Life Policy Audits and Risk Differentiation Underwriting (RDU)
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This document discusses fiduciary responsibility for life insurance policy trusts and the potential benefits of risk differentiation underwriting (RDU). It notes that 85% of trust-owned life insurance policies could provide more value if restructured. Most trustees do not have procedures to review policies or exit strategies for underperforming policies. RDU allows for a more thorough review of individual health risks, which could lead to restructured policies that better serve clients. RDU provides advantages over traditional underwriting by developing a deeper understanding of client health issues.
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Life Policy Audits and Risk Differentiation Underwriting (RDU)
- 1. Life Policy Audits and Risk Differentiation Underwriting (RDU) Risks and Opportunities
- 2. Fiduciary Responsibility & ILIT(s) “A trustee who is charged with responsibility for a life insurance policy must manage that policy just as it would any other trust investment” -American College of Trust and Estate Council “Developing trust laws poses new duties upon trustees of trusts holding life insurance policies” -Banking Law Journal RDU & A Breakthrough View on Policy Review
- 3. Fiduciary Responsibility & ILIT(s) “A study finds that 85% of trust-owned life insurance policies could be restructured to provide more value” -Lawyers Weekly “In a recent survey, more than 80% of trustees report they have neither procedures in place for life policy review nor an exit strategy for under-performing policies” -Lawyers Weekly RDU & A Breakthrough View on Policy Review
- 4. Uniform Prudent Investors Act (UPIA) A life insurance policy is now viewed as a fully evolved property. The trustee of a life insurance policy trust has a “Fiduciary Responsibility” to monitor the performance of a life insurance policy as a separate asset class. It is the fiduciary duty of an ILIT trustee to supervise the trust activities and trust assets used to achieve trust purposes…. or risk being sued by trust beneficiaries. RDU & A Breakthrough View on Policy Review
- 5. Trustee “Fiduciary Responsibility” & Life Policy Monitoring “Due Diligence” Policy performs as originally designed when purchased. Life insurance company mergers, acquisitions, declines in financial rating/performance. Improvement in the insured’s health and today’s more aggressive mortality pricing environment. RDU & A Breakthrough View on Policy Review
- 6. “Always do the good and right thing …and the client always comes first.” RISK DIFFERENTIATION UNDERWRITING (RDU)
- 7. Policy Review with RDU The Policy Review Landscape Why now? The power of risk assessment strength today The marketing power of underwriting talent… And the emergence of risk differentiation underwriting
- 8. The RDU Rules of Recognition (R3)
- 9. The RDU Challenge The unique qualities of the “individual” risk The embedded idiosyncrasies of the clinical impairment RDU & A Breakthrough View on Policy Review
- 10. How We Do RDU
- 11. RDU In Action
- 12. The Importance of RDU The Point-of-Sale Differentiator Going “beyond the APS”… RDU & A Breakthrough View on Policy Review
- 13. The RDU Advantage Preconceived levels of comfort in the Home Office The Underwriter and Medical Director RDU & A Breakthrough View on Policy Review
- 14. RDU and The Customer Impairment intimacy The Advisor/Client relationship People. Passion. Promise.
- 15. The RDU Win RDU & A Breakthrough View on Policy Review The Client The Carrier The Advisor
- 17. Thank You
Editor's Notes
- - To make the advisor a hero in front of his/her client - Underwriting & underwriters as gatekeepers
- - To differentiate an individual risk from the statistical groups of home office actuaries More time, intellectual inquiry and expense The ability to separate “one” client from the “law of large numbers” The ability to recognize when a clinical impairment merits RDU The ability to add subjectivity into an otherwise objective process (home office underwriting & mortality assessment)
- The ability to touch the client is the most intimate areas of their lives – their health and their mortality Insurance medicine vs clinical medicine The advisor underwriting advocate Congratulating the client on test results Engaging the client corps of physician care in ___ unique idiosyncrasies (subjectivity) Doctor welcomes the opportunity on behalf of his or her patient
- The ability to touch the client is the most intimate areas of their lives – their health and their mortality Insurance medicine vs clinical medicine The advisor underwriting advocate Congratulating the client on test results Engaging the client corps of physician care in ___ unique idiosyncrasies (subjectivity) Doctor welcomes the opportunity on behalf of his or her patient
- Going beyond the APS takes perseverance and tenacity It takes intellectual inquiry and more exploration to employ RDU 1st class of Law school story RDU as a key point-of-sale marketplace differentiation for the advisor… rather than introducing it at the point of underwriting, results in disappointment New study group – RDU & underwriting consistency
- The facts/amplify Underwriting is the home office are trained to ? To preconvceieved levels of comfort… I was one for CIGNA for my first 10 years of the business Expand the comfort zone of underwriter and medical directors Medical directors are General Practitioners & Family Physicians RDU physician consultants/specialists Always do the good and right thing…and the client always comes first
- The client boardroom story and RDU The resulting deepened relationship with the advisor and client Based upon a value added that differentiates the advisor from the competition
- Officially educated client who experiences the benefits of partnering in their own mortality assessment Insurance medicine is clinical medicine Compete and more amplified (?) case evidence in order to expand their assessment comfort zone Place business that otherwise wouldn’t be… A unique client relationship A point-of-sale value added Underwriting advocate Independent and interdependent