I periodically peruse the web to see what other insurance professionals are writing about. Sometimes I agree wholeheartedly and sometimes I just shake my head.
Recently I saw a piece in which the author warned about “optimizing” an insurance portfolio. I get exactly what he’s saying. His point is to beware of marketing and warn that a given advisor may likely be promoting a specific idea. I offer practically identical warnings regularly. The subtext was that there’s no objective “best,” so how could one maximize or optimize planning? This is true, but something about it bothers me.
I’m probably picking up on this because I’ve used “optimization” in some of my own marketing, and I still do because I know exactly what that means for my process and my clients. I’ve never had the intent of implementing a single idea for my clients and feel I can use such a word and allow for a customized process that will undoubtedly result in a variety of outcomes. Fixing problems and optimizing portfolios is what I do. I do it well and regularly. In fact, the state of affairs in a significant percentage of insurance trusts and portfolios is such that it doesn’t take much to result in meaningful improvement regardless of the desired outcome.
I think what bothers me is the closing line that warns of having low expectations regarding maximization. The problem I have with this line is that the results of my work are often so dramatic, my clients would never have believed it possible before proven. I’ve work with mom & pop outfits to billionaires, with single policies to significant and complex insurance portfolios. In some of these situations, there was little likelihood of ever seeing a death benefit based on reasonable assumptions. Through my work, they often end up with more conservative and diversified portfolios, tailored to their specific needs, with quality carriers and sometimes with less premium outlay. In my world, that would be optimizing.
Other instances include underfunded or over-loaned traditional whole life portfolios in which the applicable dividend option was driving the polices into the dirt. A simple analysis and dividend option change rescued the policies and resulted in a reversal of the death benefit from decreasing to increasing. No sale, no underwriting and no increased premium. That’s pretty optimal.
Substantively improved outcomes sometimes involve tweaking existing policies and sometimes involve replacing contracts. It’s often possible to manage existing policies in ways that would better align with goals and improve return on committed resources without ever driving a new sale. Other times, placing new insurance is clearly the answer while cashing out or selling existing policies to life settlement and viatical funders is the obvious solution to getting them on a better track. Depending on the specific goals, any one of a number of strategies could maximize or optimize planning.
The bottom line is that while there are insurance policies and portfolios that are fine, it’s almost beyond comprehension how poorly many of them are doing and the chance of complete failure without intervention.
What I will wholeheartedly agree with is the merit in being somewhat cynical. Caution will serve you well, but I simply don’t agree with an insinuation that it’s a tall order to experience an individualized and meaningful improvement in a policy or portfolio. I see it all the time.