The credibility of illustrations is of greater concern today than it was in 1951, my first full year in our business. As background, you may recall that non-par, guaranteed-cost life insurance was then a strong part of the market. It performed steadily as advertised and projected well when compared to most of our fine mutual companies, which had been generally decreasing their dividends and projections since the 1930s.

An example comparing historical and projected performance in 1952 may surprise you. Suppose you and I went on a joint call that year to a 45-year-old male who was interested in $100,000 of whole life. We might offer two policies for consideration, both including disability waiver of premium:

Now I come to the second chapter of history�public trust�and how it has been dangerously eroded.

When I started in our business in 1951, people believed all large life insurance companies were safe, sound, and secure. In the 20 previous years, the stock market had crashed and stayed wrecked for a long time. Most banks had gone broke, leaving their depositors high and dry (there being no FDIC). The savings and loans had followed the banks. Only the life insurance industry had weathered the economic strain of the 1930s without loss to our fellow citizens.

I remember stories of companies sending in additional personnel from home office to local office to help process policy loans promptly when banks were either closed, in default, or delaying payments on withdrawal requests. No one lost money in their life insurance. Our public was grateful. Life insurance was held in high esteem as a bastion of security, safety, and prudence.

Today we are in grave danger of losing that trust. If we do, we will be grouped in the public�s eye with all financial institutions and will lose the unique position of trust we have enjoyed.

While our industry by 1951 had earned a reputation for being sound, there is little doubt that most, if not all, life insurance companies were overly cautious, inefficient investors. More recently, and greatly encouraged by those of us who insisted on more competitive products, some companies began to invest more aggressively. Other companies that up to then had been comfortable with the results of their captive agents soon found their distribution systems upset by companies with higher investment yields projecting better results. Business was lost, along with loyalty, and the pressure for better performance intensified throughout the industry.

I believe that investment strategy should not be as overly cautious as it once was, but, nevertheless, it must be tightly related to a company�s preeminent responsibility for protecting policyholders. Policyholders do not want to worry about their death benefits or their cash values, and they would gladly trade some basis points and cost for greater security and peace of mind.

The strategy of seeking higher yields makes sense only if the client has absolute confidence not only in his company but also in the industry as a whole. Recently, we have seen the ratings of one large company plunge because of the questionable future of investments acquired aggressively. If one company can find itself in this situation today, so can other companies tomorrow. In the short term, of course, nonperforming junk is not unique to bonds. There are a lot of non-performing mortgages and foreclosed real estate held by other companies. In the long term, if we see that one company�s problems are a result of shortsighted management, how do we guarantee that other companies� managements will not become shortsighted in the 50 years or so our policies will be in force?

We need to regain the strong public trust we enjoyed in 1951. I believe we can all contribute to that worthy goal by changing our demands on our companies. While I will not back off in wanting companies to perform efficiently, I also want them to perform wisely. I will continue to insist that companies earn and sustain A+ Best ratings; but I now also want to see high ratings from Standard & Poor�s, Moody�s and Duff & Phelps�with AA being a current minimum and AAA being a realistic goal. When illustrating products, I disclose company ratings, and I find most of my clients like the security of high ratings and see no reason not to demand them. I also recommend studying copies of the rating services� analyses and sharing them with clients.

We should encourage our companies to seek and publish ratings from all the top four rating services, not just Best�s or even Best�s and Standard & Poor�s. An unrated company, I believe, will become a suspect company.

While I admit I do not understand all of the problems that companies have, I do know that millions of dollars have been wasted in fruitless reorganizations, ill-conceived attempts to diversify into ancillary and other businesses, inefficient management and foolish investment strategies. We have a professional responsibility to insist that our companies� management perform well, that they more ably fulfill their roles as our policyholders� fiduciaries.

To sum up my discussion of the two chapters of history and their effect on us today, I invite you to join me in letting home offices know how important we feel high ratings are. Tell them that you do not want them to pursue a more aggressive investment strategy that might increase dividends or yields but also might place the company�s ratings at risk. Also tell them that you and your policyholders would like to know what the assumptions are behind your illustrations. You and I have a professional responsibility to find out, and our clients have a right to know.

First, I believe that banks and other financial institutions will be in our business, and soon. You will recall that I said earlier that in 1952 we were clearly differentiated from banks and other financial institutions based on our unprecedented record of safety and performance. As we lose that differentiation in the public�s eye, all of the reasons to keep the banks out of our business disappear. However, I believe that banks will not overwhelm us, that we will be able to compete very well against them. Do you remember when banks started marketing the concept of "Your Own Personal Banker?" Was that 15 or 20 years ago? I have many hundreds of clients I have kept for the past 15 or 20 years, and so do many of you. I wonder how many personal bankers they have had during that time. Banks will probably market our product the way they do personal banking. services, with young personnel. The greater insight and creativity they exhibit, the faster they will move on to other duties. They will tend to be short term, transaction oriented, and will treat insurance like a commodity.

A second change which I believe to be more serious will be the elimination of barriers to rebating. California and Florida have struck down their rebating laws and they seem to be leading indicators for the rest of the country. Extensive rebating will hurt all of us some, but it will most hurt those who will tend to sell life insurance as though it was a commodity, like it was a CD.

When clients view insurance as a simple commodity, they wonder at the reason for a commission; but if one must be paid they view it as a favor to be bestowed. Today, this favor is bestowed on a broker with power or one who is a friend. The banks will surely become a broker with power; and with rebating, the buyer�s favor may be bestowed on his or her best friend, himself.

Therefore, we must market two fundamental concepts that confirm that life insurance should not be seen as a simple commodity:

I believe our companies will respond to rebating and expense problems by creating commission scales that are less heaped (i.e., more level). To those of us who have established practices, this will be a short-term inconvenience but should produce a better-performing product and therefore a product easier to sell. We may earn less on each sale, but we should sell more.

In coping with these and other changes to come, I try to keep in mind two rules of life that are true and dependable, however uncomfortable: (1) life is not fair; and (2) change is inevitable.

Adjusting to the jarring changes that have occurred in my 39 years in the life insurance business has been challenging and exciting.

How well we adjust to the coming changes not only predicts our happiness, but is also a strong indication of how successful we will be in the future.