Coupon Policies

  • The other approach to building your own sales force, in contrast to this full-scale approach, would be the specialized approach.
  • This could be specializing either by product line or by geographical area.
    • By product line, we mean basically what we all have called “special policies.”
    • Here you can teach the newly recruited man a simple sales presentation that he can learn quickly and give him a product that he can master and go out and sell; hopefully it will be a product that generates enough commission dollars for him to make a living rather quickly.
  • This is an area in which coupon policies were used in many instances in the past.
    • We all know that there were abuses at times with these, but I think that we should also be aware that there are many companies now of substantial size which at one point in their growth used this approach.

—  C. David Stilletto

1967 – SOA – New-Company Problems, Society of Actuaries – 38p

  • The vanishing-premium concept has been with us since the beginning of the century.
  • I’ve seen illustrations of policies in companies that were formed about that time and had things that we sometimes call charter policies, and coupon policies, for example.
  • One company I know routinely sold a coupon policy, 20-pay, with the coupons cancelled, which made it a 14-pay.
    • That’s a vanishing premium.
  • This was brought out, I think, in 1914, so it’s not a new concept, but I’d like to point out one other real problem, and that’s that most of these illustrations are not made up in the home office–they’re produced on laptops in the field.
  • Regardless of how disciplined the scale is that you put into the agent’s laptop, if he can change it or, as in one instance that I have seen, if he is trying to show a loan-supported policy and doesn’t recognize that with a variable loan rate when the interest rate changes on the loan, it’s also going to change on the dividends, somebody is in trouble. As a matter of fact, somebody was in trouble and they lost a lawsuit on that.

—  W. Keith Sloan

1995 – SOA – Practical Illustrations and Nonforfeiture Values, Society of Actuaries – 14p