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Optimize Tailored Insurance Solutions with Advanced Proprietary Software

Life Insurance • July 21, 2024 • Written by: Differentiated Solutions

Differentiated Solutions has developed a proprietary software called the Insurance Product and Structure Analysis (IPSA). This software is used to analyze and compare different insurance products and structures and to design the optimal insurance policy for our clients. IPSA makes picking the best policy more straightforward by removing guesswork and gut feelings.

The remainder of this article will highlight some of IPSA’s capabilities and uses that help differentiate us from the competition.

Error-Free, Timely, and Seamless Data Connections

IPSA directly connects to all necessary sources of data including economic assumptions, policy illustrations, tax schedules, and more. This means that all data inputs are current and error-free.

Some examples of the information that is fed into the IPSA are:

  1. Interest rates: IPSA imports the current and future interest rate projections.
  2. Life insurance company illustrations: IPSA imports policies from all insurers, including the impact of different dividend scale interest rates (DSIRs).

Flexibility to Meet Your Personal Needs

IPSA is able to analyze and compare different insurance products and structures because of its input-driven design; changing inputs in real-time is its main function, which allows for faster and more accurate results.

These inputs include but are not limited to:

  1. Corporate: corporately owned policies vs. individually owned policies.
  2. Demographic: age, gender, smoking status, and risk classification.
  3. Economic: borrowing rates and tax rates.
  4. Financing: cash surrender value (CSV) financing vs. premium financing.
  5. Policy: face amount1, policy type2, offset3, DSIR4 and rating5. 

50-Year Projections Across 10+ Metrics

IPSA’s comparison and reporting are provided over a 50-year projection period across more than 10 metrics. This ensures that our clients understand the benefits of their proposed insurance solution and the reasons they are optimal.

Some of the metrics include:

  1. Corporate details: internal rate of return (IRR).
  2. Estate benefits: the net death benefit (NDB) and the ability to generate tax-free dividends.
  3. Investment: annual contribution or financing charge.
  4. Policy: CSV6 and DB7.

Real-Time Comparisons

When designing the specific solution, IPSA analyzes and compares different insurance policies and structures in real-time to objectively determine the best solution for our clients.

When we meet with our clients to review our proposed solution, we can demonstrate the impact of any modifications or stress testing that either they or their advisors wish to see — all within real-time.

These modifications and stress testing include but are not limited to different:

  1. Borrowing rate scenarios.
  2. DSIR scenarios.
  3. Face amounts.
  4. Financing arrangements.
  5. Insurance policies.
  6. Net cost of pure insurance and interest deductions.

Conclusion

IPSA ensures that the proposed insurance policy and structure is optimized based on our client's specific needs and objectives.

If you are interested in learning more about IPSA, schedule a call with our team! 

  1. Face amount refers to the policy’s notional death benefit used for calculating policy values such as premiums. Face amount can also be referred to as the death benefit at issue.
  2. Policy type refers to whole life insurance products with either: long-term value-focus or short-term value-focus.
  3. Offset refers to a feature for dividend-paying policies in which dividends may be used to pay premiums. This may only be available after a certain time when dividends can fully cover premiums.
  4. Dividend scale interest rate (DSIR) refers to a hypothetical rate used in the calculation of the investment component of a dividend credited to a policyholder, reflecting the investment performance of an insurance company’s participating account.
  5. Rating refers to an insurer’s assessment of a policyholder’s risk profile, factoring in age, health, occupation, lifestyle, and more.
  6. Cash Surrender Value (CSV) refers to the amount of money within a life insurance policy that is available to the policy owner upon full surrender of the policy. The CSV may also be partially withdrawn as cash, and be used to pay premiums, Dividends are used to buy paid-up insurance, not cash value, and borrowed against in the form of policy loans.
  7. Death Benefit (DB) refers to the amount of money that is paid to beneficiaries upon the death of the insured life.