Ohio National - Demutualization

[Allen Trent]

It isn't a liability for the POLICYHOLDER, but the insurance COMPANY.

Run a WL illustration looking solely at the guaranteed columns. What happens if the client stops paying premiums or takes loans to cover the premium? Does the guaranteed column still show the original face amount always being paid out? Why not?

It is because the client is "liable" to make those premiums for the carrier to guarantee the death benefit. It is because the carrier has priced their product by regulation to include the mortality cost of insurance & expected rate of return on their investments

Did the WL carriers retroactively improve the guaranteed columns of WL issued from 1950 to 1990 when they experienced improved life expectancy & mortality? No, they only improved their mortality assumptions in new products. (Same for UL carriers, they didn't lower inforce COI). Carrier I work with actually lowered the COI on their inforce UL book around 2000 & at same time lowered inforce term premiums when mortality assumptions improved greatly. Had never seen that done.

Not saying UL or IUL is better as I own about 80% WL myself & prefer it. WL today is in a disadvantaged position when it is forced to build CV to equal death benefit when the client can't take both the CV & death benefit of the guaranteed columns. So, fully guaranteed or secondary guarantee UL/IUL is cheaper for protection focus & allows any variation of being "paid up" compared to the very few & inflexible limited pay WL. Now add that another regulation, 7702, is making accumulation focus look way more attractive with VUL/IUL because you need way less net.amount at risk compared to a WL.

I dont like it. I prefer the simplicity of WL for myself & consumers as too much flexibility doesn't have a great history with consumers that change their minds & agents that don't service ongoingly the "plan" made at time of sale.

The low interest rate environment is no where near done. Saw a carrier has $50M of bond maturities this quarter that are currently at 7.5%. it is still going to be awhile of hearing of dividend reductions & lower caps on products. All this has proven is we as agents over the last 30+ years focused clients too much on the projected columns & built the "plan" around the projected when the client likely wouldn't have bought the "plan" had we focused it on the worst case. It began with all the 1035 of solid WL policies getting surrendered or 1035 exchanged to ULs in the 1980s

 

[scagnt83]

And yet, I repeated myself over and over again that I was talking about a policy that would be paid up.

Did I stutter???

NO! The 10-pay policy (for death benefit purposes) is still GUARANTEED if all 10 years of premiums are paid.

The viability of the policy to use for retirement income purposes is the only part that is questioned.

I sure hope your E&O is paid up and that you aren't making undue statements that aren't true.

You are talking about a policy that WOULD BE paid up in year 10. You never said you are speaking solely about 10pay policies that are beyond year 10. And if thats the case... what about all the 10pay policies that are under 10 years? Do they not matter??

You are the one making false statements about UL. I repeated myself over and over... PFG and I are talking about the CV... not DB. Specifically the PLAN THE CLIENT HAD REGARDING THE CASH VALUE.

You want to keep deflecting back to the DB. Nobody ever said the DB was not guaranteed.

What you are refusing to acknowledge, is the "premium risk" that WL carries. It is a risk of "lost opportunity cost" if the carrier does not follow through with their promises like ON has.

And Im not saying UL does not carry premium risk.

My E&O is just fine. Im not advising clients to take their 401k accounts and put it into Life Insurance via Indexed Annuity Riders. Plus, Im not making any false or misleading statements like you are.

 

[scagnt83]

The viability of the policy to use for retirement income purposes is the only part that is questioned.

Which is the main reason people purchase 10pay WL.... and the main sales pitch agents make when selling 10pay WL.

If someone was not concerned with supplemental retirement income, they would purchase a Pay to 121 WL. A 10pay gives them the least amount of DB per dollar of premium.

So again, you are ignoring the subject at hand... the main reason these products are bought... the exact reason YOU were selling them for...

 

[scagnt83]

It is because the client is "liable" to make those premiums for the carrier to guarantee the death benefit. It is because the carrier has priced their product by regulation to include the mortality cost of insurance & expected rate of return on their investments

Its basic logic for anyone who is not needlessly defending their decision to sell ON 10pay policies.

Clients certainly understand the risk of premium commitments and locking up significant amounts of their life savings in a product that is based on insurers promises.

 

[scagnt83]

Run a WL illustration looking solely at the guaranteed columns. What happens if the client stops paying premiums or takes loans to cover the premium? Does the guaranteed column still show the original face amount always being paid out? Why not?

Lets take that a step further to the current ON situation.

We have heard that ON clients are not screwed now because they can just 1035 their CV... IF insurable.

So lets compare the CV of a 10pay in y3 to an IUL in y3:

Using Davids example posted on this thread:
$105k in premiums gives $59k in CV after 2 years.

So this client who "is not screwed over" is forced to take a $46,000 loss if they want to keep "the plan" at the same expected return as they originally bought into.


Compare that to an IUL in y3 after $105k in premiums:
After $105k in premiums, they have $80k in CSV.
So that is only a $25k loss if they are screwed by the carrier and have to 1035 out.
(same age and standard rating on that illustration)


In that scenario, the client carries twice the premium risk with WL vs. IUL. Something Ohio National policyholders (and agents) have learned the hard way.

 

[scagnt83]

You can indeed write the protection focus IUL with No lapse guarantee to age 120 & have it be a 1 pay or 10 pay or whatever to cover the no lapse permanently. Regardless of what changes are made to COI or cap rates, it is guaranteed to pay the death death benefit.

You can design a UL to be fully guaranteed by the NAR, no secondary guarantees necessary.

IUL will never be fully guaranteed other than via secondary guarantee, because you cant guarantee an index return.

However, you can design an IUL to be fully guaranteed at extremely low index returns. I have polices on the books that could get a 2% index return for life and still not lapse.

 

[Lloyds of Lubbock]

"We have heard that ON clients are not screwed now because they can just 1035 their CV... IF insurable.
This is a bit of a reach, if you bought a ten pay, the new one is twice as much based on new 7702 rules so right off the bat you are buying less death benefit
The 1035 money over and above the premium goes into a pua rider( assuming 1035 to another whole life policy) that rider carries a sales charge some up to 10%.
The client is older so the premium will be higher and there is a new contestability clause.
A healthy client may have an out and but certainly is not in an enviable position.

 

[Allen Trent]

Lets take that a step further to the current ON situation.

We have heard that ON clients are not screwed now because they can just 1035 their CV... IF insurable.

So lets compare the CV of a 10pay in y3 to an IUL in y3:

Using Davids example posted on this thread:
$105k in premiums gives $59k in CV after 2 years.

So this client who "is not screwed over" is forced to take a $46,000 loss if they want to keep "the plan" at the same expected return as they originally bought into.


Compare that to an IUL in y3 after $105k in premiums:
After $105k in premiums, they have $80k in CSV.
So that is only a $25k loss if they are screwed by the carrier and have to 1035 out.
(same age and standard rating on that illustration)


In that scenario, the client carries twice the premium risk with WL vs. IUL. Something Ohio National policyholders (and agents) have learned the hard way.

are you using an IUL illustration before or after 7702 changes? It would be a bit disingenuous to use a current max funded today when that wasnt available.

Brings up another aspect to this "debate" you 2 are having. should insurable clients that had max funded IUL/VUL plans issued before 2021 reprices go back & 1035 to get the better offering today that allows way less NAR & more of the cash to go into the overfunding component? While I dont believe anyone could completely foresee the ON full 180 on product design, I also dont believe anyone that sold a VUL/IUL max funding before the last year could have predicted the government would allow more money to go into smaller face policies for IUL/VUL. Will there be a bunch of agents rushing to 1035 cases when they run into these situations saying "why did your agent make your face amount so large, I can write you the same $25k per year case into $400k face amount instead of $700k & look at all the COI savings in this supplemental costs chart I only show when mine is better............LOL

 

[DHK]

Will there be a bunch of agents rushing to 1035 cases when they run into these situations saying "why did your agent make your face amount so large, I can write you the same $25k per year case into $400k face amount instead of $700k & look at all the COI savings in this supplemental costs chart I only show when mine is better............LOL

I did see a YouTube video of a guy trying to promote a "fire sale" on the old 4% guarantees... so the reverse CAN be true.

I believe it depends on the nature of the individual agent.
- Does the agent merely want a sale?
- Or can he really put the client in a better position?

This is part of the conversations we're having in TBL. We're very concerned that we don't want our clients perceiving that we just want another sale (which means another commission). We can't help that we would be paid to replace the business - it's built in and it's state law. We would do the replacements for FREE if we could. We've all agreed to that in spirit in TBL.

However, that being said, we did say that it COULD be another reason we'd be talking this year about a potential replacement anyway. Again, only if we can do so in the client's best interest. (It's unfortunate that ONL isn't using this new law on behalf of client best interests but I digress.)

 

[DHK]

So again, you are ignoring the subject at hand... the main reason these products are bought... the exact reason YOU were selling them for...

No, I'm convinced that you are gaslighting me and are just trying to feed a narcissistic tendency to always be right.

I've admitted when I don't know something, but you can't. It's not in your nature and you keep twisting terms and facts in order to ... do something. I guess to always be right.

I've had you on ignore, but I have previously respected you too much to not view your posts.

I'm done with you Tyler.