This book reports a study of universal life
insurance as a case study for analyzing the tradeoff
of selling commission against product performance,
using policies that have the feature of varying
sales commission by using a noncommissionable term
rider in the policy. This study first looks at
whether the use of the term rider has a
statistically significant effect on the policy''s
performance over the long term. The study reveals
no statistcal significance, when measured against
other independent variables. The study then
performs a discounted cash flow analysis of four
different case profiles to determine what
improvements in performance a policyholder could
expect given various degrees of commission
reduction. The results indicate that there is a
tradeoff, but predictability is problemmatic. The
study is a cautionary tale to agents and clients who
assume any predictable result from commission
reductions in these products, and leaves the reader
with the question: Who then is getting the better
part of the negotiation over commissions in these
products? The agent, the client, or the insurance
carrier itself?
Academic literature yields little study in life insurance
product. This study attempts to de-mystify the inner workings
of life insurance as a financial asset. It is not
an actuarial study, but an analysis of the trsdeoff between
product performance and agent compensation when the flexibility
of that compensation is inrtroduced.