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Expert Interview Series: Cliff Pendell of on Insurance Trends & How to Select the Right Insurance Policy

    7 minute read

    Cliff is the Vice President of Operations at JRC Insurance Group where he manages the day-to-day processes and operations to ensure all customers receive excellent customer service.

    You have over 50 years of collective experience in the insurance industry at JRC Insurance Group. What have been some of the most significant changes you’ve seen during that time?

    Throughout our years of collective experience, the most significant challenge we’ve had is the amount of time it takes life insurance companies to obtain medical records from their applicants’ doctors. It’s important to note that this setback is not the life insurance company’s fault, it’s usually due to a delay at the applicant’s doctor’s office or hospital. We often refer to this process as the “medical records vortex” as it can often take weeks or months to have medical records transferred over to an insurance company. In addition, most life insurance applicants are usually anxious to get their policy approved, especially if their old policy is expiring. In some cases we actually instruct the applicant to go to the doctor’s office themselves to obtain their medical records.

    Most of your experience is predominantly in the life insurance industry. 6793821977_787265721f_bWhat are some ways that life insurance and auto insurance are similar?

    Life insurance and auto insurance industries are similar because with both products, the purchaser is underwritten based on their risk to the insurance company. In turn, this risk dictates the price of the policy. Some insurance companies are much better with certain risks than others and by shopping the market, most consumers can save a considerable amount of money. Some insurance companies will decline an applicant who poses too great of a risk, while other insurance companies will gladly accept an applicant that is a higher risk. Another similarity is that life and auto insurance companies are both evaluated for their financial stability and they must prove that they are able to pay their claims or they will be forced to stop selling insurance.

    The website recently posted an article about “4 Of The Greatest Challenges Facing The Insurance Industry“. One of the speakers stated a statistic that 50% of insurance distributors could be out of business, by the end of the 2010s. What might that mean for insurance consumers?

    When a life insurance company goes out of business, or is considered to be financially insolvent, their clients’ policies are transferred to another life insurance company that is financially stable. This process of transferring policies is known as reinsurance and it allows the insured to keep their life insurance policy and their cost of coverage the same. The only change that an insured will see is the name on the bill they are receiving each month for their policy. This process is designed to protect the consumer by allowing them to keep their life insurance policy in place even if their insurance company faces financial hardships.

    Another of the speakers quoted in that article talks about building “trusting, established, client relationships.” In this era of social reviews and the availability of in-depth information about an insurance brokerage, how are these trends positively impacting insurance consumers?

    Social reviews and the availability of in-depth information online allows a potential life insurance client to research a brokerage before starting the application process. Before social reviews were easily accessible on-line, consumers had a harder time differentiating between trustworthy insurance brokerages, forcing them to rely on their instincts. Having the ability to use the internet to research a brokerage or its agents has helped weed out the less than honest agents, thereby protecting consumers. Moreover, consumers can also research the life insurance product they are buying before they actually commit to purchasing it.

    Another recent trend in insurance, particularly with auto insurance, is that it’s shifting from a blanket rate to a usage fee. How might someone find an insurance policy that’s right for their usage needs?

    A usage fee insurance policy is different than a flat rate policy because it allows consumers to pay an individualized rate for their insurance based on their specific usage. Undoubtedly, someone who drives more miles each year is more likely to file an auto insurance claim than someone who drives a lot less. Usage fee insurance seems like a much fairer way of assessing how much someone should pay for their auto insurance each month.

    The U.S. Treasury recently declared that auto insurance must be less than 2% of a customer’s total income, in low-income and minority neighborhoods, to be considered affordable. Can you talk about why it’s important for marginalized communities to have access to quality insurance? What kind of impact will the 2% have on the auto insurance industry?

    Marginalized communities need quality insurance just as much, if not more than, other communities. Controlling the cost of insurance will make it easier for everyone to obtain coverage and prevent them from leaving behind large debts for surviving family. When someone is unable to purchase affordable insurance, it affects everybody. This is because the costs accrued from a person who is uninsured is usually absorbed by other policyholders, the community, or in the case of life insurance, the family. While controlling the cost of auto insurance might seem like a great idea, the cost of insurance is based on an individual’s risk. If the industry is forced to lower its insurance rates, the quality of service may suffer. However, many auto insurance companies spend millions if not hundreds of millions of dollars on advertising each year. Hopefully this ruling will make an impact on each insurance company’s spending on advertising rather than the quality of their service.

    The Huffington Post recently wrote a post called “What You Should Know About Bundling Auto Insurance.” What are insurance bundles, and when might they be a good idea for consumers?

    Companies offer insurance bundle discounts to clients who purchase more than one insurance product from them. Life insurance companies will often promise to reduce the cost of your insurance if you purchase multiple lines of coverage like home, auto and life insurance. It’s important to note, however, that insurance companies cannot reduce the cost of your life insurance even if you purchase a home or auto policy from them. A life insurance company must charge all applicants the same price if they are in identical health and are the same age, regardless of other insurance products they may have purchased. This is even true if the customer purchases multiple life insurance policies. In addition, with a “bundle” discount, only your life insurance rate is guaranteed to stay the same, year after year.

    Most of the companies that offer to bundle life insurance specialize in home and auto insurance, not life insurance, and their rates usually cost a lot more. Even when you consider a bundle discount, your insurance premium will be a lot less than if you purchased each policy from company that specializes in that particular insurance product. You wouldn’t buy your auto insurance from a health insurance company, and you shouldn’t buy your life insurance from an auto insurance company.

    The Internet makes it much easier to find quality insurance, with access to brokerages all over the Earth. What are some signs a customer can look for, to find the best insurance provider for their needs?

    We encourage our clients to purchase coverage from the most affordable top-rated company that offers them a policy that is suited to their needs. If you’re unsure of a company, check their reviews online or evaluate the company’s financial strength on Social reviews online are a great indicator of how a company treats their clients. If a lot of consumers are upset about their experience, take notice. It’s important to note that if an insurance company does not pay their claims, they will be forced to stop selling insurance. This is especially true in the life insurance industry. Often times consumers make the mistake of believing that companies that advertise the most are the best. In reality, advertising is extremely expensive and those costs are absorbed by the consumer. The insurance companies that spend money on expensive Super Bowl commercials must make their money back somewhere. recently reported a story about a Northern California insurance salesman that was arrested for embezzling over $100,000 from customers and clients. The salesman apparently offered customers discounts on insurance if they paid in cash, which he kept. What are some other warning signs of shady insurance practices customers should be on the lookout for?

    Life insurance clients should never pay their agent directly for life insurance. Your life insurance payments should be paid directly to the insurance company or auto-debited from your account so you are able to see that your policy is paid to the company you are insured with. Be wary of any life insurance agent that promises to make you rich; Life insurance is designed to provide a source of income to your dependents when you are no longer in the picture and it is not designed to make money for the person purchasing the policy.

    We often receive calls from clients who bought into life insurance policies that promised a sizeable cash value. The vast majority of these policies do not perform well and many clients find themselves losing their entire investment value after 20-30 years. The truth is, the cash value in a life insurance policy is not your money, it belongs to the insurance company. If you pass away before the money is withdrawn from your policy, the insurance company gets to keep it. If you withdraw the money from your life insurance policy while you are still alive, it is considered a loan against the policy and it must be repaid with interest. If you pass away before the loan is repaid, the amount of money left behind for your family is reduced by the amount of cash value borrowed from your policy. For this reason we always advise our clients to stay away from any life insurance policy that promises to make you rich.

    As a general guideline, what percentage of someone’s total income should have to pay for insurance to make it a good deal?

    With life insurance, there is no universal rule for what percentage someone should spend on the cost of their policy because everyone’s situation is different. If you have a large family or more dependents than an average person, you may need to spend more money on your policy to make sure you leave behind ample protection. If you are retired and want to spend your retirement freely, or maximize your pension, it may make sense to spend a few extra dollars on coverage each month to make sure your spouse has enough money to survive when you are no longer around. Pension maximization involves buying life insurance and selecting the single life payout instead of the joint survivorship option. The single pension payout option ends when the pension earner passes away while the joint option ends when both the pension earner and their spouse passes away. The trade-off is that the joint pay option typically pays a much smaller pension each month, and most people are able to buy life insurance for less than this reduction. In this situation, life insurance may account for 25% of your monthly income, but it’s much better than losing 40% of your income for a joint pension payout.

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    The information in this article was obtained from various sources. This content is offered for educational purposes only and does not represent contractual agreements, nor is it intended to replace manuals or instructions provided by the manufacturer or the advice of a qualified professional. The definitions, terms and coverage in a given policy may be different than those suggested here and such policy will be governed by the language contained therein. No warranty or appropriateness for a specific purpose is expressed or implied.