What to expect for a preneed commission schedule?

[Tahoe Ray]

. Raising the price of anything plays into the theme, buy now before the price goes up.

That's the approach I would take if I were in this market...

 

[Lawsonhj1]

My favorite close for decades and for everything today comes to only "X" or you can put it off price doubles every 7-10 years with inflation, or I tend to call it procrastination so 10 years down the road your looking at "2X" and the longer you live the more your penalized and that isn't fair is it? When you look at this figure here "X" and this much bigger figure here "2X" which one of these two ways looks like the best way to take care of this for your family? Hopefully it is all baited just right and they yell at you and want to pay today.

 

[Allen Trent]

I agree with all that you're saying here.

What Allen mentioned about these new regulations (that were stuck into the COVID bill in December for some ridiculous reason) is going to really hurt any type of "discounted" insurance strategy, though.

not only the Covid provision, but the existing regulations pertaining to non-forfeiture & valuation rates that must be adjusted this year because of the sustained low interest rate environment. That will push up reserving & pricing. in 2013, those non-forfeiture rates were at 5%, changed to 4.5% where they have been for 7-8 years. Those rates were expected to finish 2020 at 4%, but fell even further to 3.75%. That means these valuation & non-forfeiture rates will be implemented into cash value policies like WL, ROP, etc & I would assume funeral plans, thus impacting pricing & reserving. I am no expert, WL plans likely will have to build cash values quicker, but the required premiums to make that happen will likely jump from those rates dropping from 4.5% to 3.75%. Here is a link to some info on the topic: GBC/NMC - News (lifebase.com)

 

[Serena]

Thank you everyone for your expertise and insight. It’s all very eye opening for various reasons. This is an eclectic group of wise individuals and I appreciate the community you have formed here. I will be back with more questions and updates in the future.

 

[Newby]

be careful to not put all your eggs in 1 basket. these funeral plans without underwriting are likely to be hardest hit by some issues surrounding the low interest rate environment & non-forfeiture regulatory rates dropping. It is getting very hard for the carrier to collect a premium that isnt as much or more than the death benefit to make the math work for them to profit after expenses & commissions. There are not many places for carriers to invest the premiums or lump sum to make any interest today in the very short turnaround time between policy issuance & claim payment on funeral plans. one of the only places they could improve their assumptions could be by lowering commissions or leaving the marketplace all together.

not trying to be negative, just saying it is a serious math problem today for all insurance carriers, but funeral plans may even be harder because of the nature of the design & the lack of Underwriting,etc

That’s why they pay so well when agents write healthy people and they charge back 100% when agents have deaths in the 1st 13 months. You can’t make a living at PreNeed unless you write healthy cases.

 

[Newby]

That's the approach I would take if I were in this market...

That was always a big part of my presentation. But it honestly wasn’t the motivator for most people.

A lot of people just want to have everything nice and tidy in their estate plan. They want the i’s dotted and their t’s crossed and leave the least mess for their kids. Those are the ones that you can sell PreNeed plans to when they’re younger and healthy (60 to 75). Those are the ones that you make a good living selling to.

The ones that even understand inflation are few and far between. They have seen it happen all of their life. But they seem surprised when I explain it to them about funeral pricing.

 

[Lawsonhj1]

Yes, interesting thing my mentor taught it has nothing to do with money. Instead we focused on just four decisions money was assumed. System has been passed down for several generations now. Every time some ding bat sales counselor come in with some sad story about the customer and money you could almost always pin it down to something had nothing to do with money.

 

[GC Preneed]

There are a ton of moving parts on preneed. My agency (IMO) writes 140M annually with ~ 1000 FH's nationwide.

What percent of gross commission are the three funeral homes wanting? If you're writing over 1M as an individual producer I can get you 20%+ commissions on single pay (up to 30% on the lower ages) as a percent of face. Multipay I can get you closer to 40% commission as a percent of face.