When a young Paul D. Kaplan arrived home every night from his high school summer job at a property-casualty insurance company, his father would be waiting to ask him, "So, what did you learn today?"
Paul's answer was always the same: "Dad, I'm there for a summer job. I'm a gopher. I do whatever they tell me to do."
For weeks, the elder Kaplan continued to ask him the same question, until one night, Paul responded: "You know, the guys who earn the most money, call their own shots. If they want to go to the beach, they go to the beach. If they want to work, they work. But it's all the commission salesmen.
"My dad shouted, 'Finally!'
"By sending me to these insurance companies to work, he reinforced the idea that commission sales were the way to go in the industry, and not to ever work for some place, where, if I was a good boy, I'd get a $50 raise," Paul says. "He also told me that I was not very good at following directions, so the only way I'd be happy in life was if I could be my own boss."
Today Paul, 65, has found that happiness as president of American Capital Security Corporation, a brokerage general agency in Encino, Calif., with a notable distinction: it is one of the only firms in the country successfully marketing Secion 419(e) welfare benefit plans that meet IRS guidelines. Even after 44 years in the industry, Paul remains enthusiastic for the business and the challenges he faces everyday.
"I'm a self-starter. I don't need a lot of motivation from other people," Paul says. "From day one, I have enjoyed the challenges the industry offers, and I have never had a problem. A problem to me is simply a challenge."
Paul began his career as an insurance agent before he even graduated from college. After taking his insurance exam on April 1, 1964, Paul spent his last year at UCLA as a campus representative for Transamerica Occidental Life. As the only Caucasian in the all-Japanese H.H. Kodani agency, Paul went door-to-door, peddling his wares to fellow students in fraternity and sorority houses.
"What I learned early on was that life insurance doesn't jump out at you and say, 'Buy me.' Life insurance needs to be sold. And if you want to sell life insurance, you have to sell an intangible, and that's very difficult to do," Paul says.
Instead, Paul brought a tangible to his sales, in the form of the Curta -- a small, hand-cranked calculation device that preceded electronic calculators and computers.
"I took the Curta on every sale, and I would hand it to the client, take out the huge rate book, and teach him how to use it. He'd get so engrossed in figuring out the play-toy that I was no longer selling an intangible -- I was selling something he could actually play with in his hand," Paul says. "I was figuring out how to do something a little different from what anyone else was doing."
Finding His Way
After finishing school, Paul joined Transamerica Occidental's home office as assistant to the national brokerage director. There he got his first taste of the brokerage business. "I began to see how you could solicit business from people of all different walks, to feed business to you as a carrier, or later on, do it as a brokerage manager for your own agency."
He later spent two years helping to manage Transamerica's West Los Angeles branch, and even became one of the first external-hire sales managers for MetLife in 1974. But none of those jobs offered what he really wanted -- the excitement and challenge of running his own brokerage shop.
Paul finally got that opportunity in 1975 when a friend called to tell him that Ray Lederman was opening a brokerage general agency in the San Fernando Valley, and needed someone to help him.
"I went into Ray's office, and he said, 'I do not have the stamina to build this BGA on my own. How would you like to be the arms and legs of the operation?'" Paul says. "When I asked what my buy-in was, he said, 'None. Here's the deal -- every agent you bring in, you will get the override and the renewals on everything going forward.'
"How could I turn that down? When else do you get an opportunity, with no capital out-lay, to really follow your passion?"
Paul built the Ray Lederman Agency, or American Capital Security Corporation, from scratch, buying half of the agency from Ray in 1984, and the other half in 1986. By design, in the 22 years since, Paul has chosen to remain a four-person operation. His wife of 40 years, Pearl, handles all the compensation, Nancy Perez takes care of the initial case submission, contracting, and licensing, and Jeanne Marie Valencia is the case manager.
"I will never ask my staff to do something in the beginning that I haven't done myself. I have filed, I have collated, I have acted as a receptionist," Paul says. "We are a boutique BGA that specializes in high-touch rather than high-tech. When the phone rings, someone is going to pick it up. We don't like voicemail. You can't interact with technology; you can't interact with a computer.
"It's important to have that personal touch. Am I a dinosaur? Yes. Does it work for me? Yes. Our clients appreciate that they can pick up a phone and reach me. If they can't, someone's going to be there to hold their hand, and they won't have to wonder if I'm going to call them back."
Standing Out from the 419 Crowd
Even with the small size of his agency, Paul and his staff pay great attention to every detail in every case.
"We run a very tight ship -- we scrub every application that comes in here," Paul says.
The tight ship has allowed Paul to continue to offer 419(e) plans that have received several no-change audit letters from the IRS, in the midst of the crackdown in regulation by Congress.
In early '90s, Paul was introduced to Doug Williams of Commonwealth Benefit Plans, who had been marketing 419 plans since they were written into the tax code in 1984; Doug received his letters of determination from the IRS in 1986. Paul joined Doug in marketing 501(c)(9) VEBA Trusts, until 2000-2001, when they saw that Congress was looking at abuses in multiple-employer plans. Although Commonwealth had already received three no-change audit letters from the IRS on their multiple-employer plan, they withdrew it from the market.
After Congress enacted the Material Advisor Rule in 2004 with its $200,000 non-negotiable fine for those who neglect to inform the IRS about certain multiple-employer plans, the carriers withdrew from the market en masse.Paul and Doug convinced one of their carriers, however, that their new 419(e), Single-Employer ERISA Benefit Plan qualified under the new regulations. They became the only reapproved vendor by the end of 2004.
"But then we got the same guys who had been marketing the abusive multiple-employer plans, only now they were doing abusive single-employer plans -- for example, death benefit only plans," Paul says. "They weren't doing what the 419 code intended them to do. They were looking for the sizzle and not the substance."
Even with the additional restrictive regulations passed by Congress in October 2007, Paul and Doug's 419(e) post-retirement medical plan has passed all of the tests, including receiving a recent no-change audit letter from the IRS.
"We looked very closely at the code, and made sure we crossed all our 't's' and dotted all our 'i's.' We did it the right way from day one and never got spanked," Paul says. "We have been reapproved by half-a-dozen carriers, and to this day, I think we're the last man standing.
"It puts us in a very enviable position in the 419 arena going forward, because we adhered to the conservative intent of the code and followed the guidelines. So we've been able to maintain our position in the marketplace. We are selling substance, not just sizzle."
Paul sees the substance of 419(e) plans as unlike anything else available in the market. "It is tax-deductible going in, tax-deferred during accrual, and tax-free coming out. It's the Holy Grail of tax deferral!"
Paul's agency represents a number of the nation's leading brokerage carriers, and they "specialize in that which has potential for no more than one claim -- life insurance." The only exception he has made to that rule is creating a partnership with long-term care insurance specialist Barry Fisher, CSA, LTCP, of Barry J. Fisher Insurance Marketing, to form Paradigm Insurance Marketing in 1997.
"Paradigm acts as a funnel for LTCI to go to Barry, and life insurance to go to me," Paul says. "When my life agents produce LTCI, I will hand them over to Barry, and when Barry's LTCI agents produce life insurance, he'll get them over to me. It gives us the image of a one-stop shop for life and LTC insurance," Paul says.
Developing New Agents
While the agency has roughly 200 agents who submit business in any given year, Paul is always looking to recruit and develop new agency producers. It is a part of the industry that he believes needs a lot of work.
"The insurance industry has bred a bunch of order-takers, because we are not recruiting and training anymore. We're proselytizing, so if I bring in someone today, and tell them to explain a universal life policy, they have no clue," Paul says.
"If you understand what you're selling, you're going to be able to help clients achieve their goals and not just be an order-taker by spreadsheeting your premiums. Unless you study the differences in the products, you're just going to go to the far left column of the spreadsheet and choose the cheapest one. You have to at least understand the underpinnings of a policy in order to market it properly."
To stop the breeding of order takers, Paul says the industry needs to improve its education facilities, bringing back what existed 15-20 years ago, "when every major carrier recruited, trained, and educated the sales force before letting them loose in the streets. Yes, we have programs like LUTC and CLU, but it's not like working in the environment, where you're getting the education everyday."
Paul does recognize, however, the importance of joining an organization, to help educate and develop oneself as an agent. He is a member of SubCenters, the nation's oldest study group, which founded The Marketing Alliance, one of the largest brokerage networks in the country. He's also past president of the Life Insurance Leaders Roundtable, a now-disbanded Los Angeles-based study group, and a Life member of the Million Dollar Round Table. Paul has attended almost every annual meeting of the National Association of Independent Life Brokerage Agencies (NAILBA), which he sees as "instrumental in the operation of this agency, because of the benefits and services it provides to its members. It is second to none."
Beyond the organizations, Paul teaches by example, using training methods he developed in the '60s and '70s, as well as continuing his own personal production, to stay up to date.
"While I make sure I am not in competition with my field force, I need to be out on the firing line, in order to keep current. I need to know what it is like to sell a policy in today's market, as opposed to years ago, when I was doing it as a kid."
Turning an Intangible Into a Tangible
It is the personal relationships and the interaction with agents and clients that Paul enjoys everyday. He even enjoys cold calling, because it gives him the opportunity to meet new people, even over the phone.
"You have to use teasers -- never ever sell the product over the phone, sell the appointment. Always give the potential client something they need an answer to, but don't give them the answer; that buys the appointment," Paul says.
And when he gets that appointment, Paul reverts back to the days when he used his Curta to make a sale.
"You have to be able to break it down into something the client will understand. Take it out of the world of the intangible, and turn it into the tangible -- something the person can touch, feel, and identify. That's how you become a salesman. Ask a question, then shut up and listen."
When a case becomes difficult or presents a problem, Paul lives to find the solution. Recently, a client was looking for $20 million in coverage, but Paul learned that the reinsurance market had reached capacity at only $5 million. Instead of giving up, however, he discovered the real reason for the shortage -- a 40-page attending physician statement (APS) that was unintelligible. He got a two-page narrative from the physician, clearing up the medical history. That enabled the the client to be approved for the entire $20 million in coverage, spread between three carriers, within their own retention limits.
"This is the type of work I really enjoy -- it's a challenge. Everybody else gave up, and I asked, 'Why?'" Paul says. "Can you imagine -- $15 million was declined because they couldn't read the APS, and nobody thought to question that?"
Family, In and Outside Work
Paul continues to enjoy coming to work every day, even after 44 years in the business, because he makes it a goal to treat the people he works with as family. He'd "much rather do business with friends and family, than an acquaintance."
Family is extremely important to Paul. Pearl has worked with him since 1986. Two of their grown children, Dawn and Danielle, are the survivors from the first set of quintuplets ever born in California, in 1971. Third daughter Melissa lives in Denver with her husband David and their two children.
"I live in an environment with a wife and three children, where I've said a woman can do anything a man can do, as well, or better. They're very strong in their self-worth and beliefs. And Pearl is my partner -- how many guys do you know who have been married 40 years and have their wife working in the office with them?" Paul says.
While he may occasionally play hooky when his grandchildren come to town, Paul wakes up every day, wanting to go to work, with no plans to stop anytime soon.
"I really enjoy what I do here. To me, this is fun," Paul says. "For me, it's been a passion since I started in this business. I am legitimately old, with my Medicare card and grandchildren, but I still have the same work schedule. I come in here because I want to do it. It's not a work ethic, but because I love what I do."
