Hybrid Concepts Look Good on Paper, Regulatory Approval Could be Lengthy

imageCombining a reverse mortgage with other financial products continues to be a topic debated in our industry and in the halls of Congress.  

An article from Investment News describes how companies like Sun Life Financial are developing a hybrid benefit linked products which could involve a reverse mortgage: 

“There are products in the space that will be more consumer friendly by combining the characteristics of what’s in life insurance with what’s in a health insurance policy,” said Jon Boscia, president of Sun Life.  “This way, the consumer doesn’t have to pay top dollar for each.” But he warned that while some hybrid concepts look good on paper, the regulatory approval for them could be lengthy. 

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Later in the article, Boscia describes how you could combine a “reverse mortgage with an annuity, long-term-care insurance and a death benefit.”  He admits that a product like this would have several different obstacles to get it to the marketplace.

“Getting through the regulatory-approval process will be one hurdle, then taking that to the distribution will also be a second hurdle, and then simplifying it for the consumer will be a third,” said Boscia.  He did predict, however, that “the hybrid space will be an active space in the years to come.” 

What do you think, is there a place for a hybrid product which includes a reverse mortgage in the years to come? 

Sun Life adding VA wholesalers, cutting back on VA products

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  • Certainly. Provided it has a clear and bona fide benefit to the consumer and it puts folks in a better financial position, it makes sense to tap an non-earning asset.

  • Absolutely! Combining a long term care insurance product with a reverse mortgage is exactly the way this product can do the most good. As long as the end product is suitable to the seniors needs and creates a better financial situation for them it is a win/win scenario for all.
    Kudos to Sun Life’s President Mr. Boscia, for having the courage and business acumen to be vocal on this sensitive issue. As the Founder of a reverse mortgage company whose business model is based on referrals from trusted senior advisors I wish him all the luck, and speed, in the world!

  • I think it is a fantastic idea, but the overall menatlity of ignorant people like Senator McKasskil make something like this almost an impossibility.
    I have always felt that Long Term Care Insurance was an abvious fit (Has anyone ever been taken advantage of whiel buying a LTC policy?)for Reverse Mortgage proceeds. I just doubt that the few “champions of the elderly” who have indicated their lack of understanding when it comes to Reverse Mortgages (ever see the satisfaction rates in an article?) would only see this as another opportunity for the horrible,predatory loan officers to make more money at the expense of the preyed upon senior clients.

    • Mr. Pinter,

      Speaking of the ignorant, who is Senator McKasskil? I think you are referring to Senator Claire McCaskill (D-MO), correct? Since you decry the ignorant, I searched on the Internet for your senator whom I have never heard of and perhaps found the person you so intellectually reference. Since I know your mentality exceeds those who disagree with your position, I will use your spelling from here on out to address the senator from Missouri.

      Some of those who are mentally inferior to you, especially elder law attorneys I deal with, have questioned the need for LTC in cases where the senior went into debt to buy inadequate amounts of LTC when in fact what they ultimately ended up with and needed anyway was MediCal.

  • It will never happen. If, as the critics suggest, seniors can't grasp the concept of a reverse mortgage then how will they possibly be able to understand it when layered with additional products which, in themselves, are not exactly simple.

  • Although I believe it could be a great fit in the right circumstances I have to agree with REVGUYJIM.

    I hate to through out the baby with the bath water but it will bring in alot of the undesireables along with more fraud and more negative press which we certainly do not need.

  • Unfortunately, I have to agree with REVGUY and treverse.
    However, if i were to bet on some form of hybrid, my money is on Snoopy.
    Also, as I have stated before, I would love to see a tenure only RM product, since currently the monthly payments are greater than under a fixed annuity with joint and survivor, no term guarantee. Believe me, from a regulatory perspective, it would be much faster than a hybrid security.

  • The insurance product already exists, Mr.Boscia is just talking about merging the two and using the RM for the funding mechanism. I have to give him credit, in the current atmosphere, it takes nerve to suggest cross-selling the RM with Insurance!!! It makes a lot of sense for both the senior and the government to lessen Medicaid cost so we can all afford our new health plans. But, I wouldn't hold my breath until MetLife, Wells Fargo and BoA are on board.. heck, then even NRMLA will become a cheerleader.

    • jschel,

      Maybe giving credit is not what some of us think about foisting his suggestion. Some of us might call it galling chutzpa. Excuse a few of us for viewing this as an ethical issue.

  • Mr.Boscia is on the right track thinking life companies can provide combination products to serve consumers,however as we all know (KISS) should be the formula.Twenty five years ago I made presentations to several large Insurance companies to enter the reverse mortgage business,the answer was always the same,we need to limit our real estate exposure.Remember at that time there was a limited secondary market.Now markets are more fluid,ergo you have Metropolitan Life and others looking to enter the reverse mortgage business.Overall life insurance companies providing long term payouts are a natural progression in their on going business,product design and options will evolve as time go's on.I don't think they can create hybrid products right off the block and get not only approval from governmental authorities,but consumer acceptance.

    • Mr. Frankel,

      As would be expected, they view their own positions not that of the senior. Who would expect more? So what you are saying is, their risk of loss at that time in investing in mortgages secured by the homes of their clients exceeded their expectation in profits? And you attribute the difference in attitudes toward this combined transaction today as the ability to securitize those mortgages and sell the risk to others? What a novel idea, if we had not had the demise of AIG and the huge market losses in MBS securities!!

      Did I see or read of any concern for the client? Thank goodness the world is not composed of overzealous insurance advocates.

  • While combining insurance products is an exceptionally good idea, combining them with reverse mortgages is not. One would expect current and former insurance agents and their lackeys (along with those who falsely believe that all seniors who are not declared legally incompetent are fully capable of making decisions that are in their financial best interests no matter how integrated or complicated the product may be) to respond positively to the combining of insurance products with reverse mortgages. It was a responsible and wonderful thing to see a true advocate of LTC and other insurance products express his reservations about combining insurance and financial products with reverse mortgages. dduck12, you are a true credit to your profession.

    There are two distinct groups of seniors: the elderly and those who are on their way. CSA education caused me to take note of the aging of my father who is now in his nineties. Up until a few years ago, certain patterns were fundamentally true of his aging. One was his strict preference for beef and potatoes for dinner. As he was fond of saying, he ate his last fish when he was 9. But now when we go out to eat, he eats blackened salmon. His reason is that he can taste it; yet he considers himself a strict beef and potatoes man to this day.

    Obviously other areas are not what they were when Dad was 60. The trouble is determining which he truly understands are diminished or changed and how he is coping with diminished and changed capacities. Unlike most his age, he lives by himself, gets up daily, showers, shaves, and gets dressed to take care of his business activities. He must meet education requirements for his business licenses and is, therefore, keenly aware that he lacks sufficient agility and capacity to understand the new and ever expanding field he is licensed in. Fortunately he can limit his practice to those areas where he is competent and notifies his customers of areas in which he is not competent.

    The trouble is I have met those who are more mentally incapacitated in some areas at 62 than my father at his age. Yet very few seniors are basket cases in their 60’s but the quality of their decision making skills lack the vigor, rigor, agility, and other factors needed to evaluate highly integrated insurance products. Now add that to a reverse mortgage and all rhyme and reason as to the reasonable expectation that seniors can readily evaluate such products in light of their own situations, flies right out the door. Too many times I have heard seniors declare when confused about reverse mortgages, “Honey, I am sure you would not sell me anything that was really bad for me. Now would you, huh?”

    While counseling may help seniors evaluate insurance that is funded through reverse mortgages, most of us believe counseling is stretched to its capacity already. Insurance companies are always exploring new products, ideas, combinations, and other approaches to sell more product; this is natural. When it comes to seniors, such strategies should be greatly restricted.

  • It was a responsible and wonderful thing to see a true advocate of LTC and other insurance products express his reservations about combining insurance and financial products with reverse mortgages. dduck12, you are a true credit to your profession.”

    While I would like to get a free trip to Stockholm to accept a prize of some kind, I must like Teddy Roosevelt, wait.
    I did not mean that a hybrid would be bad, I just meant that it is impractical because of all the regulatory hurdles. Actually, I would love a “well designed” product like that. And, yes, it would probably be abused, so perhaps in the senior market, separate products are better. Oh, but wouldn't FFIEC, or whatever the new behemoth agency is called, protect the seniors?

    Just kidding.

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