Highland Capital Brokerage provides superior client service through a vast network of business and underwriting experts. Each of our team members has longstanding experience and is committed to helping you serve clients. BACKSTAGE, our new blogpost series, takes you behind the scenes so you can learn more about your dedicated professionals.
In her work as a policy review specialist for Highland Capital Brokerage and Premier Trust, a dedicated Nevada-based trust administrator, Peg Michails resolves orphan individual life (no agent of record) and trust-based policies. Her goal: to ensure clients and their beneficiaries get what they were promised.
The passage of time often makes it difficult to understand these cases. Even when brokers of record can be found, they often did not service their old accounts, so there is no track record of beneficiaries, changes of address, policy loans and lapse probability.
“When you sell an insurance policy, you become the agent of record,” she says. “The carrier will honor that as long as the broker is in the business, dies or gets a client letter requesting broker replacement. But that commitment is a two-way street. It comes with certain fiduciary obligations. Our goal is to ensure client obligations are honored.”
A Matter of Trust
These fiduciary obligations are clearest for trust administration. Irrevocable Life Insurance Trusts (ILITs), for example, need constant performance monitoring to ensure sufficiency of current premium payments and whether any withdrawals or loans outstanding have affected the policy over time. Failure to do so could subject all parties to an unintended breach of fiduciary duties and legal liability.
As a result, Premier Trust asked Peg to review more than 400 policies that they administered, providing only policy numbers and a list of original insurance carriers. She began by collecting authorization letters, informing writing agents, ordering in-force ledgers, and following up with insurance carriers. This effort enabled Peg to thoroughly review the policies and provide Premier Trust with enough information to fulfill its legal obligations.
The other half of the policies required a deep dive. Will the policies meet their intended goals? Are they performing relative to their original objectives? Are the policies’ cost competitive given the market today? These questions seem academic, but when a $10 million policy is called into question by its heirs, the trustee has a fiduciary duty to ensure it stays in-force and is fully payable at the time of the insured’s death.
To make these determinations, Peg relies on HCB’s Policy Analysis & Comparative Evaluation (PACE) report.1 It’s designed to evaluate the performance of a policy to date, project its performance going forward and review alternate forms of coverage assuming the insured remains in good health. By analyzing current performance information and reviewing options for optimizing the benefit and cost effectiveness of coverage, it ensures current and future objectives are being met.
Completed PACE reports are provided to Premier Trust, which presents Peg’s findings to advisors. If there is no agent of record, Peg works with Premier Trust or any existing client counsel to explain the contents of the report.
The Future Cost of Procrastination
Producers tend to be hunter-gatherers, preferring to land new clients rather than focus on back-office service work. Yet as new fiduciary standards gain traction, both at the state and federal levels, the need for ongoing policy reviews will become an accepted practice.
“The policies we handle at Highland typically are for millions of dollars in coverage,” Peg says. “Get just one negligence claim and it could set off years of expensive litigation. That’s why there is a form in the PACE report to be signed by the insured. It’s an acknowledgement that the client has seen and understands the report. The last thing you want is a beneficiary filing a lawsuit down the road that says you were negligent in some way.”
These are, no doubt, thorny issues that most would rather avoid. But, for Peg, it’s just another day in the office. “I have always felt strongly that we must do the right thing for the client all of the time,” she says. “You’ve got the responsibility and the accountability, so you’ve got to make sure clients are informed. If you can do that you can go to sleep at night with a clear conscience.”