Update News for June 2007
Here is a quick run-down on what you will find in this bulletin:
These topics will be dealt with in more detail throughout this bulletin.
In conjunction with the 3 new premium categories introduced into Compulife:
Term4Sale and Compulife issued a press release. A copy of the press release is available at:
Please take a minute to read the press release. It will review what Compulife is attempting to accomplish with these new categories.
We have initially filled the 3 new categories with one company's new products. AIG has introduced a new product called "Select-a-Term" which allows the buyer to select a level premium period from 10 to 30 years. Compulife has gone to the trouble of manually selecting level premium periods to correspond to the age and level to retire category for all scenarios.
For example, for level to 65 we have chosen the following Select-a-Term level periods for the following issue ages:
We have had a handful of calls from agents who are wondering if Compulife will be adding the Select-A-Term products for the in-between periods; in other words for periods other than 10, 15, 20, 25 and 30. In discussing this with those agents I have challenged them to explain to me where the demand will be for these in-between periods. I tell the agent that I can't imagine a consumer looking at a 20 year term product, and saying "Gee I don't think this is giving me long enough coverage" and then looking at a 25 year product and saying, "Gee I think this is too long". In each case the agents have responded that the reason they want these in-between periods is for replacement scenarios. For example, imagine a person that has a 20 year term plan that is 4 years old. The agent now wants the ability to compare it to a 16 year term policy.
While Compulife can't do that yet, please take a look at another close scenario: a 20 year term product that is now 5 years old. To do a theoretical replacement let's run a comparison in Compulife for a 45 year old for a 20 year term plan. We will base this on $500,000 for a preferred plus non-smoker in California. Running a comparison we find the lowest premium is $615.
Now pretend that our sample client has become 50 years old, 5 years later. We are now looking for a 15 year term. The lowest premium in Compulife is $725. $725 is $110 more than the 20 year term on the 45 year old. It would appear the 45 year old will be hanging on to their 20 year product.
Why is there such a difference in premium even though both policies cover to age 65?
The reason is that in pricing the 20 year product for the 45 year old, versus pricing the 15 year product for the 50 year old, the life insurance company has 5 more years (between ages 45 and 50) to collect extra money over and above the real cost to insure the client.
When we are talking about a coverage period for age 45 to 65, the least expensive period of time to insure the client is age 45 to 50. This period has the least actually mortality expense because it covers the youngest period. That means that any extra money collected during that time can be invested and assist with insurance costs between ages 50 and 65. That is why the 15 year term can't beat the 20 year product 5 years later.
It is my belief that agents planning to use the Select-A-Term product for replacements may find that if the previous product has been in force for any time at all, and the product was relatively competitive to start with, the product may have a premium that can't be beat.
Having explained that Compulife would still be happy to add the in-between categories providing that we see a multi-company trend established. Our promise to subscribers is that if there are two other companies (a total of 3 companies) who introduce similar products with in-between coverage periods, Compulife will create categories for those in-between level periods.
By contrast Compulife is out front on the level to 65, 70 and 75 categories. Why? Because there is a natural, non-replacement need for those coverage periods. The idea of buying "term to retire" is a natural need scenario and will be a concept that most financial gurus, particularly those who recommend that consumers buy term and only term, will seize upon.
With the introduction of Select-A-Term, we now know what prices for older people, for those scenarios, would be. But what would prices for younger people be?
To understand that let's turn our attention back to the example that I just gave you. We found that a 20 year $500,000 policy for a 45 year old cost $615 per year, and that a 15 year policy for a 50 year old was $725. Even though both products provide coverage to 65, the 50 year old pays a higher premium. As I explained, it's because the 45 year old is chipping in money for 5 years longer.
The same logic can and will apply to level to 65 products for younger people. Consider the AIG product. A 35 year old male, in preferred plus health, can buy $500,000 of 30 year Select-A-Term for $505 per year. If AIG offered a 40 year version for a 25 year old, what would it cost? I believe the premium would be considerably less than $505 per year. Why?
There are two ways to see the basis of my belief:
First, look at the cost of level to 65 for AIG's Select-A-Term for the 35 year old. The premium is the same $505 because the price that Compulife is quoting is for a 30 year Select-A-Term product. Now we make the sample client age 36 and check the premium for level to 65. In this case the premium is $525 which is the cost for a 29 year Select-A-Term product. Note that the premium is $20 higher.
Let's try it again. This time we make the client age 37 and check the premium for level to 65. In this case the premium is $550, which is again higher, this time by $25. So the pattern appears consistent. The older the starting age of the client, the higher the premium for level coverage to age 65. You would expect that the younger the client, the lower the premium for level coverage to 65.
Therefore, you would expect, if there was a 31 year term product, and you quoted the price for a 34 year old, that the premium would be less than $505.
This brings us to the second way to look at this. Suppose our 25 year old purchased a 10 year term policy from AIG. The cost of the policy would be $185 per year. Now assume the same client purchased the 30 year version, 10 years later. We know that the premium at that point would be $505 per year. The difference in premium is $320 per year. Let's assume our client, who knows that, budgets $505 per year from ages 25 to 35. He would accumulate $3200 by the end of 10 years (no interest). The client now has $3200 to assist him in paying the $505 premium for the next 30 years. That would have the impact of lowering his net cost for that insurance.
Of course this is precisely what the life company could do itself. Instead of the client accumulating the difference, the company can and would. In exchange for that, the company would be able to offer a lower price than $505 for the entire 40 year period.
And our client would secure his insurability. The problem with buying the 10 year product at 25 is that the client is taking a serious chance his insurability could change between age 25 and 35. That would create a serious problem at 35. But the life company can average that risk out over a large group of people, just as it does now when it sells 30 year term products to 35 year old people (versus selling the same group 10 year term).
Finally, we look at the price for 30 year term for a 25 year old. In that example we find the premium for Select-A-Term is $400 per year. We know that a 40 year term product for the same person would be higher. The premium would be something between $400 and $505 per year.
Therefore, it is reasonable to guess the cost for a $500,000 40 year term plan for a 25 year old to be between $450 to $500 per year, with the premium being much closer to $450. That was the premium guesstimate that I used in the press release:
Now my question to you is what would you prefer to sell to the 25 year old, the 10 year product for $185 per year, or a 40 year product for $450 per year? I can tell you which one I would tell my son or daughter to buy - GO LONG! You could argue that you could sell the 30 year plan for $400 but that ends at age 55, and the argument that they need level insurance coverage to retirement identifies a need that makes sense to the client.
Oh, did I mention the commission difference?
Compulife has delayed the release of our new Internet engine. As we were wrapping up work on the new categories and state based issue age limitations, we realized it was a good time to also enhance our Preferred Health Analyzer. If we had waited, it would have meant another update - which we are avoiding by doing it now.
The need to change the health analyzer is internal and will not affect the interface. The change will address the fact that some companies are now age banding their requirements.
For example, some companies now have more than one height and weight table. For older ages their table is more lenient with weight - recognizing that as people age, they naturally get heavier. This is not to suggest they have a greater health risk, it simply recognizes that it is a natural fact of life. Insurance premiums at older ages are already based upon mortality experience that is based upon that reality and so we expect more companies, as time goes on, to have age banding in their height weight tables.
Family health history is another example. If a 70 year old is buying a new policy, the concern about their parents' cardiovascular history before age 60 becomes a moot point. If a parent's early onset of heart disease was going to be a factor, you would expect it to have shown up in the client by age 70. Once again, Compulife is changing the system to allow age banding of family history tables.
In fact we are adding age banding to all our preferred health criteria, which mean something of a mini-overhaul. That is why the process is taking a little longer than we thought.
Once this new capability is released in the PC based software, sometime in June, and once we are satisfied that we have all the bugs out, the new internet engine will be shipped to those who have asked for it. If you haven't requested the new internet engine, and you are an internet engine subscriber, send an e-mail to firstname.lastname@example.org.
Thanks for your patience.
Compulife has now sold out our remaining stock of Palm Zire 31's. We are keeping the balance of the units for parts in order to service our extended warranties on the units sold to subscribers.
We are now back to offering Tungsten E's as our one and only PDA. We have also changed our pricing to eliminate the distinction between Grade A and Grade B Tungsten E's. The new price is $84 and we are also offering a card and adapter for $15 which means you can get all you need to run Compulife for only $99 (you can get it for even less - but you need to keep reading to find the special offer).
Transamerica Life has advised Compulife that they will be shipping us their forms some time in June. That will bring the total number of companies to 13. Slowly but surely, the forms database is expanding.
To date the following companies are now available:
Banner Life Insurance
Centrian Life Insurance
Jefferson Pilot Life
Jefferson Pilot Life (NY)
Pruco Life Insurance
Pruco Life Insurance of New Jersey
North American Company for L & H
Reliastar Life Insurance Company
Reliastar Life Insurance Company of NY
Savings Bank Life Insurance
Western Reserve Life Insurance
William Penn Life Insurance
We have also added our new forms categorization function and have categorized the term insurance forms for Pruco and North American. During June we will be apply categories to the other companies in our system. The process takes a little time and so we appreciate your patience. More important we would appreciate your feedback on those categories. The design is highly flexible and we should be able to package forms in a variety of ways.
If you help us convince a life company to provide us with their forms, we'll give you a Palm Tungsten E PDA as our way of saying thanks.
In April we announced a change to the pricing structure for QuickerQuoter. Agencies can now buy as little as 3 companies for only $225, and can now buy 12 companies. Here is a copy of the e-mail announcement:
Have you heard about QuickerQuoter for your agents?
QuickerQuoter is a limited edition version of Compulife Quotation System that agencies can distribute FREE to their agents and brokers - no matter how many brokers they have.
IMPORTANT: QuickerQuoter runs on your agent's desktop and laptop computers but also comes with software that runs on PDA's and PDA phones. The PDA software works on both Palm and Windows Mobile devices. This lets your agent put your companies in their pocket - ready to go - anytime, anywhere.
QuickerQuoter is now available for 3 to 12 life insurance companies
Agencies buying 3 companies can now get started for only $225 per year.
Compulife has changed the pricing for its QuickerQuoter program and is now offering the program for up to 12 life insurance companies.
Here is the pricing:
Most QuickerQuoter buyers have purchased 6 companies - therefore the price is unchanged.
NOTE: Those wanting to add additional companies to their original 6 can do so for $200 per company (6-9) or $250 per company (10-12) and we will pro-rate the cost to the balance of your current QuickerQuoter subscription.
Click Here to try Compulife's QuickerQuoter.
There are two reasons for this change in pricing:
1. There is now NO REASON for an agency to not get and try QuickerQuoter for its agents.
This gives your agents a way to run quotes their phones and PDAs for your favorite life companies. $225 gives you software you can give to ALL your agents for FREE!
IMPORTANT: The QuickerQuoter program now comes with FREE Windows Mobile Phone software. The current phones running this software are the:
Samsung Black Jack
Think about the importance of PDA/Phone software for your agents.
2. Some agencies have wanted more than 6 companies.
The rational behind this new stepped pricing is that the more companies in your QuickerQuoter program, the less demand there is for the Compulife program, which we are retailing. That's also why the QuickerQuoter program is simpler than the Compulife program - we don't want this product being a substitute for agents who want all the features and benefits in Compulife. But that isn't all bad for you - there's less need for technical support, which you must do for this product.
As we have indicated before, if Compulife determines that QuickerQuoter is having a negative impact on our retail sales, we will discontinue the product. But that gives an important benefit to existing QuickerQuoter purchasers who will have a 36 month service extension for service to their QuickerQuoter program (for the number of companies purchased). For complete details refer to the October 2006 Compulife bulletin:
As before, buyers of QuickerQuoter are entitled to as many FREE updates per year as they have companies in the software. An agency buying 12 companies is entitled to 12 FREE updates. An agency buying 3 companies gets 3 FREE updates. Updates over the FREE number permitted are available for $100 per update.
Here's Something Else that's New:
Click Here for more details about Compulife's QuickerQuoter.
Feel free to reply to this e-mail with any questions you may have