A question to life markets on issuing annuity contracts.

I know i'm going to come across as the bitter old guy who pines for the good old days, but could the various life markets and back offices who read my blog answer a question for me. " Why does it take 4 to 8 weeks for a "clean case" to get issued by a life market when I could get a contract issued in 48 hours back in 1980."

 A little context is called for here, but before I start in on what was and what is, my premise is that the single most troubling aspect of the structured settlement business is how long it takes to get an actual physical contract issued, commissions paid, and a nice, clean professional contract in the hands of the claimant and owner. I posted some of my concerns in the rumors and gossip section, but today I had one of those minor events that sets us all off, when I was told by a life market, "it takes at least 4 weeks for a clean case, once all paper work is in, but 8 weeks is pretty typical to get it issued." Do the life markets realize there are general agents that don't pay agents UNTIL the contract is issued?

Here is the back ground and standard i'm holding the companies to. My first job out of college was working for the old New England Mutual Life Insurance Company back in 1979 to 1982, prior to starting my structured settlement career. I was a supervisor in the underwriting and policy issue department, and at the time New England Life was probably the 5th to 7th largest life company by volume of new business written thanks to some innovative whole life contracts they developed around that time called, "The Vanguard series". I'm dating my self but we didn't have a fax machine in the building, there was no internet or email, no laser printing. Instead we had manual forms stored in huge collating shelves, clerks who were cross trained to handle all aspects of policy issue, and at the time IBM and Ross Perot had just finished installing the first main frame system that allowed for data input of cases, underwriting and policy issue. It was about as low tech as policy issue could possibly get compared to the communication, systems and printing options that are available to every company now.

I managed the Midwest region of agencies, and we were given a standard. Clean cases, to underwriting in 2 hours after mail delivery at 8 am, approval of clean cases by 4 pm, policy reviewed and then cycled through the main frame system for that nights batch run. The physical contract had to be collated and grommeted together the next morning, then reviewed, packaged in a clean professional binder that looked like something a company would be proud to mail, and had to be in the mail for drop off by 4:00 pm the next day. 48 hour turn around and we had days where we were issuing a couple of 1000 contracts across all four regional divisions. If it took longer then 48 hours, or if you had cases that didn't make underwriting in 24 hours you had to go to a supervisor meeting at the end of the week to discuss every single case that didn't meet standard. If you didn't have a totally legitimate reason for why it was delayed, you got a warning. Second warning you were usually fired, often in front of your peers. I saw two supervisors packing boxes after a couple of meetings and trust me it made an impression.

Now, someone please tell me, with the advent of scanners, pdf files, laser printers, online storage of documents, instant communication, faxes, over night express and billions of assets why there isn't a single life market in the structured settlement market that can even dream of meeting that standard? I'm not talking about cases where requirements are missing, i'm not talking about cases with factual errors that need to be corrected and caught. I'm talking about clean, simple, fully documented and prepared cases where you can't get a contract, and worst of all can't find someone at most markets who will take responsibility for getting them out. I just got a contract last week from a major life market, that was a totally clean case, small premium and split with another broker. There was some minor, and I do mean minor confusion about who was supposed to be providing a tax ID number that slowed it down by about 5 days. It took 7 months for the contract to make it's way to my office. 7 months.

So my questions are as follows for the life companies:

 1. Why do most of the physical contracts look like they are photo copied at Kinko's and stapled by a team of 6th graders, with policy jackets that don't fit a standard over night envelope and don't begin to reflect the quality of the sales material put out by the same company. John Darer addressed this same issue late last week in his blog.

2. Why does it take literally weeks to issue a structured annuity contract? No company is that busy, that overwhelmed or that understaffed unless they deliberately choose to focus money on sales to the detriment of underwriting, policy issue and back end service. I'd like to hear from companies that have internal standards as to issue times because I don't believe from what i've seen and heard from others that there are any standards, just a promise to "give it our best shot".

3. In this day and age, and with online case tracking systems, why don't the life markets have an online tool that tracks contracts during underwriting so that both the General Agent and writing agent/broker can see outstanding or missing requirements and is able to provide them EARLY in the process. As we all know, if you tell me 10 weeks after premium funding that the life company needs an additional document or signature, trying to get it from the various claims, defense, plaintiff and claimants is exceptionally difficult as they have typically moved on to the next case. It would cost very little to create an online directory for appointed agents and general agents to review and maintain and software to do the job is readily available.

4. What is the deal with closing up a national structured settlement department at 5 EST? If your a national company you should provide national service. I'm in my office most days at 5:30 am to be available for my east coast clients, and I have someone in the office until 5 pm PST for our west coast clients. In 1980 at New England Life they had someone in at 7:30 am to take calls, and staying until 7:00 pm to handle West Coast service. Couldn't one life market put one employee on flex time to handle West coast business? Just a thought.

In summary what i'm essentially asking for is a return to some standards and accountability on the back end of the process, instead of focusing exclusively on the front end business acquisition mode, which I generally give most companies very high marks in. I mean, lets be honest here, we are talking about mega billion dollar life markets, the pantheons of the US financial community. I'm thinking you guys could shake the dollar tree and do a better job on policy issue and underwriting, and the first company that does so is definitely going to be in the top of my rotation when it comes to selection of markets to place contracts, all other things being equal.  

Posted on July 26, 2006 .