Below is an excerpt of an industry article on why a life insurance agent lost his license. (STAY AWAY FROM THIS PRODUCT! BUY TERM LIFE)!
Findings of Fact (the following come from the report filed by the Hearing Officer and are included in the OH DOI Order (some coming directly from a transcript of testimony at the hearing)).
-An insurance agent in OH used LEAP (Life Economic Acceleration Process) software to sell whole life insurance to clients.
-LEAP opposes maintaining or growing equity in real estate, opposes 529 Plan investments, rejects the value of compound interest, recommends stopping of payments into 401(k) plans, and over time cashing out all brokerage accounts and other investments.
-"Whatever we do has to increase wealth, reduce risk, create no additional out-of-pocket outlay for the client. It has to protect the client better, and if we can't prove it using math and science, we don't do it, period."
-The agent stated that the whole life policy would have immediate value if the client would liquidate their other investments, mortgage their farm, and use the income and cash on hand in the client's business (and then the proceeds of the sale of the business) and invest the same into LEAP proposed whole life policies. The agent said the LEAP proposal and the whole life policies would then be self-supporting-no cash out of the client's pocket.
-The agent in his LEAP proposal intended to ultimately move ALL of each client's investments into the whole life policies.
-The LEAP method of sales, and its financial manipulation of client assets, is designed to induce the prospective client to purchase large whole life polices with large commissions on the premise that the policies will pay for themselves if the LEAP process is followed.
-The agent led his clients to believe that using the LEAP system and its whole life policies are investments.
-One client who took out a home equity loan of $100,000 to fund the policy ended up cashing it in for the $2,820 cash value and still owed the money for the equity loan.
-One client lost $700,000 by following the agent's recommendation to take out a $1 million mortgage on their farm. After 2.5 years, they were forced by inadequate cash flow to stop making premiums and withdraw the $400,000 in cash value which they then applied to the mortgage, leaving a $700,000 balance.
-The agent says the losses were because the clients didn't stick to the LEAP plan.
Conclusions of Law -The hearing officer found:
-That the agent knowingly used terms and complex LEAP analysis and recommendations to sell whole life insurance that reasonably led buyers to assume the LEAP/whole life insurance process was an investment that replaced, or would replace, their previous investments.
-That the agent knowingly misrepresented that the whole life policies would pay for themselves, would not increase any out-of-pocket expenses, and would actually increase the client's wealth and make cash available for other items.
Final Order-the Department of Insurance affirmed the finding of the hearing officer and then revoked the insurance agent's license (April 28, 2016).
What can be learned from this case?
Sales software that has a predetermined outcome (like the purchase of whole life or any product) should be avoided. It is best to use software that is product agnostic and simply looks to put forth the best overall plan for clients.
When selling fixed cash value life insurance, avoid telling clients:
-not to invest money in qualified plans
-to take out massive loans to fund policies
-that policies will be self-sufficient if funded as proposed
-to use cash value life as a college funding tool (Which does not work)
-that it is an investment
This story should be very troublesome to many who are selling cash value life. Many of the negative findings by the OH DOI are right out of the sales playbook many are using to sell Indexed Universal Life. Be very careful how you sell cash value life and make sure you document that you are doing so correctly or in a suitable manner.
(For the BEST help in the USA contact Agent Randy (855)firstname.lastname@example.org