they emphasized dividend performance of the policy.

The plan will work, but the dollar amounts would simply need adjusting (lowering). The math would still work better than having the money in an account where you cannot even calculate the amount of taxes you owe.

Any illustration shown with dividends was emphasizing the dividend performance... which means all of them were.

Sure, you can take income from the policy if Dividends stop. But it will be a fraction of what you originally planned. Not even close to anything that was in equities over the past 10 years, even at the highest tax brackets.

I doubt any client "planned" for a no or ultra low dividend scenario. The definition of "works" is highly subjective when you are the one who sold the policy and made the plan. But when you are the one who did "the plan" instead of your 401k... the definition of "works" is not subjective at all... the plan working means an income comparable to what they would have had with alternatives.

 

[scagnt83]

Or encouraged them to liquidate their 401k to buy a WL policy. I can see lawsuits on the horizon, as the "plan" won't even be close to working. And with the 10pay or pay to 65, they will take a pounding to get out. We live in a sue happy world, I see it coming unfortunately.

I agree.

Also, Ive heard about stuff ON was letting get by in suitability that other carriers would not have let happen. Signs of desperation. But it put those agents in a highly liable situation.

Try telling a jury or a judge that a 1% return is a suitable retirement solution or a "working plan" .... that's a guaranteed way to lose your case.

 

[DHK]

Try telling a jury or a judge that a 1% return is a suitable retirement solution or a "working plan" .... that's a guaranteed way to lose your case.

Dividends are not in the control of the insurance agent, so it can't be an E&O issue. Certainly no fraud involved.

A complaint can be filed, but since the insurance agent isn't responsible for the dividend performance of the company, the agent won't have an issue.

You can't sue because your WL didn't perform to expectations. You can try but it won't work.

That's like trying to sue your advisor that since taxes went up, you didn't get the net income you wanted from your IRA. That case would be tossed out instantly too.


We are concerned about the performance of these plans, but we're not concerned about being sued over all this. Two different considerations.

 

[Chuckler]

So...how do I get in touch with these clients that want to leave ?

 

[DHK]

You don't want to. Affected policyholders should wait until after the end of the year to ensure that they are compensated for their ownership interests. If they surrender the policy before that, they may not receive that compensation.

I've heard that some companies are not allowing 1035 exchanges from Ohio National for that purpose, but that's just heresay. I don't know that for certain.

 

[Allen Trent]

You can't sue because your WL didn't perform to expectations. You can try but it won't work.

you are correct about the dividends, but I recall many agents & carriers being sued for "vanishing premium" sales in late 90s/early 2000s. MetLife settled in the Billions, Manulife, General American & John Hancock, etc................vanishing premium was solely a dividend concept, so there is some precedence on lawsuits regarding dividend selling. The difference now is carriers have way better disclosures & less captive agents, so the agent may face more of the scrutiny than the carrier in present day cases, if any. Some of the suits, if I recall, were for giving consumers the impression the life insurance was a retirement plan and/or personal pension plan.

Not likely in this OH situation, but if there are emails/texts/materials out there talking about using 401k or IRA money into this same but better life insurance retirement income plan, it will be easier for a lawyer to make a case or get an E&O carrier to settle out of court. Or if there are documents encouraging premium finance of the premiums to get all the good stuff of the life insurance but none of the bad stuff of the loans (margin calls, etc) a case could be made I am sure.

 

[Chuckler]

You don't want to. Affected policyholders should wait until after the end of the year to ensure that they are compensated for their ownership interests. If they surrender the policy before that, they may not receive that compensation.

I've heard that some companies are not allowing 1035 exchanges from Ohio National for that purpose, but that's just heresay. I don't know that for certain.

There were smiley faces that should have conveyed the jovial nature of my comment...but I guess they don't translate well from mobile.

 

[DHK]

Vanishing premiums was finally ruled on by the NAIC and now is more accurately defined by the term "premium offset by policy values" so that it's never implied that the premium actually "vanishes" (regardless of dividend performance).

If there's ever to be any lawsuits over any of this... it would be to Ohio National, not necessarily the conduct of their agents. It's not like the agents wanted demutualization.

Sure, you can imply that clients were harmed by it... but when did the harm come in? At the time of sale? That's the agent. Because Ohio National reduced their dividend to be the "first to the worst"? That's on Ohio National... not the agent.

Got to be clear on where the faults lie. If the lawsuits are coming up because of demutualization... that's on Ohio National, not the agent.

 

[DHK]

Not likely in this OH situation, but if there are emails/texts/materials out there talking about using 401k or IRA money into this same but better life insurance retirement income plan,

Btw, we have a whole brochure on 1099's in retirement that is client approved.

Ohio National is not the only company to have such a brochure. I have one from New York Life. It's practically the exact same content. (I say that because I know the outline of the info, not that I read them in serious detail.)