The life insurance industry let us down when it allowed the estate tax rate to settle at 40% and the lifetime credit (exemption) to rise to $12MM per couple. The impact is still punishing planners of all stripes. It is time for life insurance companies to step up and commit to national advertising and marketing campaigns to promote the virtues of their core products, especially permanent life insurance.
Since then, the pin has been pulled from the grenade for PERMANENT life insurance. If the estate and gift taxes are successfully repealed in an upcoming tax reform act, it will be a devastating blow for the jumbo case market and for PERMANENT life insurance. The grenade will have gone off. I understand there will be a few niche markets (key man, forced savings strategies, over-funding for retirement income, premium finance and others) that will survive. Those niche markets for permanent insurance may be meaningful enough for a handful of carriers; not for dozens of them. There will always be a need for low face amount, permanent policies. To be clear, the sale of these permanent policies does not support or lead to a successful, bustling practice. That model used to work by helping new agents develop the stepping stones to much larger opportunities. That model is on life support and the repeal of the estate tax will be its end.
Just look at the overall permanent insurance numbers since the industry did not prevent the tax from being lowered or the exemption from rising to almost $6MM per person. Hopefully, the life insurance industry is mobilizing their influence and inspiring their troops to prevent the estate tax repeal from becoming reality. Personally, I don’t see it happening and I’m not sensing the passion and the fear required to win this battle. As much as anyone else in our industry, I hope that I am wrong.
Whether the tax is repealed or not, I would urge life insurance companies to act like companies in other industries who own the responsibility for creating a product’s demand. Without advertising and marketing campaigns on a national stage to re-brand the image of permanent life insurance and its distribution system, the remaining agents who average 60 years old will continue jumping ship. Leaving the responsibility and the cost of creating demand for this product to the distribution system, or no one, is a recipe for further disaster. Manufacturers create organic demand for their products. The auto industry and consumer electronics are two great examples.
Imagine if Apple and BMW left all sales and marketing solely to their local dealerships or the local wireless stores? No national sales and marketing campaigns to launch new products, defend against competitors, shape markets or educate consumers?
Today, most life insurance companies do not advertise on a national stage and if they do, they are brand advertising, which is of little or no value in business development at the local level. We don’t need anymore TV branding ads from insurance companies during The Masters. What the industry DOES NEED is for every relevant company to start running advertising campaigns about the virtues of permanent life insurance (and their other products) during the NCAA tournament, The Bachelor, the morning news shows, The Late Show with James Cordon and The Masters. This is an industry-wide problem and the industry needs to step up.
Permanent life insurance is a remarkable tool with extraordinary flexibility and great versatility. It can be customized, by the right professional, so that no two permanent life insurance policies are the same. No two buyers are the same. Their policies can and should reflect their differences, their needs and their desires, now and in the future.
One client may have an over-funded $5,000,000 IUL with Option C and a death benefit payable in a lump-sum. Another may have a $5,000,000 GUL with Living Benefits and the Installment Payout Option to protect his/her family with 20 guaranteed payments of $250,000 for 20 years. Another client may have a minimum funded UL tied into their lifestyle, earning credits for living the good life. And another might have a $5,000,000 WL policy with vanishing premiums.
Just like the combination of apps on my Smart Phone are not like the apps on another’s, no two permanent life insurance policies should be the same. We each start with a Smart Phone that makes calls. But, the way I intend to use mine is different than how you use yours. Our needs are different and that is what leads to which apps we download.
To help our industry fight the battle against the estate tax repeal, contact AALU for information about who to contact in Washington.
Ted Bernstein can be reached at Life Cycle Planners or by calling him in Boca Raton, Florida at 561-869-4500.
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Also published on Medium.
