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Understanding Life Insurance and Rethinking Policy Management and Evaluation: Explaining the Unexplainable



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With the advent in the late 1970s and 1980s of flexible premium, non-guaranteed universal life insurance, or any other policy whose performance is based on nonguaranteed elements, the risk of policy sustainability, performance and solvency was shifted from the life insurance carrier to the policy owner. Yet the nature of this risk shift, the risks assumed, the effect of volatility in investment returns, both for fixed accounts and equities, on policy account values, and the inadequacy of the traditional policy illustration tool to measure and account for these risks, is either, at best, completely misunderstood or, at worst, thoroughly ignored; resulting in policy insolvency and lapse. This is particularly a problem for trustowned life insurance (TOLI) where the trustee is under a fiduciary duty to manage the risks and monitor the performance of the trust estate policy assets. 

The TOLI Center, LLC (TTC), a fee-based policy administration and risk management services firm since 1992 whose clientele includes professional and non-professional trustees, attorneys, affluent family groups and ILIT beneficiaries, has maintained portfolio. According to the TTC statistics as of April 2020, approximately 36.5% of in-force universal and variable universal life products are carrier illustrated  to lapse prior to the insured’s estimated life expectancy or within five years of the insured’s estimated life expectancy. Further, according to TTC approximately 15% of whole life and guaranteed universal life policies have compromised guarantees. Since 1993, TOLI risk management articles have suggested that non-professional trustees administer up to 90% of the in-force policies in ILITs. If the TOLI Center Statistics, whose clientele are extremely sophisticated, skilled professionals, suggest a 36% insolvency or lapse rate with TOLI policies, what is that statistic for the vast majority of unskilled, non-professional trustees or other policyowners? 

In his exclusive LISI Webinar, Gary L. Flotron will explore this question as well as the risks in life insurance policies and provide a process for managing the life insurance policy risk, as well as the proper "dispute defensible" creditable evaluation of non-guaranteed life insurance policies, which accounts for policy return volatility and places a statistical confidence of probability on policy results. IMPORTANT NOTE: Registration includes a complimentary Veralytic report which consists of several measures of policy suitability in an easy-to-read graphical overview, summarized by a simple star rating system that measures against five different categories of policy performance.  

Gary L. Flotron is principal of G. L. Flotron & Associates, and specializes in the areas of trust-owned life insurance, estate and business planning, and, executive and employee benefit plans. He is also the Associate Director Financial Planning Programs and an Adjunct Faculty member at the College of Business Administration, University of Missouri - St. Louis, where he teaches courses in estate and trust planning, planning for business owners and professionals, employee benefits and life insurance. An author and frequent national speaker, Gary has spoken to numerous professional associations and groups, including the Heckerling Institute On Estate Planning, the NAEPC Annual Conference, The Federal Tax Institute of New England, and, the FSP Video Training Conference. Mr. Flotron has been an active member in various professional associations. He is a Past President of the National Association of Estate Planners & Councils (NAEPC) and The NAEPC Education Foundation. A past Member of the National Board of Directors of the Society of Financial Service Professionals (FSP), Mr. Flotron, in addition to having served on numerous National Committees and Task Forces, is the current Editor of the Estate Planning quarterly publication for FSP. A past President of the FSP Greater St. Louis Chapter, Gary is also a past President of the Estate Planning Council of St. Louis, and past President of the National Association of Insurance and Financial Advisors St. Louis Chapter. Gary is the 1996 recipient of the Stan Towerman Excellence in Professional EducaOon Award from the FSP Greater St. Louis Chapter. He was inducted into the NaOonal AssociaOon of Insurance and Financial Advisors St. Louis Chapter Hall of Fame in 2003. The University of Missouri - St. Louis named Mr. Flotron as the recipient of the 2014-2015 Chancellor's Excellence Award for a Part-Ome Faculty Member. An MBA graduate of the Washington University John M. Olin Graduate School of Business AdministraOon, where he was inducted into Beta Gamma Sigma, the NaOonal Business Honors Fraternity; Flotron completed his undergraduate work in engineering management with a concentraOon in electrical engineering (B.S.E.Mgt.) at the University of Missouri at Rolla (now Missouri University of Science and Technology).

 



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