Many of your clients may naively assume that their interests are aligned with their agent and their insurance company, or at least that the agent and company are neutral. But in reality, there are many products where the interests of the agent/company are diametrically opposed to the interests of your client, and you and your clients would be well-served to approach these situations with healthy skepticism.
For any policy that provides less than a fair economic value at the time a policy is lapsed or surrendered, there is a perverse incentive for the insurance company to induce policyholders to leave the company.
“Lapse-supported pricing” refers to a technique whereby companies rely on profits derived from those who lapse their policies to subsidize the benefits that will be paid to policyholders who maintain their policies. The more lapses that a company assumes in pricing, the lower the premium it can justify. And the more lapses that a company actually induces, the higher its profits.
None of your clients will buy a policy like this planning on being a loser, yet the insurance company is banking on many of them being just that. Other products that utilize lapse-supported pricing and that put the company at odds with the policyholder include level term and long-term care.