What do all of these have in common? Perhaps nothing, unless you have been a regular reader of The Rant and now The Strategy. All four topics have been covered in the last few months, and they all have recent developments that make them worth revisiting.

Corporate Owned Life Insurance (COLI)

I shared a story of a producer finding out the hard way about the notice and consent requirements as well as the tax filing requirements for COLI products. How did he find out? The insured died! Fast forward to today and last month's Central Intelligence from John Hancock outlines a Private Letter Ruling (PLR) that supports the normal life insurance application process as adequate notice and consent. You can read about it here. While we can't rely on PLR's as gospel truth, as they only apply to the specific case, it is an indication of the attitude of the service on this issue.

4506T

You may recall a bit about this form, allowing the carrier to obtain client's tax information directly from the IRS, being introduced by Lincoln National on all cases with an insured older than age 26. Perhaps you even remember my opinion that it was ultimately a good thing, that other carriers would soon follow suit and that Lincoln may have applied it a bit too broadly. Turns out I was two for three at a minimum with my crystal ball. Since that writing, MetLife and Hancock at the very least have either announced or clarified use of the 4506T and Lincoln has adjusted their policy to a less inclusive range of face amounts and ages. I think they got it right this time.

Life/LTC Hybrids

This article pointed out a potential pitfall in these hybrid products - if you accelerate all the death benefit for critical illness/chronic illness/LTC benefits what is left when you ultimately pass away? A minimum death benefit, that's what. The bit I came across regarding this product line is a set of statistics from LIMRA for 2011. There was a ton of this product type sold, roughly $1.4 billion. Of that $1.4 billion, some $1.2 billion went to one carrier: Lincoln National. Most of the rest went to Genworth, State Life and John Hancock.

There are also a ton of new players in this space, and some of them are making quite a bit of noise. Based on the sales numbers, noise may be exactly what it is from a market share perspective. Perhaps more important to your clients, however, is what this may tell us about the stability of pricing, claims administration, and who we may want to hitch our wagon to for the long haul in this space. Bigger may not always equal better, but I think taking a moment to take a look at who is really committed to this space rather than chasing the flavor of the month (or out of sight compensation!) may serve us all well.

Family Limited Partnerships (FLP)

The same edition of Central Intelligence from John Hancock referenced above drives home a point we made in our recent Cavalier Seminar session - careful attention to detail in Family Limited Partnership design and execution is critical if you want to stay on the right side of the IRS. I suggest you check out the horror story of disallowed discounts here.

Talk to you next week,