Tuesday, December 29, 2009

My Experiences with NML (as a customer) after Two Decades

Your life insurance agent will stop returning your calls when you stop buying policies.

Note: this was an epinions piece I wrote about my experiences with Northwestern Mutual Life Insurance (NML) after having policies for nearly two decades.

For more information on insurance in general, see my entry "Are You Over-Insured?"

* * *

When I was 29 I bought a $100,000 whole life policy from NML for about $100 a month. I figured it was a good adjunct to my investment portfolio and a good way of spreading risk.

For the first 10 years of my relationship with NML things went swimmingly. My agent contacted me every year and even offered to do free financial analysis on my investment portfolios (NML and others). This was useful information in retirement planning.

He also kept trying to sell me policies. I bought a term life policy from NML and a few years later, he suggested I convert part of it to an Adjustable Whole Life Policy, which I did. I was making more money and figured this was yet another good investment vehicle.

A few years after that, I converted the remainder into a variable whole life policy. As you may have read, there is come controversy regarding these polices from around that time period.

Over the years, the policies have done OK and as a way of diversifying your portfolio, a whole life policy is not a bad idea - but not a good idea as a SOLE investment.

I would recommend a simple whole life policy if you get one, for about $100,000. I would not recommend the adjustable and variable products. I did not feel these were explained to me sufficiently at the time or since. Moreover, I feel that the primary motivation for the agent to recommend these policies was commissions. From what I read on the web, agents are basically salesmen, and they are on a 100% commission basis, so they SELL.

When I started my own business, he sold me a disability policy. I also set up a SEP plan through his office (although it is not a NML product from what I can tell, but it is hard to tell).

Then he tried to sell me a nursing home policy for $500 a month. It simply wasn't affordable, and I told him no thanks on more than one occasion. Finally I put my foot down and said I could not afford to buy any more life insurance products.

A weird thing started happening then. He would have his wife call me to arrange an "annual policy review" weeks in advance. I would have to arrange a phone call for a specific time and date, as though he was the Queen of England. I think this was a cheap psychological plot to make me feel that he was important and I was dirt.

Anyway, when this call would occur, it would quickly devolve into another pitch for nursing home insurance. Gone were the days when he would do financial analysis of my portfolio for me. It was like he stopped caring - all he wanted to do was sell, sell, sell, and if I wasn't buying, well I was no use to him.

With the economic downturn, I started reviewing my policies which by now were a major cash flow burden every month. All my policies were set to use dividends to buy more insurance, which was good for him, but didn't really help me. When I asked him to apply dividends to reduce premiums, he said it could only be done on the anniversary date of the policy or that it was a bad idea. I kept pushing, pushing, pushing, to get this changed, and he fought me every inch of the way.

Finally, I contacted the home office. The people there were fairly helpful and suggested a number of options, including converting policies to "Paid up" status, meaning that no further premiums would be needed. At this point, I was horribly over-insured and it was a good idea, at least for two of the policies.

The policies are old enough that money invested increases in value  I still pay the premiums on the original whole life policy, but apply dividends to reduce premiums. The policy is almost self-funding at this point. The adjustable and variable policies I converted to paid up whole life policies. 

I also discovered that it is possible to have the dividends on the polices paid out to you every year as CASH. Again, they don't make this information readily available and discourage you from doing it. And again, you are told that you need to make the request on the "anniversary" of the policy, (is that a window or what?).

So I made the request the other day, filling out the correct forms and sending them in. This morning, I found a sizable deposit in my bank account. For some reason, they liquidated one of my polices, cancelled my insurance and deposited the whole sum in my bank account.

I called the main office and they agreed it was a mistake on their part. "Just send the money back" they said, not realizing what a hassle this is for me to do - to fix their mistake. The agent on the phone who made the mistake said she'd look into it, but would be out of the office for the next few days.

It seems that no one takes responsibility there, and after reading some of the comments here from people trying to cash out on deceased loved one's policies, I am a bit scared.

BTW, NML monitors the Internet for negative comments about the company and has actually sued people who say negative things about the company. There was a website NMLCOMPLAINTS which NML was successful in getting shut down. They claimed it was a scam to extort money from the company. There does not seem to be any information on the web other than NML's position on the matter, which is a bit chilling.

There are several postings here that are so cheer-leading that they would appear to be from agents or agents of the company. Sorry, but ordinary consumers don't write reviews like the ones I have read here. I cannot believe they are spontaneous endorsements from anyone but NML. Again, this is sort of chilling and makes me wonder if they are trying to groom their image - and if so, if perhaps they are hiding something. I have a gut feeling on this, and my gut usually is right about these sort of things.

Have my policies done well? Well, for the first decade, they were all worth less than what you pay into them. This is normal for most life insurance. Many people bail out at this point and take a huge loss. After 20 years, there is some investment value now, but it takes a long time. And it is not guaranteed. As I noted, a small whole life policy is not a bad idea. Buying a number of policies is probably not a good idea for the average middle to upper-middle-class American.

Also, they recently decreased the dividend rate. They said this was done because of the economy, which is plausible. I noticed an article on-line, though, that in December of 2008, they were caught up on the Lehman Bros. debacle, as guarantors of some funds. I thought this was an odd "investment" for a life insurance company to be in. I wonder what else they are invested in?

What I am REALLY disappointed in is the lack of real financial advice from the Northwestern FINANCIAL NETWORK - advice other than "buy another policy please". As I noted above, when I started with NML, they provided a lot of free investment counseling for policyholders (who are also owners of the company, as it is a mutual company). I felt that NML was providing some good overall financial advice. I feel less so in the last 5 years.

I am not sure whether I am doing the right thing with my policies in this economy. I am not sure whether I should maintain them, cash them in, or what. I am not sure what to do with them when I retire - borrow against them, covert them to annuities, cash them out, or what?

When I ask my agent I get no advice. When I ask the people at the home office, I sometimes get options (not all agents seem to know all the features of their products) but no advice. No one seems able to say "well, for someone in your position, we would recommend doing X".

In other words, I want someone on MY SIDE helping me out here, not just a company selling me products and then providing lackluster service when I stop buying.

With all the problems in the financial sector in recent years, I am beginning to worry about the insurance sector. We also have four policies with State Farm (also now a "financial network" or "bank" or something).

If these companies go belly up, what happens to my money? It is not insured, of course.

Again, there seems to be a lot of cheer-leading on the Internet for NML, but little in the way of real data. I am not sure ratings agencies are worth anything anymore (they all said Enron was a good buy, right?).

Maybe the person at NML who "cashed out" my policy and put the money in my bank account was trying to tell me something - take the money and run before it is too late!

Maybe. I am starting to wonder.

Again, my advice to any young person starting out is that a small whole life policy that is affordable might not be a bad idea - pick a simple policy with a premium you can afford. This should be after you have a TERM LIFE policy to cover your family, should you die.

Then, stop buying. Remember that the agent is not your friend or your buddy, nor does he have your best interests at heart. He is on 100% commission and often gets a big chunk of that first year's premiums (sometimes more than 100% for variable products).

Frankly, I am skeptical that any "financial counselor" who is also selling financial products can be trusted at all. In our 401(k) era, I wonder how most people, who are not sophisticated with investments, figure all this stuff out.

Supposedly Highly rated
Claims to have lot of money
rate of return WAS good
Great service initially

Agents interested only in selling
Poor customer service from agents and phone
mistakenly canceled policy

The Bottom Line: 
Put your money in your 401(k) first.

Buy a term policy next.

Then, if you have extra cash, consider a small whole life policy.

Overall Product Rating: 
Product Rating: 3.0 Average


UPDATE:  Read this thread from a former NMFN agent as to his experience with the company.  It explains a lot of what  went through with my agent and why he stopped returning my calls, once I stopped buying policies or providing him with referrals.

Selling life insurance to college students?  I'll bet 90% of them stop paying on the policies within a year - that's free money to NMFN.

I am more than disappointed after reading this....