For advisors who focus on large case insurance opportunities, and for others who have come across a few in their career, you know these generally don’t land in your lap one week and settle the next. These are typically long, drawn out processes! Right before I joined QFS in April 2019, I had been working on a large case with an advisor and his client’s CFO for 1 year before it was written up. It then sat in underwriting for 9 months and finally settled last June. The annual premium was $3.2M dollars for a total combined coverage of $80M ($50M Term and $30M Par Whole Life). For almost all of us, this would be a life changing career opportunity. Some argue they would never play in that sand box because if the client was unable to write the cheque on the policy anniversary, it could be career ending.
I re-connected with this advisor and asked him about the case. He paused… and said “The CFO just called me last week.” With confidence, the advisor continued “He was wondering when they might expect the annual statement, then asked how they should pay for it once received!” He then continued to tell me how the CFO asked if they could bump the permanent insurance coverage by $10M? You see, because this took almost 2 years in the making, the CFO had become an expert on what value a properly structured insurance policy could bring to his client. Here are some take aways:
This was HOLDCO money and not OPCO money. Due to the structure of the assets in HOLDCO and the structure of the insurance, these policies won’t be in jeopardy of lapsing.
The client was not oversold on a commitment they may have trouble funding in the future. In fact, the client has a permanent need of more than $50M today and the agreement was to chunk it off when appropriate in years to come.
The advisor did an excellent job educating the CFO, he clearly understands how insurance is priced. As a result, the CFO is suggesting they chunk off $10M NOW because he is concerned life insurance premiums will need to increase soon due to even lower interest rates.
Underwriting - the advisor has two options, convert some of the term or apply for an additional $10M. Because the meds are less than 12 months old, the insurance company will be using the existing meds!
This case was originally opened up with the use of the following CPA whitepaper from March 2018 titled Bolstering the Balance Sheet.
Some advisors are saying that they are sitting on large cases right now because getting meds done at home is impossible. These cases very rarely move that fast, so it’s important to start the conversations now.
Most Canadians are feeling vulnerable these days and the more successful ones are no exception. As a result, we are still seeing large cases being written. Many large cases written are corporate in nature. Earlier this month, we hosted corporate insurance sessions to keep advisors focused on the road ahead. There were some great ideas shared.
What’s important to remember:
Become a student of the game. It will put you in the best position to educate your clients and their other advisors. They are your best source for introducing you to your next opportunity.
Revisit cases you’ve settled in the last year and consider upgrading with existing meds on file
Start a conversation – that’s all it takes some times.
Vice President, Business Development
This communication reflects the views of Qualified Financial Services Inc. as of the date published. The information in this publication is for general information purposes only and is not to be construed as providing individual legal, tax, financial or other professional advice. Qualified Financial Services Inc. assumes no responsibility for any errors or omissions in the information contained herein nor for any reliance placed on such information. Please seek independent professional advice before making any decisions.