My friend, life insurance agent Brian Fechtel, has been working assiduously over several months to interest insurance regulators, financial journalists, and consumer advocates in a long-needed, effective means of measuring the costs of traditional cash value insurance policies.

I have repeatedly made two related points in what I have written here and in the articles on my firm’s website – (1) that sales commission expenses can often be substantially reduced (and sometimes avoided) to improve significantly the returns from an investment in life insurance and (2) that, in any case, some insurance companies and policies can be expected to perform much better than others based on their past track records.

Brian’s approach, explained in detail on his website (www.breadwinnersinsurance.com), analyzes the two components in a cash-value life insurance policy: its annual costs and the assumed annual investment rate of return on the savings component. It then totals the costs for a given period of years, such as 20, and states them in terms of a current dollar, or “present value,” amount.

This analysis can be done on new sales illustrations, “in-force” illustrations for existing policies, and actual historical policy performances. This straightforward framework enables one to readily understand a life insurance policy and to make meaningful comparisons of different companies and policies. In looking for a good cash-value policy, one ought to seek a policy offering the likelihood of favorable results with respect both to the cost and investment components.

It is important to recognize that the projections of policy performance that one may be comparing are, in most cases, not guaranteed. Companies often use unreasonable assumptions in trying to make their policies more attractive and competitive. Reviewing the historical performance of insurers’ various cash value policies and identifying questionable projections of policy costs helps to flag illustrations that are overly optimistic and which rely on unsupportable assumptions. In many cases, for example, one can see that a company is projecting lower future costs than those which they charge on their current policies.

Brian’s cost disclosure methodology can be especially revealing in comparing policies from the same company, as certain policy designs, given the same death benefit and the same premium, can offer substantially better values (through lower costs, especially sales commission costs) than others. Companies and their agents do not disclose such potential cost savings, and consumers are left in the dark as, almost invariably, they are sold the high cost/commission alternatives.

Requiring policy cost disclosure in the manner Brian recommends would bring a new day to the life insurance industry. With such disclosure required in the sale of all other financial and investment products, its absence in the case of life insurance is impossible to justify. In any case, Brian’s “campaign” for life insurance policy cost disclosure deserves attention, publicity, and regulatory support.