January, 2012

Dear Friends and Clients:

For years, I have subscribed to the NFL package offered by DirecTV in order to watch every pro football game on Sunday afternoons. For this, I pay over fifty dollars per month. In their quest for new subscribers, DirecTV has offered sweet deals on the NFL package (i.e., much cheaper than the $50 per month) to off-the-street buyers with no history with DirecTV. In 2011, the offer was the ultimate – no charge for the NFL package to new subscribers. The rest of us long-time loyalists paid the full freight. I called DirecTV to complain about this inequity and threatened to drop my subscription, and then re-enroll to get the free deal. Their response? "We have software which catches such behavior and negates it." The implication was that if you are unhappy, we're sorry, but you can go elsewhere for your football – oh, wait! Maybe not, since we have exclusive rights to the NFL package.

Why am I bringing this up? Because as interest rates have stayed low for so long now, some carriers are supporting higher new business crediting rates with higher yields from previously-purchased assets. This may be similar to existing customers paying substantial freight to benefit new customers. Mind you, there is nothing illegal about this practice as long as it is consistent with policy form language and the carrier's internal redetermination policy. However, especially for life insurance, where new underwriting may be required in order to switch policies, we need to be sensitive to the perception and reality of inforce policyholders experiencing the "NFL package irritation effect".

Tim Pfeifer
President