Resource center

Institutionalize Your Life Insurance Portfolio

October 20, 2016

An article published in the July/August 2013 issue of Private Wealth Magazine entitled “Taking a Cue  From Institutions” suggests that family offices should mimic institutions and adopt an institution-like disciplined and process-oriented approach when managing their investment portfolios. The  idea is that through a process-oriented approach institutions, and family offices, can be more effective and produce more efficient long term  results.

While this concept is often discussed in an investment context, family offices should consider a similar process-oriented  approach when managing  other family assets, such as life  insurance.

For advisors of UHNW families to achieve and maintain the most efficient and effective life insurance portfolios, we recommend a similar institution-like seven step process. During this process, selecting a life insurance specialist who can align the family’s specific needs with the proper insurance is of the utmost importance.  Wealthy families and their advisors need an  expert life insurance advisor they can rely on to objectively assess existing life insurance portfolios and recommend  targeted, efficient solutions to accomplish their objectives.

  • Information gathering and analysis: Family advisors should collaborate to thoroughly assess the family’s situation and needs specific to the family’s perspective, facts, and objectives.  This includes quantifying financial needs to determine strategies and/or financial products that present viable solutions. In the best case scenario, the life insurance advisor has the proper consent to work collaboratively with the other key advisors to the family to develop those strategies that effectively assist in achieving the family’s goals. It is imperative that the family advisors and insurance specialist work together to analyze the financial consequences of each potential alternative, always keeping in mind the family’s planning goals, objectives, and risk tolerance.
  • Product selection: The family’s advisors and the insurance specialist should evaluate various alternatives to determine the most competitive products and planning


The product design and selection process involves reviewing confidential client data that is used during the underwriting process. Both medical and financial information can have a direct impact on the final recommendation. Risk tolerance (includes market and interest rate risk, carrier selection, guarantees vs. flexibility) and the use of sophisticated designs (GRAT’s, FLP’s, CLT’s, private financing, split dollar, etc.) must be weighed and considered. The insurance specialist should provide an executive summary with a complete analysis of suitable products along with overarching planning  and economic implications.

It is important to note that UHNW families can take advantage of their size, scale, and overall better health characteristics by accessing a suite of institutionally priced life insurance products. The design and cost of these restricted access products reflect the three key areas where the UHNW community demonstrates superior characteristics: mortality, average policy size, and persistency. The result is typically lower premiums and policy expenses vs. the retail products. Selecting an insurance specialist who can properly analyze and utilize these products is critical to serving as an effective steward for the family.

  • Carrier selection: The insurance specialist should identify the appropriate company(ies) for placement of the desired  financial Factors to consider include: Is the advisor captive to  a particular company or function independently? Does the advisor understand that carriers often specialize in particular product lines, thus affecting price and commitment to policyholders?  Does the advisor have access to institutionally priced products that have been customized for the UHNW market? Has the advisor worked with senior level management of the carriers regarding the feasibility and design of new products? Does the advisor understand the impact of the reinsurance market on  pricing?
  • Underwriting: This is where a clients’ insurability is assessed by the insurance companies. This is also where pricing is determined. To begin, medical records must be gathered, and this can take approximately 4-6 weeks. An experienced advisor will review the records for accuracy and consistency, and point out discrepancies where they Often, such discrepancies can be resolved before a formal submission takes  place.

Family offices can avail themselves to a process whereby their medical  records  are simultaneously sent to various carriers informally. This allows the advisor to obtain preliminary feedback as to probable underwriting classifications, and gives the family a sense of what the pricing may begin to look like. When a new placement or a restructure of current coverage is being considered, this informal process begins to address whether or not it is in the family’s economic interests to retain or consider changes. Many families appreciate having this knowledge before any medical exams have taken place. Again, selecting an insurance specialist who is experienced in working with UHNW families and their advisors will go a long way in insuring this part of the process is strategically  followed.

When a family decides a change may be appropriate, underwriting advocacy is absolutely critical. The insurance specialist must have a deep understanding of all facets of the underwriting process, including carrier negotiations, how best to present a family’s case, managing a carrier’s capacity limits for larger placements, etc. It’s important to note that the first offers are on occasion, not the final answers. Factors that can have a positive impact on the negotiations include the advisors credibility with the carriers, the history  of the relationship,  the amount and type of business  placed, and in the case of a select group of UHNW  life insurance advisors, the ability to participate in the underwriting  risk itself.

  • Policy delivery: This encompasses implementation of the plan, including a summary of the coverage placed, and the ongoing administration of the coverage. It is important that the insurance specialist and family advisors verify the current ownership and insured information, along with underwriting classes and product types, beneficiary designations, and premium amounts (if any).
  • Periodic reviews: Evaluations of in-force performance should be conducted at selected intervals.  The insurance specialist should continue to work with the family’s advisors to compile a detailed listing of all policies, contacting each carrier to collect the current data (death benefit, cumulative premiums, cash values, and any outstanding policy loans) and assist in analyzing  policy performance. Actual policy performance should be benchmarked  against the original design, as well as the market place. Discrepancies should be researched and explained, and then corrective steps taken if necessary.

Ongoing service and administration: Proactive ongoing servicing of the implemented portfolio should collaboratively continue between the insurance specialist and the family’s advisors. In addition to the ongoing reviews, the insurance specialist should have the capability to understand and report on fiscal year end values, reportable income related to split-dollar arrangements, and information required under IRC Section 101 (j). The life insurance specialist should continue to work closely with the family’s advisors when  coordinating planned annual funding, coordination  of payments for gift tax purposes, beneficiary withdrawal rights, and cash flow planning. In-force pricing improvements,  if any, should be tracked and communicated  as well.

Finally, a claim is the culmination of the process-oriented approach. The insurance specialist should control this process in-house, and expedite the claims process by processing of the required forms for payment. This is often a difficult process for many families, and the life insurance specialist  should endeavor to make this as seamless as  possible.



By following a more disciplined, and process oriented approach, families have a tremendous opportunity to improve their results, and drive much greater efficiency and effectiveness into the management of their life insurance portfolios. When following these guidelines, and by selecting an insurance  specialist who adheres to these principles, families can have an institutional and customized relationship …far different  from the retail,  transactional  model  that permeates the life insurance industry.