Why Ordinary Life Is Taking On The Mantle Of Cutting Edge
Cutting-edge products do not arise spontaneously out of the blue. They arise because of outside stimuli.
A few years back, I showed a chart illustrating just that point. It listed some of the cutting-edge products that emerged in life insurance over the past 80 yearsinnovations brought forth during periods of tremendous outside stimuli.
With this article, I repeat the chart, updated for today, so take a look for yourself. As you peruse it, you will note that there is an entry for this year.
Thats because there has been plenty of outside stimuli in 2001, most notably terrorism and recession. Sept. 11, 2001 made that abundantly clear.
Did the life insurance industry respond to such stimuli as it has in the pastwith product innovation? I think so. Lets see how.
Ordinary life insurance sales are suddenly up. In fact, we could call it the new cutting edge product.
How does that old standby fit into the cutting edge mode, you ask? The answer is, it has what people want in todays market–guarantees, a known track record, some predictability.
The good thing is, considering the extremely sudden nature of this years outside “stimulus,” the insurance industry has its new cutting edge product “ready to go,” as it were. After all, the industry has ordinary life pretty well refined. It comes in many traditional and variable versions. It is equipped with many custom tailoring riders.
But can the industry do more? Can it refresh the product, make it truly new?
Yes, it can. For instance, adding critical illness riders to the producta trend still in its infancywill make ordinary life do double duty. It will enable owners to receive benefits while alive (if critically ill) as well as allow their heirs to receive proceeds at time of death. That will increase its security-building aspects.
Another major refinement has to do with the use of the proposed new 2001 Commissioners Standard Ordinary Tables.
As you know, CSO Tables are required in the United States for establishing reserves and cash values. The present tables (the 1980 CSO) are badly out of date. After years of study, and intensive work since September 11, the new 2001 CSO Tables are ready. At the moment of this writing, it appears they will be officially adopted later this month.
That means the industry will be able to come up with a better product for the American public.
The new Tables demonstrate that the industry (including its regulators) is not stodgy but modern. At a time when the whole country is under stress, it is moving forward with much-needed innovation.
John M. Bragg, FSA, ACAS, MAAA, is actuarial consultant at John M. Bragg and Associates, Atlanta; past president of Society of Actuaries; and past CEO of Life Insurance Company of Georgia. You can e-mail him at email@example.com.
Reproduced from National Underwriter Life & Health/Financial Services Edition, December 10, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.