Ohio National and Constellation

[Allen Trent]

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.

good point..............and carriers tend to be the targets with deeper pockets. only really takes 1 aggressive law firm to get rolling on stuff like this

 

[scagnt83]

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.

David, there are 1000s of E&O lawsuits over cash value life policies that do not perform as an agent claimed they would.

How many are successful? I dont know. But I do know it cost those agents both money and time to fight those claims in court.

Lawsuits are not just immediately thrown out. Even if it is able to be "thrown out" by the judge, that is a motion the agents attorney would file with the court. Meaning it would cost them attorney fees no matter what.


The issue is not just about Dividends. Its about the "retirement income plan" sold to the client that was based around dividends.

Its the recommendations & suggestions to do something different for their retirement income... and that recommendation is now going to provide 50% less income than the original plan called for.
(that is why most carriers warn agents against stuff like that)

That is exactly the kind of scenario that makes it to a jury... thats if the E&O carrier cant provide an offer high enough to satisfy the plaintiff. Most are settled. Juries are very sympathetic to people who lose out on half their retirement.

 

[scagnt83]

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.

good point..............and carriers tend to be the targets with deeper pockets. only really takes 1 aggressive law firm to get rolling on stuff like this

Anyone with E&O insurance is a target to lawyers. Same with medical malpractice. Sure the hospital gets sued, but the doctor gets sued right along with them... because they both have insurance policies.

And when a retirement income plan does not work out, they blame the person that convinced them to do it. Ohio National did not tell them to use the policy as their main retirement vehicle... the agent did. When a policy is sold for retirement income, and dividends go away... its most definitely a sales issue in the mind of the client and their attorney.

 

[DHK]

So what you're saying is that anyone can sue for any reason at all, regardless of blame or fault.

No surprises there.

For my group, we're more concerned about the plans working out than we are about the potential of being sued. We want these plans to work out for our clients. That's our primary concern.

But typically speaking, the person with the most documentation... wins.

There's a reason why I subscribe to CopyTalk. There's a reason why my client files and notes are as complete as they are.

More documentation can help dismiss complaints easily. Marv Feldman talks about that in this video here:


I pity the agent that doesn't have documentation or notes for high premium sales. (That's just being stupid and not managing one's business risks well.)

 

[DHK]

Btw, if you want to save $20 a month on CopyTalk... I have my own discount code here:

http://www.copytalk.com/dkinder

I just get a free month for everyone who signs up.

 

[scagnt83]

So what you're saying is that anyone can sue for any reason at all, regardless of blame or fault.

No surprises there.

For my group, we're more concerned about the plans working out than we are about the potential of being sued. We want these plans to work out for our clients. That's our primary concern.

But typically speaking, the person with the most documentation... wins.

There's a reason why I subscribe to CopyTalk. There's a reason why my client files and notes are as complete as they are.

More documentation can help dismiss complaints easily. Marv Feldman talks about that in this video here:


I pity the agent that doesn't have documentation or notes for high premium sales. (That's just being stupid and not managing one's business risks well.)

We arent talking about a DOI complaint. We are talking about a lawsuit. Two extremely different scenarios.

E&O does not kick in with complaints to the DOI. E&O kicks in for a court of law.

You sell someone a "safe retirement plan" that now is looking at a 50% income reduction, you are looking at a lot more than just a DOI complaint.

Documentation certainly helps with a lawsuit. But so many more factors come into play.

Especially if recommendations were made to stop contributing to a 401k or IRA. Or comparisons to a 401k or IRA were made. Or tax advice about other products was given as a means to facilitate the sale. Etc. Etc.

Because those are non-compliant situations that a client certainly can take an agent to COURT for, even in normal circumstances. Much less when their retirement income gets cut by 50%.

No judge or jury is going to agree the "plan is working" with a 50% income reduction. When it was sold as a "safe alternative". The agent made bank with not just a life sale.. but an annuity sale as well... and the client gets half of what they planned to survive on in retirement. The agents E&O will settle that case in a heartbeat.... probably for 50%-60% of the difference in cumulative lifetime income. Oh, then there is the issue of the annuity they are locked into. That will likely come into play in the settlement as well.

BTW, less than 20% of life insurance related E&O claims ever see a judge or jury. They are settled prior to that.

 

[scagnt83]

Btw, if you want to save $20 a month on CopyTalk... I have my own discount code here:

http://www.copytalk.com/dkinder

I just get a free month for everyone who signs up.

Talk to text on a smartphone is the free version of that. But copytalk is a great service. I used it a lot in my early days as an agent.