Government Regulations To Help Consumers, Insurance Agent Shortages, and The Misrepresentation of Insurance Products

I intentionally try to keep these posts short because, in some instances, I can find myself writing 3000-word posts that the average person won’t have the time or desire to read. So, as you’re reading this, keep in mind this information is being compressed.

It’s been argued that it was never supposed to be the government’s job to interfere in the marketplace; however, when consumers feel as though they’ve been wronged, the first entity they go to is a government official.

This demand by consumers for the GOVERNMENT to do something in the marketplace often creates problems in the insurance industry. All parties are often well meaning, however numbers are numbers and when the authority that has monopolized the use of Force, makes certain activities in the marketplace illegal, the entire make up of an industry can change.

When it comes to insurance, I try not bash any insurance product, because, for every insurance product there’s a legal history surrounding it, that might force an insurance company to change how it does business.

For people like myself, insurance is fun and exciting, but for the average human, insurance is the LAST thing they want to talk about, which is why you’ll find insurance agents trying to get CREATIVE with how they promote themselves and their insurance products they’re promoting to their prospects.

 

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The Power of Financial Education Rich Dad Poor Dad By Robert Kiyosaki

Most insurance agents work off commissions and some insurance agents spend a lot of money just to be seen. Profitable insurance agents are a rare breed, because selling insurance requires knowledge as well as going outside of your comfort zone.

When you take a step back and look at the insurance industry from a distance, you start to see why FINANCIAL EDUCATION is so important. It’s not only about financial education insurance agents, we also need more financial education for consumers.

The first time I heard about Financial Education was from the legendary Japanese-American businessman and author Robert Kiyosaki, who wrote the book Rich Dad Poor Dad. Because of the aforementioned books, I learned about the differences between assets and liabilities simple easy to understand terms that changed my life forever.

Robert Kiyosaki along with his wife Kim Kiyosaki, went as far as to create a board game to teach people about financial education. For most people with basic financial education it’s easy for them to imagine insurance as an ASSET.

For most of the world however, they imagine insurance as liability. Why should I pay for something that only pays out if the worst happens? Suppose the worst never happens, a person can argue. And for people who think this way, they have a point, and you see this is where the LIFE Insurance agent, may attempt to get this “prospects” attention, by throwing out words like “infinite banking” or “buy term invest the difference” or “Be your own banker with an IUL” policy.

Now, when it comes to auto insurance it’s an easy sell, “if you don’t have auto insurance it’s illegal for you to drive” so the consumer is trained to simply shop around for the cheapest price.

Government regulations on insurance, help to shape consumer behavioral patterns, so, in the end there’s no easy fix to the insurance industry or the financial industry in general. Because for example, buying a Mutual Fund doesn’t guarantee you a perpetual 10% return on your investment.

Yet, you’ll get a lot of financial “experts” claiming that buying mutual funds is the only way to invest? Robert Kiyosaki’s “financial education” formula revolved around the consumer taking responsibility for educating themselves, and more consumers have been educating themselves.

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When it comes to Insurance products, the consumer would be wise to consider seeking out the services of insurance agents who love what they do and love people.

Hold Your SegFund To Maturity and The Most You can lose is 25%, Ask Romone about the Reset Feature

One of the reasons this blog was labelled Segregated Fund Insurance(SegFund Insurance), is because, the average person I meet, is looking for some sort of INSURANCE or guarantee when they invest. a SegFund is like a mutual fund, except that it’s an INSURANCE product, that guarantees at least 75% of your initial deposit.

So if you invest $100 the most you can lose if you invest to maturity is $25. So for the financially educated, this is why a lot of them invest AGRESSIVELY in SegFunds.

There’s also something called a reset feature, in short, if let’s say that the $100 that you invested, appreciates in value to $150, you can use the rest feature making $150 your new deposit amount.

Some basic math $150 x 0.75 = $112.5 which means that out of the $100 you initially invested the most you can lose if you exercised your reset feature would be $112.50. This is merely a basic illustration of the possibilities of SegFunds, in Canada, contact Romone to learn more.

Participating Whole Life Insurance(Par-Whole-Life Insurance) is by far my favorite type of life insurance, however, Participating Whole Life Insurance is NOT an investment, and a lot of life insurance agents, as well as financial talking heads attempt to sell or promote Participating Whole Life Insurance as an investment, because of the cash value component, and the guaranteed returns.

If you’re going to compare whole life insurance to anything it would be a PERMENENT life insurance product with savings account attached to it, but savings accounts to the average person sound boring. So if you’re an insurance agent who or financial “expert” wanting to stand out in a crowd, you’ll say all sorts of things to attract clients. I find that Par-Whole-Life Insurance makes more sense to people who are financially educated.

The same can be said about Universal Life Insurance. Why, I typically recommend Universal Life Insurance(UL) to higher Networth clients, is because, UL policies allow for INVESTING, Index Universal Life Insurance products(IUL) are permanent insurance products, that combined the idea of “buy term and invest the difference.”

In practice, insurance products for the most part are loved by the financially educated because they’re often tax sheltered. Insurance companies in general contribute a lot of money in taxes to governments, which is why government’s don’t nationalize or overly regulate insurance companies.

Because for example if insurance companies no longer existed, that entire tax revenue provided by the insurance industry to governments would not exist. People will learn to do without, and government creating derivative financial products requires an incentivized free market.

Insurance companies will often create insurance products based on consumer DEMAND, governments, were not created to meet the IMMEDIATE demands of the marketplace, and with governments, there is a slow EXPENSIVE bureaucratic process.

When authorities restrict and regulate market activity the result is often dissolution. I bring this up, because there’s no easy fix, the best fix is financial education, which is what I implore all insurance agents and financial talking heads to consider doing for their clients.

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Insurance agents should try their best to educate their clients, consumers should do their best to become financially educated, I don’t deem it wise, that we run to politicians to do for us what we can do for ourselves.

I personally see regulations in the marketplace as the reason why Insurance has certain pitfalls. For Life Insurance, the problem with Term Life Insurance is that if you’re not rich when you’re 65, Term Insurance will either no longer be available for you or it will be extremely expensive.

So if let’s say you “bought term and invested the difference in mutual funds” and the mutual funds didn’t pay you enough to retire on after 65, and your retirement income is not enough to survive on, and money you could have easily saved in whole life insurance was squandered on term Life Insurance.

Now at 65 either the insurance company won’t renew the term insurance contract or if it does it will only offer you 25% of the term insurance you had prior for double the price? Most people figure this out about term life insurance when it’s too late

Let’s not ignore Whole Life and Universal Life Insurance, imagine, a person was told they will get RICH simply putting money into a Participating Whole life Insurance contract? But when they retire, the money is not what they imagined it would be? This too can be considered deceptive.

When I talk to my clients, I do a needs analysis, and I also do my best to educate my clients incrementally. There is no quick fix, there’s no getting rich uick, however financial education can go a long way.

In the western world, we vote for these politicians, we even vote to grow the size of the government, so to blame the government entirely is silly, we need to look in the mirror and as insurance agents we have to do our part to bring UNBIASED financial education to the marketplace.

Call or text Romone for more information

Contact Romone: (416) 705-0892
You can also use the contact form for more information.