The life insurance industry in 2013 will be in a state of transition, to say the very least. For an industry not commonly pressured to make substantial and fundamental changes to how it operates, life insurance is finding itself in unfamiliar and uncomfortable territory, indeed. Five topics are likely to show most brightly on the industry’s radar over the next twelve months.
1. The tax-favored status of life insurance products.
Many industry watchers believe that life insurance products will not lose their tax-favored status as a result of fiscal cliff and debt ceiling negotiations. However, as the government looks for new revenues, everything is on the table and there very well may be a change to the tax-favored status of COLI and BOLI products.
Image: House Speaker John Boehner of Ohio points to a chart to emphasize his talking point that government spending complicates the negotiations on avoiding the so-called "fiscal cliff," during a news conference on Capitol Hill in Washington, Thursday, Dec. 13, 2012. Boehner is insisting that President Barack Obama wants far more in tax increases than spending reductions and appears willing to walk the economy "right up to the fiscal cliff." (AP Photo/J. Scott Applewhite)
2. Evolving to respond to the changing consumer.
Many life insurers pride themselves on their social media presence, as if having a Facebook page keeps them on the cutting edge. The evolving consumer may shop for life insurance products while standing in line at the supermarket, and insurers must remain nimble and able to adapt to digital marketing and mobile distribution strategies.
Image: In this Friday, Nov. 23, 2012, file photo, Tashalee Rodriguez, of Boston, uses her smartphone while shopping at Macy's in downtown Boston. Facebook isn't just for goofy pictures and silly chatter. Whether shoppers know it or not, their actions online help dictate what's in stores during this holiday season. (AP Photo/Michael Dwyer, File)
3. Remaining relevant.
Life insurers may have to rebrand themselves as many young people are not aware that the product can be used an investment vehicle. An Ernst & Young report found that the average household expenditure on life insurance has declined by 50 percent over the last decade. Insurers need to step-up their marketing campaigns to reach young people whose view of life insurance may be incomplete.
Image: Symm Vafeades, 33, finishes up an iced coffee and breakfast burrito before finishing his 2-mile commute to work as an architect in Denver. Vefeades says he briefly lived in the suburbs of Denver but didn’t like being far from work and restaurants. For the first time in a century, America's largest cities are growing at a faster rate than their surrounding suburbs as young adults seeking a foothold in the weak job market shun home-buying and stay put in bustling urban centers. (AP Photo/Kristen Wyatt)
4. Entering into developing markets.
Many large carriers are looking to international developing markets as the “next big thing.” Although these countries look appealing because of a growing middle class and low market saturation, there are huge geographic, political, bureaucratic and cultural hurdles to be overcome. It also overlooks a serious and untapped opportunity right here at home: the grossly underserved middle market.
Image: Demonstrators carry a huge Russian flag as they march during an opposition rally in St. Petersburg, Russia, Tuesday, June 12, 2012. About four thousands protesters took part in a rally against Russian President Vladimir Putin's rule. Russia is one of four so-called BRIC countries where carriers are looking to expand, the others being Brazil, India and China. (AP Photo/Dmitry Lovetsky)
5. Keep themselves up-to-date on international and domestic regulatory issues.
Insurers will need to watch what is going on in the international regulatory arena as well as what is happening here at home. Some of the largest carriers, such as AIG, Prudential and MetLife may soon be designated as systemically significant (SIFI) and they will have to get used to federal regulation and higher capital standards. Of course, SIFI designation has been on the horizon for these firms for the better part of a year, so they should be prepared for it already. The question is what happens if SIFI designation drops on a company not expecting it.
Image: In this Sept. 16, 2008 photo, an American International Group office building is shown in New York. AIG is expected to be designated as systemically significant before the end of the year.(AP Photo/Mark Lennihan)
For a complete look at what the next 12 months have in store for the life and health industry, visit LifeHealthPro's 2013 Outlook page.