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I'm giving up. There is no use to continue. It's a "why bother!" What am I talking about? I'm talking about trying to write individual health.
The carriers have tightened their underwriting to such a degree that if you have a pimple on your tush, you are not going to be accepted.
I'm simply tired of spending the time to counsel people on the best plan only to have them denied for some minor medical reason... like having had bronchitis last year.
And the carriers don't really care that much about agents. Here is a case-in-point. Some of you know what a HIPAA plan is. Basically, when you exhaust COBRA you automatically qualify for a HIPAA plan... IF you can't get regular private coverage... which a lot of people who have a pimple on their tush.. can't!
Well, Anthem has the best rates but they don't want any more of this business because obviously only sick people take it (it is guaranteed issue) and they lose money.
So in order to "direct" some of this business to Blue Shield and other carriers, Anthem has decided to end their tiny commission to agents for HIPAA. They figure that if they don't pay agents then the agents will "direct" this biz to another carrier in order to earn some compensation for their efforts.
This is a sign of things to come in the health arena.
The carriers, their reps, and the lobbyists are doing a good job trying to defend an unsustainable system. They are all good company guys! But what most agents don't understand is that when the frying pan gets hot, Anthem and every other carrier will throw the reps and all agents into it, and will accept some kind of guarantee-issue-with-mandate system where no commissions will be paid and health agents (and company reps) will instantly be, as the English say, "redundant." All of the carriers will take low premiums without commissions and sacrifice their reps and agents to avoid being put out of business.
I know a number of health-only agents who have been practicing how to ask "You want regular or non-fat milk in your latte?" in three different languages!! :-)
Usted quiere la leche regular o sin materias grasas en su latte?
Vous voulez le lait régulier ou sans matières grasses dans votre latte?
Sie wünschen regelmäßige oder fettfreie Milch in Ihrem latte?
If you find it harder and harder to find a good health agent these days it is because they are all working their bottoms off learning the ins and outs of LTC, Disability, and life sales. The future is NOT in the health arena
And that's why I'm no longer looking to write individual coverage. I'll take it if it comes to me via referral, but like so many agents the future is in life, disability, long term care, and annuity.
Individual health is a losing proposition for so many agents.
Group health is still viable... because it is guarantee issue (although rather expensive.) I'll continue to write small groups. But trying to get individuals covered in this underwriting environment is a losing proposition... a total time-sink with damn little chance of compensation for the effort.
Right now.. the annuity market is hot, so I hope you learn a lot from the following.
I have been asked this question so many times by client that I decided to write an intro about how Fixed Indexed Annuities work.
I like many of the FIAs on the market, but hardly all of them. There are a ton of the that simply... suck. There is no other way to describe it. While it is difficult to lose money in these vehicles, they are not for everyone and it takes a good agent to help you determine if YOU are a good candidate for them.
So here goes.
A Fixed Index Annuity is not an investment in the stock market. Rather, it links your interest to a percentage of the growth of a major market index (not including dividends), typically the Standard and Poor 500 Index, Nasdaq, or Dow are the common indices that are used.
At the end of the year, a Fixed Index Annuity will credit you with all of the growth of the index up to a pre-determined limit. That ceiling might be an annual or a monthly cap, or a percentage of the growth of the index. In other words, if the annual cap were 9% and the index grew 12%, you would be credited with 9% interest for the year and that interest would be added to your annuity and would "lock in"; guaranteed never to be lost, providing that you stick with the terms of the contract.
Your principal is guaranteed against market risk from day one and your interest gains lock in each year on your contract anniversary and cannot be taken away in future market downturns. In other words, you can participate in a percentage of the upside of a major market index, but you are never exposed to any of the downside market risk!
At the end of the year, you will never lose money in the market, because a Fixed Index Annuity is not a stock market investment, but rather it is a fixed financial product backed up by an insurance company with interest gains linked to a percentage of a market index. They are not designed to "beat the market" but to give you a better than average opportunity for a better than average rate of credited interest on your money. As an agent who educates clients in annuities; here are several questions that I get inundated with on a daily basis.
WHAT ARE SOME OF THE CONTRACT FEATURES?
Two features that have the greatest effect on the amount of additional interest that may be credited to an equity-indexed annuity are the indexing method and the participation rate. It is important to understand the features and how they work together. The following describes some other equity-indexed annuity features that affect the index-linked formula.
Indexing Method
The indexing method means the approach used to measure the amount of change, if any, in the index. Some of the most common indexing methods, which are explained more in detail later on, include annual reset (ratcheting), high-water mark and point-to-point.
Participation Rate
The participation rate decides how much of the increase in the index will be used to calculate index-linked interest. For example, if the calculated change in the index is 9% and the participation rate is 70%, the index-linked interest rate for your annuity will be 6.3% (9% x 70% = 6.3%). A company may set a different participation rate for newly issued annuities as often as each day. Therefore, the initial participation rate in your annuity will depend on when it is issued by the company. The company usually guarantees the participation rate for a specific period (from one year to the entire term). When that period is over, the company sets a new participation rate for the next period. Some annuities guarantee that the participation rate will never be set lower than a specified minimum or higher than a specified maximum. Cap Rate or Cap
Some annuities may put an upper limit, or cap, on the index-linked interest rate. This is the maximum rate of interest the annuity will earn. In the example given above, if the contract has a 6% cap rate, 6%, and not 6.3%, would be credited. Not all annuities have a cap rate. Floor on Equity Index-Linked Interest
The floor is the minimum index-linked interest rate you will earn. The most common floor is 0%. A 0% floor assures that even if the index decreases in value, the index-linked interest that you earn will be zero and not negative.
Averaging
In some annuities, the average of an index's value is used rather than the actual value of the index on a specified date. The index averaging may occur at the beginning, the end, or throughout the entire term of the annuity.
Margin/Spread/Administrative Fee
In some annuities, the index-linked interest rate is computed by subtracting a specific percentage from any calculated change in the index. This percentage, sometimes referred to as the "margin," "spread," or "administrative fee," might be instead of, or in addition to, a participation rate. For example, if the calculated change in the index is 10%, your annuity might specify that 2.25% will be subtracted from the rate to determine the interest rate credited. In this example, the rate would be 7.75% (10% - 2.25% = 7.75%). In this example, the company subtracts the percentage only if the change in the index produces a positive interest rate.
HOW DO THE COMMON INDEXING METHODS DIFFER?
Annual Reset
Index-linked interest, if any, is determined each year by comparing the index value at the end of the contract year with the index value at the start of the contract year. Interest is added to your annuity each year during the term.
High-Water Mark
The index-linked interest, if any, is decided by looking at the index value at various points during the term, usually the annual anniversaries of the date you bought the annuity. The interest is based on the difference between the highest index value and the index value at the start of the term. Interest is added to your annuity at the end of the term accordingly.
Point-to-Point
The index-linked interest, if any, is based on the difference between the index value at the end of the term and the index value at the start of the term. Interest is added to your annuity at the end of the term.
WHAT IS THE IMPACT OF SOME OTHER PRODUCT FEATURES?
Cap on Interest Earned
While a cap limits the amount of interest you might earn each year, annuities with this feature may have other product features you want, such as annual interest crediting or the ability to take partial withdrawals. Also, annuities that have a cap may have a higher participation rate.
Averaging
Averaging at the beginning of a term protects you from buying your annuity at a high point, which would reduce the amount of interest you might earn. Averaging at the end of the term protects you against severe declines in the index and losing index-linked interest as a result. On the other hand, averaging may reduce the amount of index-linked interest you earn when the index rises either near the start or at the end of the term.
Participation Rate
The participation rate may vary greatly from one annuity to another and from time to time within a particular annuity. Therefore, it is important for you to know how your annuity's participation rate works with the indexing method. A high participation rate may be offset by other features, such as averaging, or a point-to-point indexing method. On the other hand, an insurance company may offset a lower participation rate by also offering a feature such as an annual reset indexing method.
These methods are also used in determining the rate of interest used in an EIUL (Equity Indexed Universal Life) policy. One of the major differences is that an EIUL has a COI (Cost of Insurance); that must be subtracted off the policy value, before any interest credits are added. If at any time you have any questions regarding the crediting methods or how a particular annuity works; please feel free to contact me.
If you look at the S&P 500 over the last ten years, Feb. 1999 to Feb. 2009, it averaged -5% per year for that period.
Someone investing $100,000 in Feb. 1999 would have about $61,000 left in Feb. 2009.
On the other hand, if they had just put their money into something that even got a lousy 4% compounded for that same period of time, they would have over $155,000 now.
When you put that on a graph, the first thing you notice is that THERE WAS NOT A SINGLE DAY THE MARKET DID BETTER THAN A STEADY 4% COMPOUNDED. Very powerful stuff to show folks why they might want to avoid being in the market.
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