How I Almost Lost a $150,000 Deal

I hadn’t sweat in a meeting in years, but this was a big one. It was the middle of winter and I shouldn’t be sweating, but I was about to explain to this business owner that we had rated his policy (actually it was a test application and we were at the moment of truth).

“Are you speaking Gibberish”? He looks over at the Advisor, “Is he speaking Gibberish to me right now,” he said referring to me. “I just talked to my doctor and he said everything is fine, what are you talking about. You are speaking Gibberish to me.” I never got training to deal with this situation.

I should take a moment to explain that this client we were dealing with hates insurance, I mean really hates insurance. He thinks it's a scam or at best, a complete waste of money. Now that a decision has come back on the insurance (which he never wanted to begin with, to hear him tell it) and it had now become more expensive.  

There was a lot riding on this meeting, because he had committed to spending $150,000 a year on insurance - well that was on the pre-rated policy. Suffice to say, this was a very high-stakes meeting - a massive insurance sale for the Advisor and a deal that could make my year, if only we could get the client over this hiccup.

I tried to explain, “the insurance company decided to charge you more money based on your history of asthma, unfortunately.” This was not my best explanation, but I got all the facts out. I’d grade myself at a solid C. I wish I had said so many other things, focused on the positives like “They actually insured you” or that “the numbers still look great” - which they did. But what I really wish I did was explain to him about how ratings work 3 months ago when we took the application. 

In seemed like a different time 3 months ago, it was the end of summer, everyone was happy and we presented this client the idea of using his corporate money to pay for an insurance policy that would take care of his real estate liability. It took him all of 5 minutes to blurt out, “Let’s do it right now.” I was shocked, but without missing a beat we took an application and scurried out of his house as quickly as we came, hoping that he wouldn’t change his mind and realize he made some sort of mistake. At that moment, before we took the application, I should have stopped the process for only 30 seconds and explained to him about ratings, but we didn’t and now we were paying the price.

“I talked to my doctor and he said my asthma was under control and shouldn’t be an issue.” Can I just say that I hate when doctors tell us how they think insurance should be - how about you keep to doctoring and we’ll keep to insurancing. I wanted to say, “Then stop using your medication then”. But of course I didn’t, that would have been mean and not productive. Instead I pivoted to the only thing that mattered - the reason we were here.

“Oftentimes we have clients that get charged more money for the insurance, but I want to show you that even with this increased cost, the insurance still makes a whole lot of sense for you.” This was after all the reason for the insurance. This business owner wasn’t stupid and while he didn’t like insurance, he knew (because we told him) that if you didn’t have to pay tax on growth and didn’t have to pay tax on getting it out of the corporation at death, it would be a good investment. ABC - always be closing…errr, I mean CDA - Capital Dividend Account, the magic words, the acronym that got us the $150,000 a year premium to begin with.

In that presentation a few months ago we showed him the “The Asset Efficiency Calculator," which is really a fancy way of saying we showed him the “This is how much you need to get to beat the return of the insurance” number. The number was 17%. With this new ridiculous rating, the return dropped to a measly 14%. This was still an amazing number, one he would have a really hard time beating.

“After the increase in cost, you still need to get 14% on an investment, every single year for the rest of your life”. This is the closest an Insurance Advisor gets to the “drop the mic” moment.

We were dealing with a real estate investor, so he got it. He knew this was the best option. However, I often get pressed on this point with something like this:

“I’ve been investing on my own for the last 10 years and I can beat 14%”. You mean the greatest bull market in the last 30 years that has been supported by the massive money printing (oh sorry, QE1 & QE2, we can’t say money printing, it sounds bad) US Federal Reserve - of course you have. But I usually don’t need to say that, all I need to say is, “Yes, but at what risk level? The insurance gets the equivalent of 14% return while taking a lot less risk. Most of that return comes from the tax-efficiency of the product, so it is a perfect compliment to your current portfolio, that will at the same time take care of your sizeable tax bill”. 

I could see the wheels turning in his head, he didn’t like the answer - actually he hated the answer, but 14% was a good return, scratch that, it was a fantastic return. But here’s what he really hated about this whole situation:

Insurance was still the best option for him and that made him even angrier.

Here’s the truth, no one likes insurance, especially not this kind. In his mind, he didn’t need insurance, but once we showed him the “Asset Efficiency Calculator” he wanted it. They all want it once they understand what it is. He had no low-risk asset that would return him 14% per year, so he had to take it.

This is a happy ending type of story, after all the complaining about ratings, the client took the policy - of course he did, he would have been stupid not to. 

Here’s the moral of the story - there are lots of things that can torpedo a large case, but you should never let ratings be one of them.

We took control of this case and brought it back to the reason he agreed to do the insurance in the fist place: we were about to save him millions of dollars in tax and even he couldn’t turn that down.

Andrew McKeown is an Insurance Consultant at a leading Canadian Insurance Company. He writes about sales and insurance ideas.

Check out his online course at: www.advisorsvoice.ca

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If you would like to reach me directly, email me at andrew.mckeown@londonlife.com