life insurance is uh a financial service and uh life insurance policies have ongoing premiums and uh it's very important that a life insurance agent provides ongoing Service uh to their clients one of the major complaints about life in some life insurance agents is the customer says uh uh he or she sold me a policy uh three or four years ago and I haven't ever heard from him since or I haven't ever seen him and so you know today uh because our life insurance policy certainly uh I can think about universal life which tends to be a lot more complicated than some other types of insurance policies these types of plans require ongoing uh contact with the client uh client receives annual statements they involve different types of investment decisions with respect to the account values so at the end of the day it's very important for an advisor to be providing ongoing service and ongoing contact with their clients now what are some of the minimum requirements for ongoing service by a life insurance agent now it's important because uh you're simply not going to be selling one policy to that uh uh customer and then that's it you're moving on to other customers what we're trying to do to build a successful life insurance practice is we're trying to build a long-term relationship with the customer and through your getting to know that customer and identifying the different risks that they have uh you have a program in place where you need to monitor the changes that are going on with that uh customer uh because these changes uh certainly certain life events all lead to the possibility of additional risks or additional sales opportunities to meet new needs that your client would have so it's always a good idea to be monitoring your client's changing needs uh do they have new dependents new children did the client get uh married and so now they're married uh we then have an opportunity where people at these life events start thinking about uh life insurance thinking about covering family needs Etc did the client on the opposite end of that spect Spectrum the client become divorced are there divorce obligations you know and so we need to keep track of these Changing Life events has there been a change in the employment maybe there's been a significant promotion significant promotion uh means additional income uh which may relate to additional savings maybe they can increase their contributions to their RSP uh things of that sort do they have a new house if the new house maybe means they have a new mortgage and so there's their opportunity there for providing mortgage protection uh for that new home uh did the client now acquire a business you know have they changed their business and so uh that again provides these opportunities for looking at new risks that may come about or new needs that the client will have uh an example here even leaving Canada when we we decide to uh leave the country um then you know there are going to be some tax implications also uh when we leave our the country and we're moving to another country to live there under the current tax rules there that is a deemed disposition we're deemed to sold all of the assets we have just like if we died and so these kinds of uh life events uh need to be monitored and you are really as an adviser building a long-term relationship with that client uh the client may buy a product from you today but as they grow and they get older and their needs increase uh they're going to want to buy additional products and services and so providing ongoing service is a key uh role by for life insurance agents now the main complaint that uh you know life insurance agents have is that you know we get paid when we sell a new product we don't get paid a lot of commissions uh to provide ongoing service but having said that you do get an ongoing a small ongoing commission if the client every annual premium that the client pays and in some of the uh policies like universal life you may get a percentage of the account value as a trailing commission or a service fee and these trailing commissions or service fees are paid to you because there is an expectation that the agent will be providing this ongoing service so let's uh take a look at some of the situations where you need to be involved and so amending a policy so there may be some type of administrative change change uh companies are becoming more sophisticated these days and in fact they're allowing uh clients to have uh online access to their accounts and to their policies and they have the capability to make certain minor changes like uh address changes Etc but uh certainly in the area of amending a policy whether it's an adust change they may want to change the beneficiary they may want to change some of the investment options that uh under the universal life policy so these are types of things that an adviser needs to be involved in or certainly be aware of this uh maybe there there are some changes that are required they may want to add another life insured to the policy or some other writers or benefits uh they maybe want to change uh maybe they're no longer a smoker um or maybe they may have had a rated policy where now uh maybe they were rated because they were overweight now they're no longer overweight and they want to go back and see if that additional rating that additional premium they're paying uh can be removed so there's lots of these situations where the uh amending a policy require ongoing Service uh renewing a policy if you're selling a Term Policy and if it has a renewable or or a convertible feature uh you know the ACT activity of renewing a policy or possibly converting that policy from a turn plan to a permanent plan uh you know you as an adviser need to be involved in that process uh cancelling the policy the client decides that they uh don't need the insurance any longer uh and now they need to cancel the policy and that must be done in writing and so the client can either send a letter to you and or the company or there may be a specific company form they have to fill out to notify the company to say they're surrendering or cancelling that policy uh recognizing that you know if it was a permanent insurance policy that had some cash value in there then you know potentially they may be uh a tax situation that they have to recognize uh you know chapter 7 covered all of that information from a tax perspective and so they may need some assistance from you when this situation arises so you know we have to look at some of these areas that require your additional support and Service uh replacing a policy you know uh you may be dealing with a client and uh come to the conclusion that the existing policy that they have uh may be better uh served they may be better served if they replaced it with a new one now this always tends to be a bit of a contentious issue because life insurance uh policies when you sell a new policy uh you know you are in a situation where you're going to get a fairly significant commission the life insurance commission structure is done in such a way that a high commission is PA in the earlier years and the and then it ta it uh uh declines as the policy stays in force so a lot of life insurance agents are you know have a potential conflict of interest situation so uh what happens here is you know if you sell the client a new policy you know let him cancel the old one and sell a new one then uh you have the potential to get a new commission so this is a uh potential conflict of interest and insurance laws and insurance practices have steps and procedures in place to make sure that when you are recommending a policy be replaced that you do that when it's only clearly in the client's best interest not in your own interest for your own pocket uh so uh this is referred to as your fiduciary duty you have a fiduciary duty to make sure you're doing everything in the best interest of the client and so when we're not saying you should never replace a policy it might be that uh you want to replace a policy that you sold to that client in previous years because maybe there's something that is newer there's something that is better maybe the client's situation has changed and a different type of policy makes more sense and so we're not saying that you can never replace a policy but you must justify it so whether you're replacing a policy from uh one that you've sold to the client with with with a company uh and you're replacing it with a new policy from that same company or maybe in dealing with a new client you see that they have some insurance older insurance policies that you no longer feel are appropriate and you may want to replace those with with uh you know a new policy from a with a new insurer these are all those situations where the rules around replacing a policy come into effect so uh there are a couple of uh scenarios where you have to be very careful uh one is something called churning churning simply says you're replacing an existing policy with a new one from the same insurance company uh twisting is you're replacing an existing policy but you're putting it with a new insurer a different insurer and so in all of these scenarios where you want to replace a policy you have to follow the rules and the rules simply say that you must complete a replacement form and this is referred to as a life insurance replacement declaration an LD and so in that LD you have to complete that form and you have to be able to demonstrate to the client and to the insurance company the new insurance company that you are going to be purchasing this new policy from or you're going to be sending this application in you have to submit that LD form and that form uh has the following information you need to disclose why is a policy being replaced why is it better than the existing policy and so you have to demonstrate the values and show the values in the old policy and the values going today and going forward in the new policy uh and you have to disclose to the client you know what you know all the details about the new policy and you really have to demonstrate uh to the client and to to the uh new insurance company that this new policy is actually better than what the client currently has and uh in your textbook uh you're going to see an example of the l d so very important uh certainly from an Ethics uh and procedural standpoint if you want to replace a policy we're not saying you don't you can only do so if it is in in the client's best interest now if you're going to replace a policy uh you know you want to make sure that the new one can be issued uh because the client may have to submit obviously medical evidence and go through the underwriting process so you want to make sure that you don't cancel the existing policy until the new one has been issued accepted by the client and as in force uh because if you cancel the old one before the client gets the new one you may run the risk that the client May long no longer be insurable and so you've canceled a policy and now they end up having no no insurance so replacing a Policy important uh uh process that you have to follow uh as part of the ongoing service you will provide uh couple of other things uh that you may be involved in the client may want to assign that policy and and uh you know there are two types of assignments there are first of all there is the absolute assignment and an absolute assignment is a situation where you are transferring the legal title or the ownership of that policy to someone else you're no longer be the owner you're going to have a new owner you're transferring the ownership you must complete uh the client must complete an absolute assignment form and TR and send that form to the insurance company uh and obviously because you're the advisor you're the agent you need to understand why they're doing this and assist them through that process so they will complete the absolute assignment form submitted to the insurer and the you're really telling the insurance company you know the client is no longer going to be the owner there's going to be a new owner there's going to be a new person that you're going to have to they're going to have to send the premium billing notices too and one of the things that uh the insurance company you know when they receive that absolute assignment form they will register it against the policy but they are not going to take any responsibility uh to assume that that assignment is valid uh so they're going to put it against the policy but you know if that assignment wasn't a valid one if it was done under Direct rest or whatever reason uh insurance company says well we don't know anything about that all we know is that we've received this assignment and we have registered against the policy so they assume no responsibility that that assignment is valid this why it's important for you to be involved in this process now recognize also because this is a change of ownership so the client is in fact disposing of the policy and if you dispose of that policy because you're no longer going to own it there could be a tax liability and so you're going to go through that calculation of what are the proceeds what was the ACB and is there any policy gain if there's a policy gain then the client is going to have to report that gain on their income for that year so absolute assignments are dispositions change of owners ship of a policy the other type of assignment uh is a collateral assignment and we have covered this in other uh sessions or other chapters but just as a review a collateral assignment means that you are assigning uh the policy as security for a loan as collateral for a loan you're taking out and in this scenario what's very different here is the legal title is not being transferred you're not disposing of the policy you're not saying there's a new owner you you still own the policy uh you're still going to be paying the premiums all you're saying to the insurance company is that some of the values of this policy have been put up as security or collateral for a loan that I have taken so collateral assignments are not dispositions of a policy for tax purposes so again one of the main differences that you need to be aware of between absolute assignments and collateral assignments now uh let's talk a bit about the claims process and again this is another scenario where you may be involved in the process so let's say for example there is a death uh death claim uh coming through so one of the uh roles that you have as an agent is you need to assist in the claims process and uh you know if the executor of a person's will uh submits uh notifies you that the life insured has passed away or they may in fact uh the executive may just see that there's a life insurance policy involved and they may go directly to the life insurance company and say uh this individual has passed away and uh there was a policy on their life and usually what happens is that insurance company will look at the policy see who the registered agent is and they will likely notify the agent to say we've received this claim against the policy and so now the agent is informed and the agent can in fact contact the executive and provide uh necessary forms or assist them in that process uh you know the claims forms are going to want to make sure that you know the policy is still in force they're going to want some proof that the life insured is deceased uh so they may want a death certificate um they may request a copy of the probated will because maybe uh if the estate is a beneficiary and uh if the executive said oh they have named this person in their will as the benefici the insurance company is going to want to have a copy of that will to confirm the date of the will and the date that the client or the the policy owner had made that change of or notification of a beneficiary in the will so they may require a copy of the will in that process and so again you may be involved in that they're going to want to make sure you know proof of the age and gender these things are all on the claims form uh confirm that the beneficiary is in fact the current uh beneficiary and so uh you will assist in providing the insurance company uh with any kinds of information they require uh to process that claim now what's a little different you know this is sort of the standard stuff that happens on individual policies uh when you have a group uh policy if the deceased uh the group person that is insured dies uh usually the executive uh will deal with the plan administrator so that might be the plan sponsor or they might be the insurance company who who in fact has the risk under the group plan and so they'll deal with the plan administrator to facilitate the claim uh another role that you can play in this claims process is dealing with the settlement options settlement options are simply uh dealing with the uh beneficiary and saying to the beneficiary well how do you want to receive that death benefit now most people will say uh pay it to me in a lump sum so paid to me in one check and so that's fine that is a settlement option another one they you know the estate uh executive may say um you not you know let's say it's payable to the estate they may say uh we're not sure yet what we're going to do with this money so I want you the insurance company you hang on to this money uh you pay me some daily interest on the money and when we decide what we're going to do with the death benefit we will let you know and so you know that's another potential settlement option uh the third option is that you know the beneficiary might say I don't want this lumpsum amount of money actually I'd prefer to have some sort of ongoing income and so they may instruct you to use the funds the death benefit to purchase an annuity a series of payments so uh these are you know basically the three settlement options now recognize that you know if you're dealing in a family situation uh I always say you should participate in this death claim process have the insurance company uh send you the death benefit and you go to the surviving family and you deliver that death benefit check and so that's an important part of what you know reaffirms the job uh that you are performing you know when you deliver that check to the surviving family uh you know you get get a good confirmation that what the job you have is creating real benefit for that surviving family they're now going to be able to continue to live as best they can because you have provided a significant death benefit to enable them to certainly maintain uh the lifestyle that they currently have so it's an important part of the role as an agent so don't shy away from that people say oh well I'm not so sure I want to be they're going to be crying and whatever uh forget all that uh an important part of your job is to be involved in that claims process and as I say deliver the death benefit check to the uh beneficiaries uh if you can don't just simply drop it in the mail it's not uh doesn't build good relationships and remember suddenly now uh that beneficiary is going to have a large amount of money that they're going to have to make some possibly some investment decisions on that uh money so again you are there to provide that support and that guidance in terms of how to invest that death benefit so that's it for the section on ongoing service