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Insurance Policy Management System: How AI Enables Personalized Services
The insurance industry stands at a critical juncture. Customers reject generic policies with unnecessary features. Enterprises struggle with manual workflows managing thousands of policies. Startups race to scale without proportional cost increases. An intelligent insurance policy management system is no longer a luxury but a necessity. Artificial intelligence technologies enable insurers to transform the policy management lifecycle from inception through renewal. Forward-thinking enterprises embed AI into their insurance policy software to provide personal, responsive, and unbiased experiences. This guide explores how modern corporate policy management software leverages AI to restructure customer relationships and operations. The Old Way Versus What's Possible Now For decades, the insurance industry has operated within defined boundaries. Underwriters reviewed applications methodically. Actuaries calculated premiums using statistical models developed decades prior. Policies were issued. The process repeated for renewals, but with limited variation based on individual circumstances. This standard approach shaped the entire industry from small agencies to multinational carriers. This approach created predictable, persistent problems: Customers received quotes that did not align with their current situation. Renewals surprised policyholders with rate surges they could not explain. Cross-sell opportunities are disregarded because agents lack proper context. Claims processing followed rigid scripts that disregard individual circumstances. Low-risk customers subsidized high-risk ones through extensive pooling methods. The fundamental issue was not negligence but limitation. Processing thousands of unique customer profiles manually was simply impossible. Insurers relied on broad customer segments and statistical models that averaged risk across groups. This approach made economic sense before modern computational capacity existed. Low-risk customers subsidized high-risk ones. High-risk customers sometimes paid more than their actual exposure warranted, while low-risk customers effectively overpaid. An intelligent insurance policy management platform changes this equation entirely. Machine learning algorithms assess diverse data points than human underwriters can evaluate. This enables policy systems to discover patterns across customer behavior, property characteristics, location data, claims history, and behavioral indicators. The outcome is pricing that reflects individual reality rather than group averages. Consider a homeowner in a wildfire risk region. Traditional underwriting applied a standard premium rise to all properties in that area. Modern AI systems assess satellite imagery, local fire department records, property-based defensibility factors, and the homeowner's mitigation efforts. The outcome is personalized pricing that rewards preparedness and reflects actual risk more precisely. This shift from "one size fits most" to individualized assessment represents the core transformation that insurance policy management software enables when built on AI foundations. Rather than treating all customers in a segment identically, modern systems recognize that each customer's circumstances are unique and deserve differentiated treatment. What Operational Improvements Are Offered by AI-Powered Policy Systems 1. Building Risk Profiles That Reflect Real Life Risk assessment in traditional underwriting relies on categories. Age brackets. Credit score ranges. Zip codes. These shortcuts offered speed but sacrificed accuracy. Modern insurance policy software processes information differently. Rather than sorting customers into static buckets, these systems construct detailed risk profiles that capture the complexity of actual lives and circumstances. How AI Builds Accurate Risk Profiles The process begins with data integration. An intelligent system ingests structured data like claims history, coverage details, and payment records alongside unstructured sources such as weather patterns, property images, and behavioral indicators. Advanced algorithms then identify relationships between these factors and actual claim occurrence. Consider these examples: For auto insurance, telematics devices measure actual driving patterns. Is the customer commuting during peak hours or off-peak? How often do they accelerate sharply? What is their braking pattern? Real behavior carries more predictive weight than demographic assumptions. For commercial property insurance, computer vision technology analyzes building imagery. System age, maintenance condition, roof integrity, and surrounding hazards become measurable facts rather than inspector impressions. This granular assessment enables more precise risk pricing that reflects reality rather than averages. Continuous Assessment and Adaptation Unlike traditional policies that lock in rates for fixed terms, AI-driven systems enable continuous assessment. New information flows in constantly. A customer installs home security upgrades. A driver demonstrates six months of careful behavior. Weather patterns shift, affecting flood risk. The corporate policy management software updates risk profiles in response to these changes. This creates a dynamic pricing model where fairness and accuracy improve over time. Customers who reduce their risk receive rate reductions they can see and understand. Those whose risk profiles increase see transparent explanations for adjustments. This continuous feedback loop builds customer trust. When customers understand that their behavior directly influences their premiums, they become invested in risk reduction. The insurance relationship transforms from transactional exchange to genuine partnership focused on shared outcomes. 2. From Quote to Renewal: One Connected Journey The traditional policy lifecycle involved discrete stages. Quote generation occurred in one system. Underwriting happened in another. Policy administration, billing, and claims processing each lived in separate environments, often entirely disconnected. This fragmentation meant each touchpoint started fresh. Customers repeated information. Agents accessed partial context. Opportunities to deepen relationships were lost. A unified insurance policy management system changes this structure fundamentally. Every interaction in the policy lifecycle benefits from accumulated customer knowledge. The Quote Experience When a customer requests a quote, the system accesses available information. Have they held policies previously? Do they have an existing relationship? What preferences did they express during previous interactions? This context allows agents and digital interfaces to skip redundant information gathering, present coverage options aligned with preferences, highlight relevant add-ons the customer needs, and communicate personalized risk insights. The quote becomes a conversation about that specific customer's needs rather than a generic estimate. Ongoing Account Management After purchase, the policy enters a management phase where service quality compounds competitive advantage. An intelligent system proactively anticipates customer needs. As renewal approaches, the system reviews claim history, coverage usage, and life circumstance changes. Personal life events trigger intelligent suggestions. Customers getting married receive information about bundled policies. Those with new drivers see enhanced liability coverage recommendations. This is genuine assistance based on understood circumstances, not generic marketing. Claims Processing with Context When a claim occurs, context matters. The system knows the customer's coverage limits, deductibles, and policy history. For trustworthy customers, the system can fast-track approval. Computer vision technology speeds damage assessment while reducing fraud. The result is claims settlement that feels fast and fair rather than opaque. 3. When Prevention Beats Claims Insurance traditionally operated reactively. Customers bought coverage and insurers paid claims when they occurred. This transactional model focused on claims management after losses happened. An intelligent insurance policy management platform inverts this model fundamentally. When insurers can predict where losses are likely, they help customers prevent those losses before they happen, serving everyone's interests: customers avoid disruption, insurers reduce claims costs, and society becomes safer. How Prediction Enables Prevention Advanced analytics identify patterns humans would miss working with manual processes. A system analyzing thousands of commercial buildings might identify that specific HVAC configurations experience higher water damage rates. Instead of simply pricing this risk higher, the system recommends specific preventive actions tailored to each building. Auto insurance with telematics identifies segments where drivers struggle. Rather than imposing higher rates universally, the system provides targeted feedback and improvement recommendations for specific driving behaviors. This creates accountability while offering genuine opportunities for improvement. For health insurance, predictive models identify customers likely to develop chronic conditions based on current health markers and behavioral patterns. Proactive outreach offering preventive care, lifestyle programs, and early interventions prevents conditions from worsening and generating massive claims later. Creating Value Beyond Claims This preventive approach transforms the entire insurance relationship. Instead of purely financial coverage, the relationship becomes advisory and consultative. The insurance company becomes a genuine loss prevention partner invested in customer wellbeing. This positioning creates a powerful competitive advantage. Customers willingly renew policies with companies that help prevent claims rather than simply paying for them. Employee satisfaction with group insurance programs increases substantially when workers see genuine investment in their health and safety rather than just claims payout capability. 4. Solving the Compliance and Trust Problem As insurers adopt AI policy management solutions, a critical challenge arises: explaining automated decisions to customers and regulators. This transparency requirement is not a responsibility but an opportunity. Customers expect transparency in the way policy service decisions are made. Building this capability creates a competitive advantage. Making Decisions Explainable An intelligent insurance policy management system must operate transparently. When declining claims or pricing policies, the system should articulate specific reasons. This requires more than running opaque models. Modern systems address this through: Feature importance analysis identifying which factors influenced each decision. Rule-based overlays adding human-interpretable logic alongside machine learning. Threshold triggers routing unusual decisions to human review. Customer dashboards showing how their information influenced their premium. Building Genuine Trust and Managing Bias Transparency builds trust more effectively than familiarity. Customers accept rate differences when understanding the reasoning. This creates retention advantage competitors cannot match. Bias prevention is integral as AI algorithms make more decisions. If training data reflects historical discrimination aspects, models perpetuate it at scale. Successful systems include regular audits comparing outcomes across demographic groups, retraining procedures when bias occurs, and human review of concerning decisions. This is risk management, not just ethics. Regulatory scrutiny of algorithmic bias intensifies. Insurers with principled approaches avoid penalties and reputational damage. Starting Your Transformation Today I. For Established Insurance Enterprises For established enterprises managing legacy systems, AI-driven policy management feels daunting. For startups building fresh platforms, different challenges emerge. Both face real choices about implementation strategy. Large insurers need not replace all systems simultaneously. Successful transformation follows phases: Integrate data from separate systems into unified customer views Layer AI decision support on top of existing workflows, suggesting actions for human review Gradually shift proven processes toward automation as confidence builds. Retire legacy systems incrementally as modern platforms absorb their functions. This phased approach spreads investment, reduces disruption, and builds capability progressively. For Emerging Startups Startups have architectural advantage. Building AI-native platforms from inception is often simpler than retrofitting AI onto existing infrastructure. Successful startup strategies involve starting with specific verticals where data access is easier, building transparent decision processes from day one, and partnering with established companies for distribution. Implementation Essentials Regardless of size, successful implementation requires: Clear business objectives beyond implementing AI. Investment in data quality before expecting modeling value. Teams combining technical expertise with insurance domain knowledge. Customer communication plans building understanding. Governance structures ensuring AI alignment with company values. Successful insurance companies recognize that insurance policy management software ultimately serves customers better. AI is the tool enabling that service, not the goal itself. Final Words The transition from generic policy management to personalized, AI-driven service is already happening. Insurance enterprises and startups implementing these systems today gain competitive advantage. They retain customers longer, settle claims faster, prevent losses effectively, and navigate regulations with confidence. An intelligent insurance policy management platform represents the modern standard. The question is not whether to invest but how quickly to move forward and execute to build lasting advantage. Customers are ready. Regulators expect it. Technology is proven. The remaining question is internal: Which insurers will lead this transformation?

Accommodating Alcoholism On The Job
ACCOMMODATING ALCOHOLISM ON THE JOB by Don Phin A Legal Report from the Society for Human Resource Management went into depth about this unique challenge. Here are some guidelines for employers: You may prohibit employees from using or being under the influence of alcohol at work. You may hold alcohol-dependent employees to the same performance and behavior standards as non-alcoholics. You may discipline or discharge employees for inappropriate conduct generated by alcohol abuse, as long as you’re applying the same standards to all employees. If an employee appears to be inebriated, you may ask them if they’re under the influence. The courts are divided on whether alcohol dependency is a disability under the ADA. Some courts have ruled that alcohol dependency is a “disability” only if the condition substantially limits a major life activity. Just because an individual has an episode with alcohol does not make them alcohol-dependent and therefore covered by the ADA. You don’t have to put up with inappropriate behavior by someone with alcoholism; whether it’s profanity, driving under the influence, or any other behavior. Employees are also prohibited from being a threat to themselves or others, violating rules such as attendance requirements. The Federal federal Ninth Circuit Court of Appeals (the most employee-friendly circuit in the nation) has approved these steps as “reasonable accommodation”: The main goal of accommodating an alcoholic is to get them to treatment. Provide the employee with a firm choice between treatment and discipline. If an employee agrees to go to outpatient treatment, you may discipline them for continued drinking or failure to participate in treatment. Provide the employee with an opportunity for inpatient treatment. Discharge the employee only after a second relapse. Grant at least one leave of absence to participate in a treatment program. Consider whether it’s reasonable for the company to pick up the cost of treatment, the elimination of an essential job function, and any related absences. To learn more about accommodating alcoholism, go to http://www.jan.wvu.edu/media/alcohol.html.

Replacing An Old Policy With A New One — Part 2
The Board of Directors of the American Society of CLU & ChFC has just approved a new educational product, the Replacement Questionnaire (closely akin to the Life Insurance Illustration Questionnaire). In this second of a three-part series, Richard Weber reviews this educational concept and its timeliness in this market environment. Policy replacement might account for as much as one-third of all individual insurance policies sold. Stephen Brobeck, President of Consumer Federation of America, suggested in a National Underwriter article that consumers lose $6 billion a year in surrender charges and costs — presumably associated with replacing existing coverage. Although it’s difficult to gather historical statistics, I suspect this level of replacement has been going on since the mid-1980s. One of the most critical issues is that of replacement. Indiscriminate replacement hurts the policy owner, the ceding carrier, and even the accepting carrier — they’ll eventually become the ceding carrier on the next 'roll.' And it certainly has a negative effect on the industry. The 'hurt' can be economic. But if the policyowner develops a subsequent sense of having been 'taken,' this is a problem that we all share and is harder to measure. Although we’re pretty sure what replacement is (you think you know it when you see it) the long list of technical definitions of replacement might surprise you. Not only does it cover the obvious replacement of a new policy for an old, it includes applying for Life insurance while exercising the right to borrow from an old policy. A Term conversion is technically a replacement, as is dropping a waiver of premium or ADB while applying for new coverage. Reducing the face amount of a policy or placing it on APL is also a replacement if it coincides with the purchase of a new policy. Sometimes it boils down to the fact that it might seem easier to find a prospect with an existing policy to replace than to take the time to go through the entire Life insurance needs process. And policy illustrations and their unique tendency to give the impression of a predictable future have certainly aided the process of convincing the client and the agent that a replacement is to the client’s benefit. Consider for a moment just this type of replacement: When an agent recommends that a prospective client terminate an old policy in favor of the 'new, improved' version, a whole range of questions arises. Has the old carrier encountered problems that suggest it can no longer be relied on to deliver the death benefit? Or does something suggest that they can’t deliver the death benefit as economically as broad economic conditions might allow over the long term? Is the recommendation based on exhaustive research, or a 'gut' feeling on the part of the agent? If the old policy is to be replaced, what are the replacement rules established by the state of domicile? In California, for example, not following the rules can cost the unwary agent a $25,000 fine! Are the reasons for replacement economic, subjective, or both? In the final analysis: Is this policy replacement being recommended because it’s in the best interest of the client or the best interest of the agent? One of the reasons replacement is a problem is that there’s no standard approach to quantify the issues surrounding replacing one policy with another. There can be a mighty fine line between a justified replacement and a not-so-justified one. When I came into the business, the most I was ever told about dropping one policy in favor of another was that when it was done to you it was 'twisting' and illegal; but if you did it, it was just that kinder and gentler term, 'replacement.' For this reason the Board of Directors of the American Society of CLU & ChFC has approved a new educational product, the Replacement Questionnaire. And, as an educational concept closely akin to the 'IQ,' the 'RQ' — as it has been dubbed — is a timely concept in this market environment. The Society wanted its members to be able to deal with the fact that there’s no single resource for Life insurance salespeople to address the many issues that they should review before talking to a client about a possible replacement of policies. Although addressed to members of the American Society of CLU & ChFC, the RQ is an educational tool that should be utilized by anyone who is reviewing a recommendation for replacement: agent, client, advisor, or carrier. The introduction to the Replacement Questionnaire emphasizes that replacing an existing Life insurance policy with a newer one is generally not in the policyowner’s best interest. Changes in health and age are two obvious reasons. Less obvious is the fact that duplicate sales loads and other expenses would be incurred: once during the initial purchase, and then again when the replacement has been performed with a newer policy. There have also been a number of changes in the tax code over the years, many of which 'grandfather' policies purchased before a certain date. Another aspect of replacing a policy is that the 'new' Life insurance company has substantial rights to challenge a death claim if death occurs within two years from the date of issue. Policyowners and insureds must clearly understand this point. The 'RQ' form is similar to the flight list that pilots use before they take off. No matter how many thousands of hours they’ve flown, they must review the list to make sure that critical details affecting the safety of the pilot and passengers have been checked. So, too, does the professional Life underwriter wish to make certain that the client’s best interests are being served by reminding ourselves to address the major issues surrounding replacement. The items listed in the Replacement Questionnaire are not intended to create an opportunity to replace one policy for another; the RQ emphasizes several different times that it’s generally not in the client’s best interest to pursue such a strategy. Rather, these items make sure that the agent can examine the important issues safely and economically. Some Life insurance agents might use the RQ for their own process of deciding what’s right for the client. Others might share it with the client. In the latter case, the Replacement Questionnaire list of items for consideration are not a substitute for state law requirements and should only be used to supplement required forms and duties. REVIEWING THE RQ The first section of the RQ lists the issues that come up frequently when considering replacement. They include the possibility that a newer policy might have more favorable values in the future. The RQ reminds us to distinguish between guaranteed values and illustrated values. This section explores whether the reason for replacement might rest with the appearance of a shorter out-of-pocket payment period, better underwriting class, more favorable carrier ratings, or the desire to move to a variable form of insurance — or from a variable form of insurance. (Note, if you’re applying the RQ to a Variable Life insurance policy, and if you’re showing the RQ to the client, you must first obtain your Broker-Dealer’s approval). It’s important to point out that while the issues of greater cash value, shorter payment periods, superior ratings, etc. might be valid considerations, there’s no intention to promote the idea that any issue or combination of issues is a reason to replace an in-force policy. These issues must be taken in context of the other items in the RQ. Again, replacement is generally not in the best interest of the policyholder and the professional Life insurance salesperson will want to underscore that statement to the client directly. The next section of the RQ determines whether the agent has reviewed the sister IQ of each carrier for additional information to assist in understanding the assumptions that underlie the illustrations of both the in-force and the possible new policy. Confirming the review and allowing for the possibility of generally similar responses can be a key factor in recommending against replacement. It’s especially important in looking at an IQ of two different products to understand if current illustrations are based on similar assumptions. Do both companies use the portfolio method for illustrating yield, or does one use the portfolio method where the other uses investment generation method? Does either company assume future mortality improvements or expense reductions? There can be many other substantial differences in illustration assumptions. A thoughtful review of the IQs should be considered, and to be perfectly objective in the process, it might be appropriate to invite each carrier to comment on your analysis. After all, if replacement is truly warranted, it’s in the best interest of the client as well as the agent to allow the carriers to comment on and confirm your recommendation.

Handwritten Letters – Forward To The Past!
Writing a monthly column appears much easier than it is! After all, how hard could it be to string 500-600 words together? Well, the difficulty comes in the topic, not the words. After so many years of writing, I often wonder what else there is to say. Today is a good example. It’s a Sunday afternoon and this column was due Friday. When I sat down at the computer, it seemed that I had already covered everything. I was at a loss for words. Because I’m not into masochistic behavior, I grabbed a cup of coffee and went outside on a wonderful spring afternoon in the Ozarks. As I watched an eagle soaring overhead, I found myself thinking about this symbol of our great nation. Those thoughts quickly gave way to images of our country’s beginnings, which were recently rekindled by the cable television series about John Adams who, ironically, happens to be my ancestor. I thought about how such diverse and opinionated personalities were able to resolve differences and create one of the greatest nations in history. Note that a key factor throughout this entire historical drama was the power of the pen and the art of writing. Those thoughts got me thinking about my favorite exhibit in the Ronald Reagan Library in Simi Valley, CA. There, a small case contains a series of handwritten letters from President Reagan to Soviet President Gorbachev. The letters aren’t about politics; they’re written conversations between two men. The letters often began with questions about the health of Gorbachev’s family and personal anecdotes about the Reagans. Those intimate letters helped end the Cold War and provide a foundation for the future. The Power of the Pen The power of the pen has risen exponentially in proportion to the increasing techno-focus of today’s society. I recently had the opportunity to present a daylong workshop for the Kansas Young Agents Association. I talked about the power of handwritten notes and letters in opening doors and nurturing relationships. About a week later, I received a handwritten thank-you note from one of the attendees. Ironically, this attendee (Richard Gray of Chris-Leef General Agency) was the only one of my generation in attendance, other than myself. I haven’t heard a word from the 30-somethings who were there. One of the most powerful letters I’ve ever received came from our veterinarian about 15 years ago. I still keep and treasure the letter. After much soul-searching, we sought his services to euthanize our dog. He had met every expectation and handled this difficult decision with understanding and empathy. Yet, several days later we received a two-page, handwritten letter from the doctor. He acknowledged the value that “Mac” had brought to our lives, talked about the home we had provided for him, and confirmed the fact that we had made the right decision. He then went on to offer his heart and his ear if we needed to talk about anything related to our grief. I have never experienced that level of compassion and human connectivity from a human medical provider or any other professional service provider. As a young man selling automobiles in an Oldsmobile dealership, I still remember my most effective marketing campaign. Olds had a special Cutlass pricing promotion where a $3,682 sticker Cutlass was selling for $3,288. Using names and addresses from the service department files, I began handwriting and addressing 20 postcards per day. The message was simple: “Imagine an Oldsmobile for only $3,288!” I then signed the postcard, which also contained our dealership name, address, and phone number. None of the other sale people did anything like this. For the next three months, I was the top salesperson at the dealership—despite my inexperience and youth. Jim Cecil of Nurture Marketing traveled around the world talking to CEOs on behalf of Microsoft Corporation. The purpose was to find out how a sales professional could get the attention of a busy CEO. The nearly unanimous answer was by sending a “well-written, respectful letter.” The top level of business leaders considered a simple handwritten letter to be the most effective marketing tool! Two weeks ago, I unfortunately had to attend the funeral of a young man. This 44-year-old police officer died of a lung infection before donor tissue for a transplant became available. He left a wife and three-year-old son. The wake was attended by nearly a thousand friends, acquaintances, and family members. The funeral procession drove under a huge American flag stretched across the end of a bridge between the elevated ladders of two fire trucks. Within a week, we had already received a handwritten note from his wife to thank us for our caring, love, and support. Due to the sheer volume of people at the wake and funeral, it would have been unreasonable to expect any sort of a thank-you note – let alone receiving one so quickly. Nothing can touch a heart quicker than the art of putting one’s feelings into words on paper by hand. It is the quintessential tool for connecting one human being with another. Excuses abound. One agency owner told me that he couldn’t write a letter because his handwriting had deteriorated over the years as a result of using a computer keypad. Another said he didn’t have the time to sit down and write a letter by hand, etc., etc., etc. Yet we expect similarly busy people to grant us their time to sell our wares! Something seems to be out of balance in this equation. If you really want to set yourself apart from the competition, invest some time into re-learning the art of letter-writing and practicing your penmanship. I guarantee it will pay dividends in both your business and your personal life. Well, thanks to that Ozark eagle, I did have a topic for this column after all. The best is not always the newest; sometimes the oldies are the true goodies.

‘The King Of Broadway’
For 12 years and 150 articles, Richard Weber wrote a monthly series on 'Due Care' for Life Insurance Selling magazine. Because of his love for the theatre, he identified his articles with show tunes or show titles. This is the second of four 'swan song' articles in which Weber summarizes and integrates what he learned during those 12 years. Until the early 1980s, the Life insurance industry had a well-deserved reputation for being conservative and, let’s admit it, dull! Not to mention profitable. Whether a mutual insurer formed for the benefit of its policyholders, or a stock company formed for the benefit of its shareholders, Life insurers prospered mightily from the post-WWII boom of 1946 until the end of the 1970s. The staple products of the industry were Whole Life, endowments, and Term insurance. These products generated 80% of the industry’s premium revenue. The underlying investments of the Life insurance industry were in fixed-return securities. Securities were a primary source of long-term capital in the economy, which by 1990 accounted for almost $1.5 trillion invested in mortgages, corporate bonds, and U.S. bonds. Although interest rates could vary, they did so in a relatively narrow band until the stagnant inflation of the mid-1970s. Since the underlying policy reserve rate guarantees were a relatively conservative 3% or 4%, there was little critical stress on Life companies. As each year passed, dividends paid by the mutual carriers continued to grow, reflecting the profits and prosperity of a 'book' of business that was predominantly Whole Life. The Life industry also had a perfect franchise: Only a 'legal reserve Life insurance company' could manufacture the unique financial product called Life insurance. Typically you could only buy Life insurance through several distribution systems controlled largely by those manufacturers. So-called 'career agents' predominated, but a growing group of independent agents or 'brokers' began to emerge as product competition began to heat up in the 1970s. The combination of an emerging group of independent agents, high inflation that transformed product design, and the shift away from death benefit products to investment-oriented products resulted in a profound shift in premium revenue. Through the end of the 1980s, the industry’s traditional products dropped from 80% to barely 25% of premium flow, replaced primarily by annuity sales. The transformation also changed the way the industry’s profit margins were earned since Whole Life products were extremely profitable, but investment-oriented and current assumption products generated earnings measured in mere basis points. Two key events in the past 20 or so years mark profound shifts for the entire Life insurance industry. As referenced in last month’s article, the first event was the 1979 report from the Federal Trade Commission declaring that '… cash value Life insurance is an extremely poor investment, yielding barely a 1%-2% return on the premium …' The FTC report and the subsequent run-up in interest rates in the economy caused the almost overnight adoption of current assumption products. These products were so popular that by 1984, 40% of new cash value product sales were Universal Life. Since these products were better characterized as 'indeterminate premium' — meaning that there was no specified premium — agents and consumers began to take advantage of the choice of how much premium to pay. After all, why pay more than you have to for Life insurance? As it turned out, the courts rendered the answer during the latter half of the 1990s, when the Life insurance industry would settle more than $6 billion in lawsuits for unfulfilled promises. The second major event was the failure of Mutual Benefit in July 1991. Although the industry — and to some extent the economy — was rocked by the April 1991 failure of Executive Life, it was easily dismissed as just desserts for an industry maverick. But nothing could explain the loss of the 146-year-old, old-line Eastern mutual company. Intense media coverage, rating downgrades, lack of early action by regulators, arcane accounting practices, and inexperience of agents in dealing with carrier insolvencies culminated in a shock wave that would dominate the industry for the remainder of the decade. Agents and consumers became aware of Guarantee Associations that served as a financial form of 'reinsurance.' Carriers that were admitted to a state with a Guarantee Association were required by regulation to absorb policyholder losses up to certain limits. Not all states had Guarantee Association agreements in 1991, and there was only modest coverage for the protection of policy owners. At best, holders of Life and annuity policies were covered for not more than $100,000 of cash value and $300,000 of death benefits. Although many policies might be protected by these limits, retirement annuities were much more vulnerable to loss — and these losses were an intense source of confusion and feelings of betrayal by agents and consumers alike. Ironically the financial salvation for the industry came from the same source that had caused such agony a decade earlier: the general level of inflation and interest rates in the economy. As inflation subsided in the middle to late 1980s and as bond (especially junk bond) and fixed mortgage portfolio values recovered, the means were at hand to achieve stability. Unfortunately, this economic benefit did not help policy owners of Executive Life products, as the California Commissioner negotiated a sale of the company’s assets at a substantial discount over what those assets would be worth within a year of their disposition. As the industry began to repair its finances, dignity, and reputation, the various agents organizations were under intense pressure to do something to regain consumer confidence. Perhaps the most proactive association was the Society of Financial Service Professionals (then the American Society of CLU & ChFC). Its groundbreaking Illustration Questionnaire helped tens of thousands of agents to better understand the basis on which policy illustrations are calculated. It also encouraged agents and home offices to be aware of the true nature of the current assumptions — and the projection of those assumptions over 30, 40, 50, and sometimes even 60 years in the future — that underlie all illustrations. The 'IQ,' as it came to be known, was introduced in the spring of 1993 and was a largely educational process focused on agents. Soon afterwards, the Society developed a Replacement Questionnaire to help agents make ethical and professional decisions about whether an intended replacement was indeed in the best interests of the client. Regulators were also at work in the aftermath of carrier insolvencies. The National Association of Insurance Commissioners took two significant actions in the mid-90s: Model Regulations for Risk-Based Capital, and policy illustration reform. Illustration reform, however, became a mixed blessing. The NAICs process of reform began in earnest in 1993, yet wasn’t transformed into a Model Regulation until December 1996. At one point, the NAIC taskforce for reform responsibility actually considered a guarantees-only approach to policy illustrations. In this proposal, which was considered for almost a year, illustrations could only portray the values that would be guaranteed for a particular death benefit and paid premium. With pressure from the industry, however, policy illustrations were ultimately allowed to portray projected values, although with requirements for substantially greater narrative and tabular disclosure. As enacted by most states in the latter part of the 1990s, policy illustrations now span 12 – 20 pages (compared with the typical three-page, pre-reform illustration). The greatest dilemma of illustration reform is that a methodology that didn’t work well was retained and made more elaborate, rather than providing a better model to help customers understand how a policy works (the goal of the NAIC Working Committee on illustration reform). In fact, at the December 1997 meeting of the NAIC in Seattle, regulators complained that illustration reform would have to be revisited yet again, since it hadn’t met regulators’ expectations — even just 12 months after initial promulgation! The American Council on Life Insurance started the last phase of repairing the industry’s image by launching the Insurance Marketplace Standards Association (IMSA) in 1996. The creators of this membership organization (virtually a self-regulating body) created six principles of ethical market behavior to which all members are expected to adhere through self-examination followed by independent examination. As of September 2001, a total of 232 Life insurance companies had achieved and maintained current membership in IMSA. Similar to the 'Good Housekeeping Seal of Approval,' the members of IMSA hope to regain the trust and confidence of consumers and the press in ethical sales practices by companies and their agents and brokers. Unfortunately, some Life insurers have questioned the value of continuing their membership in IMSA. Still others have questioned whether it’s possible for consumers to become aware of the value of IMSA without massive advertising. Finally, although agents and brokers must implement the principles of ethical market conduct, few are aware of IMSA and its standards. The 'top-down' process adopted by most insurance companies hasn’t taken into account the needs or collaboration of sales professionals — and this might prove to be the ultimate problem. Although a booming economy and stock market largely characterized the 1990s, the Life insurance industry underwent profound changes. The career system of distribution has shrunk. At the same time there are many new sources of distribution that many in the industry wouldn’t have guessed as recently as 1990. As we entered the early 21st century, Life insurance sold by CPAs, attorneys, banks, and at worksites has challenged this most traditional of all businesses. A substantial and as yet unanswered question is whether these non-traditional distributors will be able to render the same level of quality service as the trained Life insurance professional. The next article will focus on that most perplexing of all sales tools: the policy illustration and the likely direction it will take in the future.

White Only!
WHITE ONLY! by Mike Manes This document by Mike Manes isn’t as controversial as you might think, or is it? Without giving anything away, it depends on how you feel about honesty.   I have one word for all of you politically correct social activists out there whose hair stood on edge when you read the title above. RELAX! You’re jumping to conclusions based on emotions. The title doesn’t say what you think it does. I grew up in the Old South and I’ve seen similar signs hanging in windows of retail stores, clubs, and doctors’ offices. These were wrong. WHITE ONLY, however, could also be the healthiest way to eat an egg, my favorite order of Popeye’s Fried Chicken (Hot and Spicy), or the choice of dress shirts available to men working for IBM and SAFECO in the 1970s. For purposes of this article, WHITE ONLY has a greater significance than your taste in food, dress codes, or even societal issues of equality. Today we’re talking about lies or the absence of them: honesty and integrity! As a civilization, what lies (if any) are we willing to accept? WHITE ONLY? Define WHITE. From the legend of George Washington and his famous 'I cannot tell a lie' dialogue with his father, through the facial distress inflicted on Pinocchio, to many parents’ admonition to their children — 'don’t lie to me,' our culture doesn’t accept lying. Accuse a friend (or, God forbid, an enemy) of being a liar, and be prepared for: Loss of a friend A fight A detailed explanation of circumstances (spin) All of the above We know lying is wrong. We don’t do it. We don’t condone it. Our society requires honesty. And when we must resolve conflicts peacefully (ours is a civilized society), we enter a courtroom and swear on a bible to 'tell the truth, the whole truth, and nothing but the truth, so help me God.' We live by the rule of law. Now scroll down to the end of this article and take the Pop Quiz. Now that you’ve been tested, do you feel as strongly about the 'wrongness' of lying or the importance of telling the truth? Do you still believe that you’re an honest person? Do you always tell the truth (so help you God)? Is WHITE ONLY acceptable? If you’re like most people who’ve taken the quiz, you’re a little more humble, somewhat embarrassed, and very uncomfortable with this journey of self-discovery. Here are a few more observations on lies, integrity, and relationships: As a teenager in the 60s my generation were 'hippies.' We said, 'don’t trust anyone over 30,' and 'if it feels good, do it!' Simultaneously we promoted a less judgmental society that said, 'there’s no right or wrong.' We were sincere, enthusiastic, and unfortunately wrong. Right and wrong do exist. The headline in USA Today (July 16, 2002) read, TRUST – Americans Have Great Faith in Each Other, But Their Trust in CEOs, Big Business, Priests, and HMOs Is Slipping Away. This speaks volumes about where we are. Accountants and the anointed members of their fraternity — the CPAs— are moving lawyers, used car salesmen, and insurance people out of society’s prestige dungeon. Some now perceive them as 'umpires who sold out.' Enron, Arthur Andersen, World Com, Global Crossing, etc. are daily fodder for the talking heads on TV. How could they? The vast majority of their employees and stockholders perceived that their companies valued creativity, conscientious effort, capitalism, community, and competition. The 'disconnect' was that the boards, leadership, and watchdogs (Arthur Andersen) knew that the real values were profit and perks at any price! This wasn’t about fraud; it was about a misunderstanding of corporate values. After all, there’s no right or wrong. When you work to build a family, a business, a church, or an organization, it’s essential to understand that values are the foundation of the entity. Make sure that everyone understands these values and agrees to abide by them. If you and the values don’t match up — leave. If someone else in the system can’t live according to these values, invite them to leave. Without congruence in values, social institutions can’t develop to their maximum potential and in all likelihood will self-destruct. Unmatched values are a lie. Think back to a recent Super Bowl and the riot that followed at the home city of the winner. Both events (the game and the riot) can be defined as violent, high intensity, dangerous, adrenaline driven, and emotional. The only difference was that the game had boundaries, rules, regulations, and a crew of referees to judge and enforce behavior. The riot was about a mob 'doing its own thing' without restrictions, accountability, or consequences. Ask yourself where we’d be today if when Mr. Washington asked, 'Is George responsible for cutting down the cherry tree?' George had answered, 'it depends on what your definition of ‘is’ is.' Would we be teaching our children the importance of 'spin' instead of honesty? Finally, when your spouse asks, 'do I look fat in this?' how do you answer — without lying? Michael G. Manes can be reached at Square One Consulting, 625 Weeks Street, New Iberia, LA 70560,  cell 337-577-3885, e-mail [email protected], or visit www.squareoneconsulting.com. Pop Quiz For the purpose of this quiz, please use the following definition from Webster’s Ninth New Collegiate Dictionary: Lie – 1: to make an untrue statement with the intent to deceive 2: to create a false or misleading impression Should people lie? ___ Yes ___ No (If you answer yes, go to question # 4)   If you answered no, are there exceptions to this rule? ___ Yes ___ No (If you answer yes, go to question # 4)   If you answered no, is it OK to lie about not lying? ___ Yes ___ No (If you answer yes, go to question # 4) If you answered NO to all the above questions, turn in your exam. You made an 'A.'   What type(s) of lies should be allowed or acceptable? ___ WHITE (LITTLE) LIES ___ Important lies (to prevent trouble) ___ Lies about sex ___ Lies about personal matters ___ Lies to the IRS ___ Lies to insurance companies   4a. Answer this question only if you checked WHITE LIE in # 4 above — What are WHITE LIES? ___ Lies that keep from hurting people ___ Any lies that aren’t black (now define black) ___ Lies that the person lied to can’t discover are lies   When should we be able to lie? ___ Morning ___ Afternoon ___ Evening ___ Night   Who should be able to lie? ___ Adults ___ Teenagers ___ Children ___ Business Owners ___ Leaders / Managers ___ Workers ___ Clergy / Teachers ___ Celebrities ___ Politicians   Where should we be able to lie? ___ Home ___ Work ___ Church ___ Golf Course ___ Sports Stadiums ___ School   What should be the consequences of lying? ___ Rewards ___ Punishments ___ None   What are the actual consequences of lying? ___ Rewards ___ Punishments ___ None   Is 'spin' lying? If yes, why? If no, why not?   Essay Exam: You’re the 'boss.' Based on your answers to these questions, explain, in very brief terms, how you’d address these issues: An employee lies on his expense account more than you do. The receptionist (and your mistress) is cheating on you and lying about it. You’re pocketing cash (avoiding taxes) and you’ve just discovered that an employee is stealing from you.