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In Reply to: Re: WHAT DO INSURANCE COMPANIES DO WITH CASH VALUES IN CV POLICIES posted by Mislead by PFS on August 30, 2001 at 06:55:12:
: --As for the rest of your post, Ken, if you will go back to the original post, you will notice that the question was NOT where do they spend the money, it was NOT what do they do with the money, it was how do they MAKE money from insurance premiums paid on CV policies. Had he asked where, what or how the premium monies were SPENT or what they did with the money, I would have answered it pretty much the same way you did. But since he asked how they MAKE money on CV policies, I answered that they make their money by investing it, which is exactly what you have stated in your post here.
Correct, I did not ask anything about the cash values in CV policies.
I will take the opportunity again to discuss my views on insurance and insurance agents in general.
My views are based on my experiences. If you are an insurance agent and take offense with what I say, well what can I do? Again my opinions are based on those insurance agents I have had contact with in the past, and until one comes along to make me change my mind, then my views won’t change.
In response to my question about how insurance companies made money on CV policies, Ken said (in a post on another board) that Mislead was, “…over simplifying a question how does a car run” and, “A three year old knows you must put gasoline in it and that was how you answered the question.” Maybe that is true. However, there are many consumers who need to have an over simplified explanation of insurance. I am of the opinion that the majority of consumers really do not understand how life insurance works. This would be mostly true of these Whole Life and Cash Value policies. I can understand how these agents have a hard time providing a simple answer. Once you gain certain knowledge in a field, it can be hard to “dumb down” an explanation to a layman. For example, I am an electronics technician and have been for many years. If I were asked to explain how a particular electronics circuit works to someone who has no knowledge of electronic principles, it would be difficult to do. I would assume they know something about the subject matter, and at some point go over their head. I asked how insurance companies made money on CV policies. Ken tried to explain what they did with the side account money. He talked of pools, and other stuff I didn't need to know. Mislead said they invested money to be able to pay beneficiaries. At least he tried to address my question instead of changing the subject all together like Ken.
One reason I think Primerica has the success they do with converting WL/CV policies to term policies is that they provide a simple explanation of term insurance. True, term isn’t that hard to explain or understand. But if you walk into someone’s house who has only dealt with WL/CV agents in the past, and give them an easy to understand explanation of your product, then I think you will be successful in selling that product most of the time.
I will be honest with everyone who reads this and tell you I currently have a Primerica term policy. Why? Because what the PFS agent told me made sense. This is now the fourth life insurance policy (not counting those through employers) that I have owned in my life. All previous policies were some form of CV policy (I’m guessing there, I’m not even sure). Each previous policy was replaced by the next guy who came along because he looked at the current policy and told me how “bad” it was, and he was now going to sell me exactly what I needed. The same holds true for the PFS agent, he explained to me how my current insurance provider was ripping me off, and he was going to fix me up. He was at least able to provide a simple explanation of why his product was better. The explanation made sense. Did he rip me off? Maybe so. At the time (about 6 years ago), I couldn’t find any negative information about PFS. Since then I have found tons of negative information about them. I do now know that I am paying more for the policy then I would pay with other companies. Is it a lot more? Compared to some companies yes, compared to others no. Am I going to switch? Not right now. Why? I’m damned tired of switching policies! Besides, if I did replace it the next salesman that comes along would only tell me he or she had something better to offer anyway. It’s a never-ending cycle. I also have no desire to let another insurance salesman in my house. I think of them as being on the same level as used car (or even new car) salesmen. Again, I believe most consumers feel the same why. When you see them coming, you turn and go the other way. I believe the industry has an image problem in that regard. If I’m paying a couple of hundred dollars more a year for a policy with Primerica, I just consider it sort of like a preventive measure (sort of like a pesticide) to keep other salesmen out of my house. It’s worth it to me.
I see these debates all over the Internet on what is the best strategy, term or CV insurance. I still haven’t seen a convincing argument of why I should have a CV policy though. Again, as I understand it (and my understanding could very well be wrong), eventually the premium you pay for the CV policy is eating up your side account anyway. I notice over at 100 insurers that Ann_T tried to explain how a CV policy would always earn more in the side account then a BTID strategy. Yet three different people asked her to provide the interest rate she was using in her comparison, and she failed to do it. It appears to me like she is being evasive, and that just goes to solidify my opinion that this is standard behavior of insurance salesmen.
These are my (a “normal”, everyday consumer) opinions on these issues as a whole. If I have pissed off any “honest” insurance salesmen who read this, well maybe that is good. Maybe it will give you some ideas on how to change your approach. Or maybe you are different then those “other” salesmen. I didn't make this post to bash or slam insurance agents, but merely to give you my point of view. Again, in my experiences, I haven’t met an insurance salesman yet that inspired trust in me. Maybe one day that will change, but you will have a hard time getting your foot in my front door to change my view.