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And insiders say a lot of companies out there are not getting it right. Policies must be reviewed every year to ensure a plan is still doing its job and to make sure a company is not throwing away money, but agents and brokers drag their feet on this important step, according to Jon Ten Haagen, president of Ten Haagen Financial Group in Huntington. “You can’t just buy (a policy), put it on a shelf and forget about it,” Ten Haagen said, adding that without vigilant updating, policies may quickly outlive their usefulness. Less than 20 percent of agents and brokers review these policies annually, and although there is no regulation requiring it there is an ethical responsibility, according to Richard Pope, president and chief executive officer of Woodbury-based Applied Financial Group. Industry rules and regulations, personal situations and business values change constantly, “and I mean constantly,” Pope noted. For example, a Ten Haagen client bought a face-value death policy in 2001 with no 100-percent death benefit or premium guarantee – typical of older policies. Today’s policies routinely offer those benefits, so analyzing and updating is necessary for the client to take advantage of current offerings, Ten Haagen said. The trend in the industry, however, is for an insurance agent or broker to “come in, write a policy, make his commission and disappear,” Pope said, adding this is “one of the biggest problems in the industry.” A cause of this neglect may be the payment structure for most insurance representatives. The bulk of their money is paid up front, sending brokers on a constant quest for new clients and leaving old clients to fend for themselves, Pope added. “If you neglect a client, another agent will come in and hurt them,” he said, which is why his company does not one policy review per year, but four. Another industry-wide problem, according to Pope, is it’s too easy to get licensed as an insurance agent. A mere 40 hours of schooling sends green agents into a professional atmosphere to manage a company’s most valuable asset, its money. Reviews, therefore, are essential, and may lead to altering or even nixing some insurance policies, Pope said. A fairly new market called life settlements is ready to take old policies off companies’ hands, according to Stephen Shorrock, co-managing director of Select Life Settlement Corp. in Northport. In a life settlement, a policy is sold by either an individual or company – who receives an amount of money between the death benefit and cash surrender value – to an institution that pays the premium until the person dies, and then collects the death benefit. Select Life Settlement acts as the middleman between agents and financial sources. “It’s just another choice for people or companies that have (a life insurance policy),” Shorrock said, adding the same warnings as Ten Haagen and Pope. “Agents have a fiduciary responsibility to update insurance,” he said, “and they should be doing it.”
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