Profession? Business? Which is it?

By Jim Ruta | March 12 2013 09:01PM

What do you make of the talk about making the business a profession?

I doubt that the change will have the impact its proponents expect. On one hand, I hear that you can’t legislate against fraudsters and on the other that we need to legislate a professions model to do just that. The logic escapes me.

There’s no magic in being a professional over a top business person. Quality is not in the name we give ourselves.
The concerns about no effective industry sanctions for bad actors, “sector hopping” - losing a life license but getting a mutual funds license instead or vice versa, lack of adherence to a code of ethics and credential verifications can be handled within the current framework. Regulatory changes can be made without creating monolithic bureaucracies, as I am certain would happen.

Frankly, I’m not that concerned about the regulations that would apply to “financial advisors”. That’s a challenging field and a complicated business. Honestly, I don’t understand how those advisors can do it all. That’s another matter but maybe part of the problem too.

What really concerns me is the idea that everyone who uses the title “financial advisor” AND ANYONE WHO DOES THE WORK OF ONE would be regulated in the same way. This would mean the end of the life insurance agents as we know them. It would also mean less insurance for consumers too.

This would not be a good thing in my opinion. Life insurance agents are not investment advisors. They do not necessarily create financial plans. They have a simple mandate. Help people protect their lives and their lifestyles.

They are primary financial care advisors. They handle the simple needs of dying too soon or becoming disabled in some way. I’m willing to give up the “living too long part”. Primary care advisors should be able to deal with one license and help their prospects and clients without having to pretend they know it all. I say “pretend” because it is pretending to know it all – “posing” as one advisor described it to me, is what it is.

No one can know it all. Doctors don’t. Lawyers don’t. Accountants don’t. Financial advisors are no different.
As for the code of ethics, maybe we can just pass into law some of the regulations that have sat un-passed? (Ontario for instance) Make life insurance agents accountable to that.

A fiduciary standard? No problem. The best advisors have always handled their clients’ money as if it belonged to their favourite grandmother. It doesn’t take a “professional” to do that. A smart, successful and honest sales person does that anyway.

Credentials wouldn’t be so much of a problem if we held ourselves out as licensed anyway. Life insurance agents in the jurisdictions with which I am familiar are supposed to do that now. How about enforcing that rule? That would make it easier for consumers and advisors alike.

In a world where a consumer can purchase life insurance all day from the TV, it’s hard to believe we need rules to over-regulate good agents that are just trying to help clients buy it properly with their help.

Rated cases are killing me. How can I handle them more effectively?

You can do two things to increase your success with rated cases. Both make a big difference.
The lack of Pre-underwriting is a big problem. Many advisors seem to think that one insurer is the same as the next. It’s like life insurance is a commodity and all you have to do is apply. That’s hardly the case.

As prices dropped and margins were squeezed, companies are more careful than ever to accept only the risks they want. They are more careful to pay every legitimate claim presented – but not one more.

Underwriting is their critical defense mechanism. It is more stringent, but you can’t blame companies for that. They have their responsibilities. You can only make these rules work to your advantage.

That takes Pre-underwriting cases. Get all the important occupational, hobby, sports, health and family questions into your sales routine very early. Why plan an insurance estate for hours for a prospect who can’t buy any? Get a good read on the insurability situation early.

Make it a practice to only quote standard rates. It’s tempting to quote those amazing, ultra, super select rates but it isn’t usually worth the trouble. If you’re wrong, you look like a heel. If you’re right, you don’t get any credit. There’s no upside. Be honest with buyers and tell them the approximate full cost and leave the final pricing up to the company.

Once you know enough about the prospect, select the company most likely to issue based on the circumstances. Different companies accept different business. Know these preferences and you will be a hero to your clients. Quality is not about rate.

If you question insurability, consider placing a guaranteed standard issue product first. Something is better than nothing. Be straight with prospects. You don’t have to be dead not to be able to buy life insurance.

If you still get a price increase, you’re not done yet. The price increase may not be so bad. You can often restate some ratings into more acceptable terms. “Your price is about the same as if you were a smoker.” Or, “Your price is just as if you were only 5 years older.” Minimize the impact and you increase acceptance.

If you still have trouble, remind them that insurance medicine is about groups and clinical medicine is about individuals. Ratings apply to groups like you, not necessarily to you. That can lessen the sting of a rating.

Finally, insurers consider claims per 1,000. Doctors talk in survivors per 1,000. So, a 100% extra premium means expected claims go from 10 out of 1,000 to 20 out of 1,000. That’s a doubling of risk but only a small change in health. There’s the reason for the extra.

But, there is not much difference between 990 out of 1,000 surviving compared to 980 out of 1,000 surviving. So your client, isn’t so badly off from this perspective. The key is to present the rating to your client immediately so a decision can be made. Time is of the essence. Ratings can never be increased, but they can be decreased or eliminated. The company has made an offer. Urge clients to take it and think about it as an owner.