Case study: Annual reviews are crucial 

53 year-old male client has a net worth of about USD60M. He is married and has four kids studying abroad. He is in good health.

Our client purchased a Universal Life Insurance (ULI) policy in 2013. During the recent annual policy review, we noted that the policy’s crediting rate had dropped, and the cash value will also start dropping. We agreed with the client’s concern about the declining returns, especially in the context of his wealth and legacy planning.

The client wanted to explore alternatives and was open to the possibility of switching his ULI to a Whole of Life (WoL) policy.

• During the annual policy review, we found (at the published 3.15% crediting rate) there is an early lapsing risk at age 87 with declining cash value from age 71.
• Our client enjoys piloting as a leisure activity and flew a lot before the pandemic, which resulted in a “dangerous hobbies” loading on his existing policy. Now he flies much less, so Mercer PCS thought it might be possible to petition for the removal of the loading on the new policy.
• A Whole of Life (WoL) policy would potentially be a better solution in his particular circumstances as there is guaranteed return and no risk of lapse.
• Our client had a medical in 2019, which did not result in any changes to the policy that was incepted in 2013. This time, due to a change his lifestyle, our client’s medical examination actually produced a better result than either of his previous medicals.

With the better medical result and reduced piloting, Mercer PCS petitioned to a few of our insurance providers asking them to waive the loadings for piloting. The client was therefore offered a number of Whole of Life options without a “dangerous hobby” loading. He chose to surrender his ULI policy:

• Surrender value was USD1.88M – which was used as the premium for the new policy.
• Previous sum assured was USD6M, the new one is USD6.5M.
• No premium financing was elected as the client wishes to nominate the beneficiaries.

The entire process, from review to changing policies was concluded within two months, and the client is very satisfied with the final offer.

1. Insurance policies are an integral part of high net worth individuals’ wealth management, so annual reviews are highly recommended, especially in times of volatility.  
2. Mercer PCS consultants works with our clients to thoroughly understand our clients’ lifestyle changes and insurance objectives, and we present considered options that meet those objectives as well as suit the beneficiaries’ needs. The clients can then make informed choices.
3. Our solutions are always the result of a highly collaborative approach when working with insurance providers and private banks.