For many years, life insurance was considered one of the most ethical and stable financial services businesses. But, following the introduction of flexible premium non-guaranteed death benefit products in the early 1980s, this reputation gradually changed. Today there is a life insurance policy crisis for reasons predicted 35 years ago, and it requires attention in order to avoid policy lapse without value along with allegations of deceptive and misleading practices.

How could this happen? Policy crediting rates have continually declined from the 15% non-guaranteed range to the guaranteed minimum, typically 4%. Sales agents had the software to prepare illustrations at crediting rates known not be sustainable over a 25 to 50-year time period, giving rise to the ‘win the illustration contest’ sales era. As the crediting rate drop to the guaranteed minimum, cost of insurance charges increased, which accelerates the probability of policy lapse especially with policies insuring seniors if corrective action is not taken. However, issuing life insurance carriers and most ‘sales’ agents do not offer post-sales policy risk management services, much less such services that meet a ‘dispute defensible’ standard. The warning signs commenced over 25 years ago but inattention has persisted. Today, many policy holders are faced with a major dilemma: either pay a significantly higher annual , or significantly reduce the death benefit, or surrender/sell the policy and lose the planning benefits they’ve paid into for decades, or do nothing an await lapse without value. This crisis has been covered by The New York Times and the Wall Street Journal, but unfortunately shows no signs of abating.

The Life Insurance Policy Crisis pulls back the veil on this looming crisis, and explains the solutions for fixing it. Authors E. Randolph Whitelaw and Henry Montag bring their 75 years of combined experience in financial planning and insurance counseling to review the readily-available post-sales policy administration and creditable risk management options that life insurance companies, sales agents and policy owners have ignored for decades. They explain the intervention process trusted advisors can recommend to policy owners to avoid unexpected lapse, obtain creditable fact-based risk management, and ensure a favorable planning outcome.

Topics include:

• A history of the lapsing life insurance policy crisis and the questionable deceptive and misleading practices that led to it
• A fresh look at the sustainability of existing policies
• Restoring customer confidence in the life insurance policy distribution system
• Reforms that can help all policies remain solvent
• Best practices in litigating against the predatory practices of the life insurance industry
• Sample documents and reference articles to resolve many of the identified problems

Praise for The Life Insurance Policy Crisis

Informed Guidance Opinion: "We can no longer pretend that there will not be expensive and time consuming litigation when Uniform Prudent Investor Act (UPIA) rules are brought to bare on trust-owned life insurance (TOLI). The Stuart Cochran v. KeyBank, N.A. case has now been followed by further complications brought by the Uniform Trust Code (UTC) in the form of Paradee v. Paradee, French v. Wachovia Bank, and Rafert v. Meyer.

Ignorance, arrogance, sloth, and greed are the toxic mix that spell serious trouble to fiduciaries and their advisors. This is all happening at a time when managing risk is both more difficult and important than ever. This book is an ice bath for advisors and trust guidance professionals– a cold splash of water in the face to wake up all of us to the risks of complacency. Trust me–you can’t afford NOT to buy and read and reread this book! It may save your ass-etts!"
--Stephen Leimberg, Leimberg Services

"I've written multiple stories over the past five years for the Wall Street Journal about the impact of low interest rates on universal life policies. The problem is exacerbated because many people underfunded their policies, often unaware of how important it was to keep them well-funded. Of the many consumers I've interviewed, most don't seem to understand how the policies actually work. Many have long since lost contact with the sales agents. I get a lot of consumer response to the stories, as the problem is so recurring."
--Leslie Scism, News Editor, Money & Investment Section, The Wall Street Journal

"Life insurance policies held in a trust have to be periodically reviewed and monitored just like any other asset held in a trust. Montag and Whitelaw, The authors of The Advisors and Trustees Guide to Managing Risk and Avoiding a Client Crisis are more than competent and capable of guiding an advisor or trustee in performing this important function with respect to life insurance policies, whether they are owned individually or held in a trust."
--Seymour Goldberg, JD, CPA, ABA Author