Death claims put the life business in you

By Jim Ruta | October 20 2015 07:00AM
What advice do you have for me with my first death claim?

You may be in the life insurance business, but paying a death (life) claim will get the life insurance business into you. Life claims are why there is a life insurance business. Your overriding consideration is to be sensitive to the situation but get things done. It’s always hard when someone you love dies. I’ve handled life claims as an agent and a beneficiary and here is some help in this difficult but vital role.

It’s always a good idea to attend the funeral. Some think it’s unnecessary but paying your respects is always good. Give the family your sincere condolences and tell them that you will be in touch with them shortly.

Life claims are the most important time to “not over promise and under deliver”. Be careful not to mislead people about when money will be paid or how much. You don’t know what a company will do.

Call the beneficiary/surviving spouse to make an appointment to see the family as soon as practical. Say, you have some paperwork to provide the benefits the deceased wanted them to have.

These are delicate times but the financial realities of a death come to the survivors very quickly. It took my own daughter only 45 minutes to ask, “Daddy will we be okay?” Most funerals cost at least $20,000 so many middle-income families will not have the money on hand. And, while funeral homes may offer credit, there are collection agencies specifically dedicated to “compassionate collections” because some people do not pay funeral bills. Money and family squabbles are at the root of the problem. As the life insurance agent, you are someone they want to see and can help alleviate the stresses. Be careful you don’t say you will bring money. Just say you will do all you can to make sure they receive their benefits. Many companies prepare a “What to do now” workbook for death claim time. Funeral homes and lawyers have other similar documents. Provide them to beneficiaries. Consider creating your own “life claim kit” for beneficiaries. 

Offer to help complete other paperwork with them. You can provide a great value because you are better able to navigate these waters than a distraught family. This is not paid work but it does pay off in many ways.

The financial side of a death is a like “unpacking a Capital Needs Analysis”. Provide and help complete government benefit paperwork. Offer helpful suggestions like: referring an estate lawyer, helping with arrangements. Be the help you would want in the circumstance. Look for debts to pay, credit cards with possible coverage, mortgages to cancel, policies to claim on, potential coverage elsewhere, research old policies… there are many possibilities. Don’t just say “If there is anything I can do, please let me know.” No one will ask even when they need help. Volunteer and then help. Also, remind the family to protect and preserve the deceased’s identity and to be careful with old ID. There is no need to ad identity theft to the situation. Ultimately, just care for your client in this time of need. You’ll be better for it.

What do you think about elimination of life insurance commissions in favour of fee for service?

Insurance commissions are better than “fee for service”. They are a “fee for results” system. My friend Lawrence Geller recently pointed me to a recent Canadian Lawyer magazine article about lawyers moving their compensation from “billable hours” to a flat fee for value. It was an eye opening article if you are a life insurance agent. 

 I didn’t have to read very far to see what a mistake regulators would make to chase last century’s best compensation practices for this century’s life insurance business. Lawyers are discovering that fee for service is an outdated compensation strategy that their clients want to change. 

 Lawyers in this country and elsewhere are being asked by their clients to deliver value and results for money. They are not interested in the various amounts of work it might take to get the results. They are especially not interested in paying slow lawyers more than fast ones for the same results. They want to pay for results. Period.

 An hourly rate in the knowledge business is a little odd when you think about it. You either have the knowledge or you don’t. You either get it or you don’t. You get the proper results or you don’t. How long it takes to get those results is to equate a profession like law (or life insurance agency) to the trade of carpentry or plumbing. I don’t believe this thinking belongs in the life insurance business.

 Think about this. Life insurance commissions are really “fee for results” compensation. No one cares how long we have to work for the deal or to put the deal makers together. They just want the result – the protection for whom or what they love… or protection from what they don’t – income taxes. Sometimes the winning result happens quickly. Sometimes it takes a while. Sometimes it takes a very long time. The compensation is the same because the result or the value is the same. It’s like real estate in that way too.

 Consider life insurance type commissions as a flat fee for the face amount of coverage and varies by the quality of the coverage. The better the result – the face amount and the quality – the higher the flat fee. Commissions are a good fit for the knowledge business that is life insurance.

 We could express commission as a percentage of the face amount and relate the value of the client result to the value of the insurance advisor result. That way, a 2 million-dollar policy with a $3,000 flat fee, doesn’t sound so bad (for a term plan). Even a $30,000 flat fee for the “best on the market” protection that lasts forever, doesn’t seem oversized either (for whole life). Think about compensation for selling a new Toyota compared to a new Bentley. There are different commissions or flat fees. There is also different value for the purchaser.

 So, moving to a more professional and client friendly compensation structure can truly mean staying where we are.  A “fee for results” is the way for the 21st Century. The lawyers caught up to us. Finally.