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Selling Term Coverage to the Masses

By Jane Bryant Quinn
Thursday, November 28, 1996

NEW YORK -- The next time you buy term insurance, you might not sit down with a life insurance agent. That's a costly way of selling, especially for term (term policies are cheap to buy, pay off when you die and have no internal investment values). The commissions are so puny they're rarely worth an agent's power of persuasion.

A new distribution system is developing, with different players and new ways of marketing. Banks and stockbrokerage houses are selling by telephone, mail or Internet. Licensed agents still take your order, but they're voices at the end of a phone.

Increasingly, agents who give personal service will be focusing on the well-to-do, who buy high-commission cash-value policies for investment, business and estate planning.

Term coverage, by contrast, will be mass-marketed to middle-income families. You'll have to take the initiative to buy coverage yourself.

The new competition, however, should help you get a better deal. Price-quote services are proliferating. They search a term-policy database to find the best price for someone of your age and health.

Once you've picked a policy, a medic drops by, to draw some blood, take a urine sample and check your general health. The rest of the sale is accomplished by phone, fax and mail.

If you told the quote service that you're in excellent health, but the medic picks up a problem, you'll be asked to pay more than you were originally quoted.

In that case, you should shop again. Tell the quote service you're a "standard" rate rather than "preferred." Another insurer may offer you a better price.

Two discount brokerage firms are selling aggressively in all 50 states.

Charles Schwab & Co. sells a 10-year low-load policy underwritten by Great-West Life ("low load" means that no sales commissions are built into the price). For information, call 800-542-LIFE.

Jack White & Co. lets you shop a database of 350 insurers, including the low loads (call 800-622-3699). Thanks to a raging price war, customers in superfine health may find that, for them, load policies cost the least, despite the fact that they're paying a sales commission.

If your health is just a hair less than perfect, however, you generally won't qualify for that extra-low price. For this group of buyers, Jack White offers special policies from Midland Life Insurance Co., with terms of 5, 10, 15 or 20 years. "The rates are lower than those of most preferred policies and more people in general good health will qualify for them," senior vice president Mark White told my associate, Kate O'Brien Ahlers.

The banks that are testing this market are licensed in only a few states so far.

NationsBank, selling in Maryland, Virginia and Washington, D.C., offers policies from a roster of some 100 term carriers (call toll-free 888-294-2265). First Union deals with around 15 carriers (800-428-9440), and currently sells insurance in California, Georgia, Maryland, North Carolina, New Jersey, South Carolina, Tennessee, Virginia and Washington, D.C.

Quotesmith, with a database of some 143 carriers, provides free term quotes by Internet (www.quotesmith.com) or by phone (800-431-1147). Applicants are initially asked only one health question: Do you use tobacco? If not, you're quoted a preferred rate. After the medical exam, however, the rate may rise.

Insurance Information Inc. (800-472-5800) covers more than 500 carriers, charges $50 for five or more quotes, and asks up to a dozen health questions. So the rate you're quoted is more apt to be the rate you get.

The president of Insurance Information, Milton Brown, warns buyers to check their premium guarantees. Some companies sell "20-year" policies with rates guaranteed for only five years, after which they could rise.

I ran a couple of sample policyholders through these different services. Jack White's Midland policy, Insurance Information and Quotesmith were all low and competitive. First Union did well on some policies, not on others. Schwab was priced somewhat higher and NationsBank, higher yet. But you should test them all yourself.

Some banks function merely as captive insurance agencies, offering the policies of just one or two carriers -- probably not the lowest priced. "The banks have to decide whether they're mainly pushing policies to earn commissions or whether they're going to hunt for the best deal for consumers," says bank consultant Kenneth Kehrer of Princeton, N.J.

If your bank pushes one particular policy, forget it. Thanks to the quote services, you can find better deals all by yourself.

Jane Bryant Quinn welcomes letters on money issues and problems but cannot offer individual financial advice.

© Copyright 1996 Washington Post Writer's Group

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