One of the significant selling points of mutual insurance carriers, especially those that have been around for over a century, is safety, primarily evidenced by their consistent dividend payments. But what exactly makes these insurance companies a safe choice compared to other alternatives? In this conversation with John Boltma, President of Lafayette Life and Columbus Life, we delve into the safety and intricacies of mutual insurance carriers.
The Safety of Mutual Insurance Carriers
Mutual insurance companies like Lafayette Life have a robust safety mechanism due to their consistent performance and the way they manage their investments. Key points discussed include:
- Death benefits, tax benefits, and access to cash as primary advantages of insurance policies.
- The importance of long-term financial planning that incorporates passing wealth to future generations.
- Potential risks such as uncertain tax policies that could affect overall tax rates and consumer behavior.
About John Boltma
John Boltma brings a unique perspective as he has experienced both the banking and insurance sectors. Here is a brief overview of his professional background:
- Originally from Michigan, John grew up in an entrepreneurial family.
- He spent 22 years in banking, developing a strong foundation in finance and economics.
- In 2017, he transitioned to insurance with Western Southern, attracted by the stability and opportunity for growth in the sector.
- Since 2019, John has been leading Lafayette Life and Columbus Life, focusing on fostering relationships and ensuring sustainable growth.
Understanding Risk in Insurance Companies
John shares his insights on how insurance companies, particularly mutual ones, handle risk:
- The importance of conservative investment strategies to ensure that guarantees made to clients are fulfilled.
- The necessity of balancing risk by investing in avenues that provide better returns without jeopardizing the company's promises.
- The advantage of being part of a larger entity like Western and Southern, which attracts top talent for investment management.
Structure and Benefits of Mutual Companies
The conversation also touched on the structure of Western Southern and its subsidiaries, emphasizing:
- The mutual holding company model that allows for ownership of various entities, not all of which are mutuals themselves.
- The efficiency and value in maintaining multiple recognized brands under one holding company.
- The long-term benefits that policyholders gain from a mutual company structure versus public companies, which often demand higher returns.
Whole Life vs. Indexed Universal Life (IUL)
As someone overseeing both whole life and IUL carriers, John's perspective is particularly valuable. He outlines the fundamental differences between these two product types:
- Whole Life Insurance: Preferred for its guaranteed 5.3% returns, low risk, and simplicity in financial planning over long periods.
- Indexed Universal Life (IUL): Choosen for its potential to earn higher returns (up to 8-10%) through market indices, appealing to clients willing to accept some level of market risk for increased potential wealth.
John emphasizes that choosing between whole life and IUL often boils down to one's philosophical mindset regarding money, risk, and returns.
Conclusion
Mutual insurance companies like Lafayette Life and Columbus Life have a longstanding reputation for being safe and reliable. Under the leadership of experienced executives like John Boltma, these companies continue to navigate the complex landscape of risk management and investment, ensuring their clients' best interests are always prioritized.
For more insights into mutual insurance and to learn about the different perspectives in the industry, stay tuned to our blog and video series.