Those who recall the coming of the first Triple-X in January 2000 will remember how 20 and 30 year guaranteed policies were adversely impacted by that regulation. Prices for such products, after January 2000, took a sharp upward turn in price. Consumers who acted to buy competitive 20 and 30 year policies, prior to January 2000, ended up with some competitive products at great prices. They did themselves a big favor by acting quickly, and agents who pointed consumers to those product while still available, did well by generating high sales volumes.
And now there is another variation of Triple-X on the horizon, which specifically is targeting "no lapse U/L" products. For those who are willing to inform themselves on this subject, I think there is another "fire sale" opportunity that you do not want to miss. More important, this is a fire sale opportunity I would hate to see your clients miss. For more details, see the continuation of this article at the end of this bulletin.
We plan to post the May 2005 Internet monthly update to our six monthly update web sites on Friday, April 29th.
The disk update will be processed Thursday, April 28th, and the disks will be shipped on that day. You should have the disk update by Monday, May 2nd.
IMPORTANT NOTE: Subscribers who still get updates by disk can save up to $100 per year by switching to updates by Internet. Please read the last section of this bulletin for complete details. Don't wait for your next invoice to make this change. Compulife will BONUS and add to your subscription renewal deadline for switching from disks to internet. Please call us at 800-798-3488 for further details.
There remains a smaller and smaller minority of Compulife's subscribers who still get disk updates rather than Internet updates. We are rapidly approaching a crossroad. As the number of subscribers getting updates by Internet increases, the cost per customer to handle disk updates is growing, particularly when you consider that equipment and office space is set aside for those functions. For that reason we are making the following changes to pricing for disk updates:
Effective July 1, 2005, NEW subscribers will no longer be able to purchase updates on disks. (MOST NEW SUBSCRIBERS DON'T PURCHASE DISKS ANYWAY)
Also effective July 1, 2005, EXISTING customers will be able to still renew their subscription for updates on disks, but the renewal price for disks will increase by $50 per year making disk updates $150 more per year than getting updates by Internet.
VERY IMPORTANT: The absolute last date anyone will be able to obtain their monthly update by disk will be December 2006. From January 2007 and forward, ALL Compulife subscribers will need to receive updates by Internet.
To ensure that all disk update customers stop receiving disk updates from December 2006, all disk update customers renewing after July 1, 2005 will be invoiced for the total number of months left to December 2006. This will ensure that your are paid to the end of 2006. The cost of your renewal will be based upon the total number of months left to that point, times the average cost per month based upon the new HIGHER disk update price.
PAY ATTENTION TO THIS!
If you will still want disk updates up to December 2006 here is your chance to save money. If you act to renew your subscription PRIOR to July 1, 2005, we will permit you to renew up to December 2006 at the average monthly cost based upon the EXISTING lower PRICE for disk updates. That will save you over $4 per month!
If you wait until AFTER July 1, 2005 to renew disk updates to December 2006, you will pay the higher price.
It was my intention in March of going to work on the web page that would combine all the e-mails that I have received regarding our proposed new feature to enhance U/L no lapse premium comparisons. As it turned out, being away for a week in March proved to be far more taxing than I anticipated I have never before sat on an airplane for 17 hours (and sit for another 19 hours for the trip home). As a result of that experience, I have a new found respect for those who talk about jet lag. On top of that the cities of Pretoria and Johannesburg in South Africa (where we were visiting) sit at 6,000 feet above sea level and the air is a little thinner than we are used to. Coming home and catching up took more time than anticipated.
As a side note, many thanks to those who sent their kind regards regarding my son's wedding. If you missed it, the wedding and travel pictures are at www.termcomparisons.cc/roblerato.htm.
I want to thank each and every subscriber who wrote an e-mail in support of the U/L "link" project and hopefully, once the new page is posted at our web site, we can attract some additional voices to the cause. We believe that if there is any chance in persuading life companies to become involved in the project, they will need to hear from you.
So you know what is going on, I am repeating what the plan is all about:
First, Compulife is not planning to add U/L comparisons to our software. We already have the U/L comparisons that we want to have. You will find those products in the comparison category called
NOTE: Term4Sale Agent Edition customers do NOT have this category.
Providing that a U/L product has a fully guaranteed premium that will not lapse before age 100 (some guarantee premium and face amount longer), the product can be included in that category. As always is the case, we want to include every product that we can.
The NEW PROPOSAL that I talked about last month adds nothing new to that comparison within the Compulife program.
The PROPOSED NEW feature we would like to add, is a "link" or a "connection" between the Compulife program and the Home Office software provided by the life companies. Here is how I envision the function working:
From the comparison results you would be able to double left click on a specific U/L product which would cause the "Display Single Product" window to appear. (just as it does now)
Next, if the company has worked with Compulife in order to facilitate the new feature that we are PROPOSING, there would be a NEW BUTTON on the single product display window. Currently you have a button called "Rate Class". Imagine a NEW button just to the left of it called "Illustrate". If you were to click on this imaginary new "Illustrate" button our software would then connect you to the Home Office software, passing into the Home Office software the client's information and displaying a genuine Home Office illustration for the exact same product with no lapse option that you were looking at in Compulife.
Again, this is NOT a new comparison feature. This would be a proposed new interface between our software and the company software. It would make it much easier to use the company software to generate a genuine life company illustration for the product you saw in Compulife.
As we move toward the 3rd quarter of 2005, when the DOS version of Compulife will no longer be provided, one of the functions/features that some Compulife subscribers needed the DOS program for was the ability to produce formatted .TXT files instead of printouts. They would then take the text files and reformat them to a customized presentation style that they created and preferred over what Compulife provides.
The new version of the Windows program which we provided last month now allows you to create a formatted text file instead of printing to the printer. For those subscribers who use the existing DOS text format, you will need to get busy and try out the new Windows version which is somewhat different. If you are doing post processing on these .TXT files, you need to let us know what problems, if any, the new function in Windows presents. Time is running out for us to make changes. By the 3rd quarter of 2005 (likely October 2005), Compulife will no longer be providing a DOS version of our software and we will not be making ANY changes to the .TXT option in Windows, assuming that others have already adapted to it and it is not fair to mess up what they are doing, making changes for you.
Once again, it is VERY IMPORTANT that you check out the new .TXT file printing option in Windows as soon as possible. We are still willing to make changes to it, but as we move forward we will be increasingly reluctant to do so.
As we have previously explained, a small but increasing number of companies are quoting from rate tables that have fractional pennies. This is particularly true for U/L - no lapse policies. To address this we are working on a change to our database which will allow us to increase the number of decimal places from two decimals to six decimals but ONLY for products that need it.
Our current practice is to take products that have fractional pennies in their rates per thousand and round the rates up to the next whole cent. This can make our quotes fractionally higher than they should be.
IMPORTANT: The Change Will Require a New Internet Engine
This change will require a minor data conversion which will necessitate a change to the data structure. This means that new data will not be compatible with old data. While this will not be a problem for customers who subscribe to our software, because the new program and data will be introduced at the same time, it does create a problem for those who use the internet engine.
Therefore, if you are using Compulife's Internet engine, you will need to be ready to replace the engine with the new engine once the new data has been introduced. Due to the significance of the changeover, and the fact that everything will need to be implemented and tested before release, we are planning to make this change in the May or June monthly update.
If there is anyone out there, who uses Compulife's Internet engine, and has not kept their subscription to that engine current, the new data files in May 2005 will NOT WORK with the existing engine. You will need to upgrade the engine in order to continue.
Therefore, if you are a current engine user it would be a good idea to make a note to contact Compulife in April, to ensure you get an updated version of the engine. If you are NOT a current engine user, but still using the engine, the day is quickly coming where you will not be able to run current data with that old engine.
IMPORTANT: The Data Modification will NOT BE AVAILABLE for DOS
Originally we were planning to make the new data format (multiple decimal point storage) available for the DOS version of the program. Having gotten deeper into the project we have come to the view that it will take too much additional memory for the DOS program, requiring more renovation than we originally had anticipated. As a result, we have decided that the DOS program will not be modified with one small exception that has been already implemented. If a product requires only two decimal storage, then the DOS program will be able to quote it. However, if the multiple decimal data storage option is being used for a product, the DOS version will skip that product and that product will NOT be quoted. The toggle/switch for that is now in the new DOS program we are providing this month. Because no products yet use the toggle/switch, there is no impact on your use of the DOS software but that will change in May.
For those who update by Internet, Compulife has gone to great lengths to provide you with redundancy in our web sites. Our main web site is:
However, we keep two other completely separate web sites, on two completely different servers, at:
Whatever we update to compulife.com, we are also updating to compulife.us and to compulife.cc. If one web site goes down, for whatever reason, either of the other two are ready to serve you. That includes both monthly and mid-month updates.
For those doing monthly updates by Internet, we rely on three other web sites to supply monthly updates. These are automatically checked and used by our automatic Internet update software.
For those receiving updates by disks, you are responsible to return those disks each month. Not returning disks can lead to the termination of your update service. For those not wanting to return disks there are two ways to eliminate the problem.
1. Switch to obtaining monthly updates by Internet.
Not only will you eliminate the expense and hassle of returning disks, you will save $100 per year in subscription fees.
To switch to Internet monthly updates, go to our web page www.compulife.com and select the last menu choice "Forms, applications, instruction tutorials, etc." Under the section "License Agreements" you will need to select and complete a new License Agreement for the type of license you have. After you have printed the new agreement, please read it, especially the part where you agree that you have successfully downloaded and processed our "mid-month updates". If you haven't done that before, call us and we'll be happy to step you through the procedure. It's easy.
2. Disk Purchase Program
The other way to avoid returning the disks and the disk box each month is to pre-purchase them for $21 per year ($1.75 per month). Once you do that you can keep them for future reference, throw them away or return them for a credit (once each year) when you are invoiced for the following year. $21 costs you less than mailing back disks each month.
The original triple-X was a regulation which was introduced to "toughen up" the rules regarding the reserves which life companies need to carry for term products where level premiums are guaranteed for longer than 10 years. Supporters of the original Triple-X regulation argued that life companies were using a loophole to escape carrying adequate reserves and that the loophole needed to be closed.
During the period when the NAIC was trying to sell this regulation to state regulators, I was a vocal opponent because of the existence of another loophole which I saw as a serious problem for consumers.
As noted, the regulation was targeted at level premium products which guaranteed their level premiums longer than 10 years. For example, if a policy guaranteed its premium for 30 years, the rationale was that some companies were not carrying adequate reserves for those 30 year products and the rule imposed higher reserve requirements. For a life company to put aside higher reserves, it translates into a higher cost of capital which is itself an increase in the cost of providing the insurance coverage. In other words, premiums would have to go up to cover the cost of providing for those higher reserves.
To summarize, I am not opposed to higher reserves that are necessary to guarantee the safety of companies/products, but everyone needs to keep in mind there is a cost associated with providing that safety and it is the consumer who pays that cost. It must also be kept in mind that any cost over and above what is actually needed, is a waste of the consumer's money and I am very opposed to that. To add insult to injury, if the consumer pays too much, it is the company who ends up profiting from that extra cash and I can't stand unnecessary government rules that take from consumers in order to give to corporations.
But in the final analysis I am not an expert on reserves, and I am not in a position to say what is or isn't needed. However, a loophole in the original Triple-X led me to believe that the supporters of the regulation were less than sincere in their position that it was really needed.
The loophole that I am referring to was the fact that if a company elected to NOT guarantee the 30 year premium for 30 years, and only guarantee it for 10 years, the company could ignore the new rules and avoid the reserves supposedly needed. This gave an unfair pricing advantage to non-guaranteed products, all courtesy of government regulation.
My problem with 30 year policies that only guarantee premiums for 10 years is that a life company can come back later, jack-up the premium for the 30 year policy in the 11th year (or anytime following) and the consumer can end up stuck with what was an unexpected, and possibly unfair, price increase. Worse, the consumer, now being 10 years older, and having already shelled out the heavier extra premiums to cover the cost of a 30 year premium versus a cheaper 10 year premium, loses if he or she decides to move on to a new policy.
It was the combination of these self evident facts that led me to use colorful language such as "consumers could be held hostage" to such non guaranteed contracts and "consumers could be bushwhacked by higher unexpected premiums". Not only was that language appropriate then, it continues to be appropriate. I maintain my view that non-guaranteed 20 and 30 year products are not good product alternatives although they cannot simply be dismissed out of hand. The problem is that their very existence complicates what would otherwise be a simple decision for consumers to make about which type of product to buy. We don't let people sell cars without seat belts, and the government should not let people buy 30 year term plans that do not guarantee premiums for 30 years.
It should further be noted that there are recent developments in product pricing that lead me to believe that my position on this has not only been well founded, it could be correctly described as having been prescient.
All that as background to say that my position was that Triple-X should not be applied JUST to guaranteed products, but also to non-guaranteed products. If the concern about reserves was legitimate, that reserves were too low (and I was not convinced of that), then regulators should not give life companies a loophole to evade the need to carry adequate reserves. Despite that view, regulators have continued to give non- guaranteed products a pass and continue to be on the rampage to track down competive guaranteed products wherever they may be found.
Which brings us to the "no lapse" U/L products, which guarantee face amounts and premiums to age 100 or longer. As you know, these have been growing in popularity. In case you hadn't noticed, over the past 5 years these products have been getting more and more competitive. Regulators, spurred on by the traditional elements of the industry who are feeling the bite from those products, have taken note and are hot on the trail. The NAIC has been actively working on a new Triple-X rule which specifically targets U/L "no lapse" products.
Based upon my reading of the process, it is my view that the regulation is close to adoption by the NAIC. It is also my view that once the regulation is implemented, that premiums for these products will skyrocket. In the same way that 30 year products were impacted much more than 20 year term products, and that older ages were impacted much more than younger ages, no lapse U/L products will be even more negatively impacted than 30 year products were and will be particularly hard hit for older aged cases. The actual amount of increase is not something I can speak to intelligently, but my gut feeling is that price increases will be much, much higher than you might imagine.
There is another particularly important reason why I see this as a last ditch fire sale opportunity for your clients and you. For those who have forgotten how quickly Triple-X impacted term prices in January 2000, let me assure you it happened very, very quickly. While some companies delayed implementation for a month or two, the fact is that within 3 or 4 months ALL products had been re-priced.
By contrast, and while the majority of states have implemented the new 2001 CSO tables, we have yet to see ANY impact on term prices as a result of the new CSO tables. That's not because there is no impact, it is because there are still some states which have not yet passed the new tables.
Why is there such a difference in the speed of implementation?
You must remember that life companies, that operate in multiple states, must satisfy the rules of the state which imposes the strictest or most conservative reserve rules. Life companies do not have the option of differentiating in reserve rules on a state by state basis. If one or two states are still using 1980 CSO tables, which are more conservative than the 2001 CSO tables, the states using the 1980 tables require that companies utilize those tables for all their products sold regardless of which state they are sold in. This means that a handful of states, which have not passed the more liberal reserve rule, are effectively holding up the implementation of the regulation for the ENTIRE COUNTRY. It is my view that it is the consumer that is paying for the tardiness of those states who seem to think they have more important things to do. Shame on those states!
By contrast, the new Triple-X regulation for U/L no lapse policies represents the more conservative rule. Just as soon as a handful of states adopt the new rule, the rule will directly impact all products sold in all states because that rule must be implemented by companies for all products sold in all states or the company is not in compliance with the state that adopted the rule.
To sum it up more simply, any rule that lightens reserve requirements, cannot take affect until passed by all states whereas rules that tighten up reserves are effectively implemented in all states by passage in just a handful of states. That is why the 2001 CSO tables are not likely to impact insurance products before 2006, whereas the new Triple-X regulation, which may be passed before the end of the year, could take affect much sooner.
And once the new Triple-X regulation is passed, you will see no lapse U/L product prices jump and I suspect jump so high that the product will no longer represent a competitive alternative to traditional whole life products. While I may be wrong, I suspect that no lapse U/L products are on the verge of extinction which is a dirty shame given that those products represent an excellent permanent insurance alternative for consumers who need insurance for "when you die needs" as opposed to "if you die needs".
My advice to subscribers is to sell these products while they are still hot, because they are not going to last very long.