Summer 2002 Edition

BAD NEWS -
Well, there sure is enough of this to go around. We feel we have to cover it, but we do hope you won't shoot the messenger!
Last week saw the Dow record its second largest weekly point drop in its history. The 617 point drop is second only to the 1300+ drop of September 11, but several higher "percentage drops" have been recorded.
As of Wednesday July 17, the Dow was at 8589 and NASDAQ at 1389.61.
See below for our take on these events…

-JD Moya, President,
The Pegasus Group

• Solutions for our Economy
- (Life Insurance More Important than Ever)

• Top 10 Check Off Before You Check Out

• Voluntary Benefits & Retention News

• Funding Your Next Buy-Sell Agreement

• Converting Policyholders into Customers

• LTC policy purchases have tripled in last decade!

• Long Term Care Insurance Survey: Over $80,000 for Nursing Homes

Our Economy - Causes & Corrections

There is no question that we are in a difficult and perhaps drastic economic situation. Here are a few of the problems and what we think should be done.

1. Restore public confidence in our business leaders and the accounting profession. A good start would be to "throw the RICO organized crime book" at the offenders. Putting them in jail and confiscating their ill-gotten wealth could serve as a pretty good deterrent to others.

2. Tighten up oversight. We hate to see more government regulation, but someone apparently needs to make sure people do the right thing.

3. "Government, heal thyself." The government says that it can't account for about $17 billion of expenses. Currently there is no overseeing agency of government spending until the GAO is called in after there is a problem. Note re all of above: "Character does count" because it indicates a knowledge of right and wrong. However, for now, we better "inspect what we expect."

4. Do something about our legal system that has spawned a "jackpot justice" and "legal larceny" atmosphere. A "loser pays all" legal costs system patterned after the English system would be a good start.

5. Continue the War Against Terrorism abroad. As Barney Fife advised, "We better 'nip this in the bud,' Andy."

If you had bought $1000.00 worth of Nortel stock one year ago, it would now be worth $49.00.

With Enron, you would have $16.50 of the original $1,000.

With Worldcom, you would have less than $5.00 left.

The truth of the matter is, there are only two things necessary for the successful completion of any financial plan; time and money. Because most "engines fail" at inopportune times, that is, the majority of people die unexpectedly, you cannot guarantee your clients the time needed to achieve their monetary success.

Your life insurance products can guarantee them the money! According to Research and Review Services, "R & R", eighty percent of what a person earns goes for living expenses, including taxes. Of the remaining twenty-percent, seventeen goes into investments and the other three-percent pays for life insurance premiums.

The seventeen-percent that went into investments, however, accounts for only fifteen-percent of total estate values when probated at death.

The three-percent that went into life insurance, provides over eighty-percent of all that is left for surviving families and loved ones to live on. These facts must be conveyed to all clients who engage in the comprehensive planning process, and, substantial safety nets of life insurance must be installed in these plans!

Today's commonplace "investment only" approach to planning, which fails to incorporate these safeguards, often proves disastrous.

Top 10 "Check Off" BEFORE You "Check Out"

The Life and Health Insurance Foundation for Education (LIFE) has made a list of "to do's" before "mañana comes" and your family is left with all kinds of financial, legal and logistical problems. Make your "dying a little less trying" for your loved ones:

Voluntary Benefits and Retention

Prudential released the results of a new study of 20,000 households, which looked at how having voluntary benefits at work increases employees' loyalty to their employer. Loyalty is viewed as a key driver of employee retention.

The majority of employees (84%) agree that offering voluntary products is an important way for companies to retain talent. Companies that want to explore how voluntary benefits can help them meet their employment demands can contact Pegasus' at 800.658.9360 for more information.

Pegasus has Found a Home for your Rated & Declined Clients!

Do not let your impaired risk go without insurance and you without a commission. Send it to us and we can help! Ask for Gale at 800.658.9360.

Business Week Article on Variable Life and it's Problems

This article came out in a recent Business Week Magazine. For a copy of this article, please email me and I can get you a copy. Entitled "Watch Out! The Policy May Blow Up and Leave You Empty-Handed."

A.M. Best affirms Fidelity & Guaranty Life’s A Rating

Fidelity & Guaranty Life had its Best’s Rating of A (Excellent) affirmed and removed from under review by A.M. Best, one of the nations leading independent rating agencies. The recognition of this financial strength is further testament to their exceptional business success and solid relationship with parent company, Old Mutual plc.

Sales Tip of the Month-
"Funding a Buy-Sell agreement with Permanent Insurance rather than Term Insurance"

Whenever you fund a buy-sell agreement customers frequently request a term policy due to the cost. Is term good for the client? Not necessarily.

A properly funded UL can provide many advantages over term. Call or email our office for a complete analysis on a case recently sold through one of our carriers with an annual premium of $37,000. This case was sold after a complete review of different term analysis.

Not selling Buy-Sell? Call us for a review as to why you are losing a lot of money by not presenting this to your small business clients.

Customer Service Tip - Use The Web!

75% of consumers will wait no more than one day for an email response to a question before they consider their provider's customer service bad, according to a survey by Mobius Management Systems.

Almost one fourth (23%) of consumers are even less patient, saying if a response does not come in one hour or less, they classify the customer service as bad.

The Mobius survey should be troubling to those who do not provide internet communication to their customers particularly because more and more consumers are going online for service.

One third of consumers polled said they prefer contacting customer service by sending email (19%) or navigating their provider's website (13%).

Do you have a website? If not and you want some help in that area please contact us. We can help you start up your own website for a modest cost through the use of our website specialist, David Civetti. David designed our website and is familiar with what insurance agents need for their customers.

Americans Uneducated on New Social Security Benefits Regulations

Think you can collect full Social Security benefits the day you turn 65? Not anymore. Most Americans don't know the minimum age began creeping up two years ago.

That is just one example of how most people are not correctly planning for retirement, according to the 2002 Retirement Confidence Study, released last week to coincide with the start of the National Saver Summit on Retirement Savings in Washington, D.C.

The report, conducted by the Employee Benefit Research Institute, the American Savings Education Council and Mathew Greenwald & Associates, showed that though seven Americans in 10 are confident they will have enough funds in retirement, they may find themselves sadly mistaken.

For instance, the study revealed that only 20 percent of the U.S. population knows at what age they will be eligible for full Social Security benefits.

In 1983, Congress mandated that the age at which people could collect full benefits would rise from age 65 starting in 2000. The minimum age increases gradually over the next few years. Anyone who retires in 2002 can't get full benefits until age 65 and four months those born after 1959 won't be eligible for full benefits until age 67.

Also, 42 percent of Americans believe they will need less than 60 percent of their pre-retirement income once the stop working, the study revealed. Financial experts, however, say most Americans need a minimum of 70 percent to 80 percent to fund their retirements.

Converting Policyholders into Customers: Insurance Agents Hold the Key!

In a just-released report from their Customer Relationship Management practice, Meridien Research predicted that new front-office CRM technologies will now allow insurance firms to stimulate their businesses by refocusing from individual lines of business onto customer retention.

The historically conservative insurance industry, with multiple disparate legacy systems and a policy-based sales structure, must follow the lead of other financial services segments by better meeting the needs of their customers through integration, personalization, and heightened service. Insurance agents, supported by these new technologies, hold the key to converting single business line policyholders into enriched multi-product customer relationships.

LTC Growth Tripled in Last Decade!

The number of Americans who have purchased insurance against the catastrophic costs of long-term care has more than tripled over the last decade, from 1.9 million in 1990 to 6.8 million in 1999, according to a survey from the Health Insurance Association of America (HIAA).

Long Term Care Insurance Survey:
Most Expensive Markets Now Over $80,000 Per Year for Nursing Homes

Released on March 4, a survey of nursing home costs commissioned by GE Long Term Care Insurance shows that spending a year in a nursing home in the ten most expensive areas of the country now carries a price tag of roughly $80,000 or more.

Two other statistics bring the significance of this survey's findings into sharp focus: roughly 40 percent of those reaching the age of 70 are expected to need some type of long term care during the rest of their lives; yet only seven percent of Americans have done any planning at all for their long term care needs.

The national annual average cost of a year in a nursing home is $54,900. The survey evaluated the cost of assistance in a nursing home with the activities of daily living for a person suffering from a debilitation such as Parkinson's disease. It did not include costs for therapy, rehabilitation, or medications. The survey of 2,462 skilled and intermediate care nursing homes in all 50 states has an error rate of plus or minus 1.3 percent.

These results emphasize how vital it is that people plan appropriately for their long term care needs, and helps underscore how valuable long term care insurance can be. At the rates shown in this survey, it wouldn't take long to exhaust even a substantial nest egg. Long term care insurance can help protect assets accumulated over a lifetime.

The survey also revealed that costs varied widely, from a low of $52.14 per day at one nursing home in Montana to a high of $704 per day at a facility located on an island in Alaska.

The survey did not evaluate the cost of assistance with activities of daily living provided either in the home or other types of facilities, including adult day care centers or assisted care facilities.

Federal Long Term Care Insurance Plan Under Scrutiny (Press Release)

Now that the early enrollment period has begun on the eagerly-anticipated federal long term care insurance program for federal employees and retirees and their families, people are asking: How good is it? The answer depends on several factors, according to Ed Neveleff, long term care insurance specialist with Senior Insurance Services of Gaithersburg, MD.

"Your age, your health, and the benefit levels you want will determine whether the federal plan is the best fit for you, or whether you would be better off purchasing a policy privately from one of the companies offering long term care insurance in your state," says Neveleff. The federal plan is offered through Long Term Care Partners, LLC, a joint venture between John Hancock and Metropolitan Life. According to Neveleff, who represents over 15 top companies offering long term care insurance in Maryland, Virginia and Washington, DC, the pricing of the federal plan is most competitive for people over age 65 and those with significant health problems. For such individuals, says Neveleff, the federal plan is probably unbeatable. "However, if you're under age 65 and reasonably healthy, you're likely to find more competitive coverage privately and you should shop around a bit before making a decision."

One advantage of the federal plan is limited health underwriting for active federal employees and military personnel and their spouses. "If you're in this category," says Neveleff, "and have significant health problems, you might obtain coverage under the federal plan where you would otherwise be uninsurable." The drawbacks of the federal plan, according to Neveleff, are that the pricing is not particularly competitive for those in reasonably good health under age 65, there is no spousal discount, and the home care benefit is limited to 75% of the facility benefit.

"The home care issue is extremely important," says Neveleff. "For many people, particularly those who are married, home care is a very attractive option. This benefit might enable them to avoid, or at the very least delay, going to a nursing home. However, home care can be every bit as expensive as facility care. Unfortunately, the home care daily benefit in the federal plan is capped at 75% of the facility care daily benefit. This could create a significant shortfall that the policyholder would have to pay out of his or her own pocket."

Despite these reservations, says Neveleff, "the federal government and Long Term Care Partners deserve a great deal of credit. The emergence of this program is one of the most positive developments in the long term care insurance industry in many years. The heightened public awareness and education that will result from this program will have a tremendous ripple effect in the private sector and will help put this important national issue on the front burner. It's a win-win situation."

J.D. Moya
President
The Pegasus Group
800-658-9360