According to Bloomberg News, more than 6.6 million Americans over the age of 65 either worked or looked for work in the first half of 2010. A staggering number of people in their mid-60s or beyond either haven't retired yet or have returned to the workplace in the last 10 years.
What stands out here is a correlation between "retirees" not retiring, and the rise of guaranteed insurance products, especially guaranteed universal life (UL). As the number of seniors in the workplace has more than doubled, the demand for guaranteed products has boomed.
Guaranteed UL products continue to increase in popularity and number. Understanding why clients want them -- and will continue to, at least in the near term -- is essential to successfully selling them and effectively serving clients.
The low-interest rate consequence
Retired and pre-retirement Americans have more debt and obligations than ever. And millions of people age 65+ are returning to work because they need to, not because they want to.
For years, our industry's "current assumption" UL products remained popular, while fixed interest rates stayed high. Now, not only have interest rates dropped, but most market forecasts indicate that rates will remain low while financial leaders try to create conditions that favor market growth.
The low-interest rate consequence for current assumption contracts sold in past years is that performance reality hasn't lived up to illustrated assumptions. And for new UL sales, illustrations based on current low interest rates are unexciting.
The move to guaranteed UL
It's not surprising that Americans are seeking guarantees -- including guaranteed UL. Many need insurance coverage that extends well beyond retirement, and perhaps for life. Additionally, clients are less comfortable with risk. This makes guaranteed UL especially attractive, particularly because it allows clients to lock in a guaranteed death benefit and premium for exactly the period of time during which they expect to need it.
Guaranteed UL is attractive for a number of reasons:
- A guaranteed death benefit if conditions are met
- Reduced potential for volatility
- Continued low interest rates (for fixed products)
- Stability in unstable times.
The number of guaranteed UL carriers and products continues to grow. The increased product supply is driving more price competition among carriers, and can be a boon to both the producer and the end consumer.
Agents can feel more comfortable offering a guaranteed product to risk-averse clients. Clients can feel more secure knowing a guaranteed product has so many benefits, including the retention of its value.
Some carriers offer an alternative guaranteed UL (at a higher premium than the low-cost product) that can, in addition to providing a death benefit guarantee, generate substantial cash value. A cash value product is a more appropriate fit for some clients because it gives the policy owner more options in the future.
Today we are seeing guaranteed UL products that are highly flexible and customized, with such features as:
- "Consumer-friendly processing" that imparts some forgiveness for late premiums while preserving guarantees
- The ability to structure premium payment periods to individual needs
- The benefit of dialing the guarantee to a desired age or duration
- The potential to generate significant cash value (albeit at a higher premium than the low-cost product)
Traditional wisdom held that as people draw nearer to retirement, they don't need as much -- or possibly any -- life insurance. That isn't true anymore. Not only do many clients need life insurance these days, they want an assurance that they will still have it tomorrow. Guaranteed UL products can help you fulfill that need at an affordable price.
Mike Murphy is vice president of account services for American General Life Companies.
For more life insurance coverage, visit ASJ's Life Insurance Resource Center