Say It Ain't So TIAA

Published on 08/28/2019

Recently, TIAA shocked the industry by announcing that they would no longer be selling life insurance after the end of this year (and applications must be submitted by the end of September). TIAA will continue to service existing policies, but the company is putting its focus into its much larger annuity/investment side of the business.

Aside from being a top-rated company with an excellent reputation, TIAA had been one of our go-to companies for a specific product type where the combination of no sales commissions, low expenses, and optimal policy design were virtually unbeatable within in the industry.

No doubt many insurance companies and insurance salespeople are breathing a huge sigh of relief with TIAA's exit.

Fortunately, other alternatives exist to fill the void left in our practice by the departure of TIAA. In situations where we had typically used TIAA, we are still able to design flexible contracts with low expenses - and still eliminate all agent compensation. Other carriers are rumored to be contemplating entrance into the "no-load" or "low-load" space, but there is always an internal conflict with the need to support a field force or brokerage business with attractive agent compensation - so we shall see what unfolds in the coming months and years.

If you are wondering why eliminating commissions can be such a big deal, consider this: It's typical for a full-commission policy to have a first-year cash value of zero, whereas with a no-load policy it's possible to have a first-year cash value of 90% or more of the first-year premium. So on a policy with a $10,000 annual premium, your immediate savings with a no-load policy could be $9,000. (Don't be fooled by companies that boost the first-year cash value and spread out the commission hit over 10 or more years - that's not a low load - that's just a rearranged load!)