Last week, we wrote about the impact of the US Downgrade on the ratings of insurance companies. However, we inadvertently approached this Ratings e-Alert issue like any other. Clearly, the downgrade of US debt is an unprecedented event, and as such, last week’s Ratings e-Alert issue should have considered those matters unique to this unprecedented event. Fortunately, a good friend of THEInsuranceAdvisor.COM – Dick Weber of Ethical Edge – brought this to our attention and was kind enough to author a “response” to the "August 2011 Ratings: Consequences of the US Downgrade" .
In his response, Dick provides a well-reasoned explanation for how financial strength and claims-paying ability ratings are ONLY one of the major elements to consider as part of determining the overall suitability of a life insurance product, and cautions against comparing illustrations ofHYPOTHETICAL policy values to determine whether a “new” policy can do a better job than the “old,” in-force policy. Thanks to Dick for his willingness to contribute to the emerging, higher standard-of-care for life insurance product selection and portfolio management.
For those of you not yet familiar with Dick's presence in the industry, he is a 45-year life insurance veteran (yes, he was a child agent!). For 25 years a successful life insurance agent and 20-year life member of the Million Dollar Round Table, Dick and his firm now provide fee-only analytics and consulting services to family offices and high net worth individuals.
An academic in his spare time, his most recent publication, co-written with Christopher Hause, FSA, MAAA, is Life Insurance as an Asset Class - A Value-added Component of an Asset Allocation, was honored with a 2008 Best Paper Award from the Academy of Financial Services. Hause and Weber published a second volume in the Asset Class series - Managing a Valuable Asset - in December 2010. In addition to these two ground-breaking research papers, the two authors are best known for their unique process of applying Monte Carlo and industry standard expenses to the assessment and remediation of in-force variable universal life.
Dick's firm is located in Northern California, and he can be reached by email atDick@EthicalEdgeConsulting.com. The firm's website can be accessed atwww.EthicalEdgeConsulting.com.
Lastly, if you are interested in also contributing to and/or participating in the dialogue about the emerging, higher standard-of-care for life insurance product selection and portfolio management, please contact Sarah Riedel at sriedel@theinsuranceadvisor.com with your ideas for an e-news article.