Does the average agent understand the implications that the current instability in the reinsurance marketplace has on his business?  Furthermore, if the average agent did not view reinsurance as a factor in making a Life Insurance Sale in the past, should he now?  The answer is a resounding “Yes!”

In an article in the December Edition of “The Cutting Edge,” I reviewed some of the problems currently affecting the reinsurance industry.  Particularly, I presented an overview of how the industry has become destabilized.  Now, I would like to concentrate on the fundamentals of “shopping” a large life case in our current environment.  If you are an agent who operates in the “Big Case” Market (cases with $10,000+ premiums or $5,000,000+ face amounts) you need to plan your sales very strategically.  It is no longer advisable to file formal applications with two or three different companies in order to obtain the best offer.  In fact, this approach of filing multiple applications for an important client will most often guarantee declinations from all insurers!  Reinsurers have become so cautious that simply discovering that a client’s application is being shopped to multiple carriers will cause them to decline to participate in the deal.  In addition, as the reinsurance marketplace shrinks (there are only five or six primary reinsurance companies remaining), insurance carriers are forced to lower both their retention limits and the maximum face amounts for “automatics” (reinsurers will not insist on reviewing an applicant’s file as long as the face amount of the policy requested falls under an established maximum).  In this environment, a poorly presented case has almost no chance of getting approved, even if a client is in perfect health. 

Not only should agents take special care when presenting big cases to insurance companies, agents need to become much more aware of the companies who are truly capable of underwriting such business.  It doesn’t matter if you quote the best rate in the industry with company “XYZ” if that company lacks the appropriate reinsurance agreements to actually underwrite that case. 

Bottom line: you need to consider the implications of reinsurance on all of your big cases before any rate is even illustrated.  Granted, it’s unlikely that the average agent has time to do this kind of research on insurance companies, which is why working with ABS can make such a difference.  If you have a client seeking a large Life Insurance Policy, you’ve already done the hard work.  ABS will review your client’s file and determine which company is best suited to handle your case so that the first illustration you run will be the last!