This month, I want to begin my worksite product discussion a little differently than in past columns. Well get to the trends, but first I want to bring up a topic that is really disturbing for the insurance industry.
This disturbing topic is the climate the industry has been developing as of late. Its in what I call a “Do-Nothing Mode.”
We know there is a lot of money sitting around, earning 1% to 2% in money market funds. Its not being spent. Virtually no one is buying big-ticket items. At best, only a very few are doing so, relative to the moneyed population. There has been a slowdown, for example, in purchase of real estate in certain areas. According to people with whom I speak around the country, the underlying mood is very pessimistic.
In the insurance industry, this Do-Nothing Mode is really intense. Let me give a few examples.
The wrecking of the industrys mortality studies has gotten even worse than when I first wrote about in the March 25, 1996 issue of National Underwriter. (Thats when NU showed the wrecked Dunskey Castle in Scotland to illustrate the problem.)
Distressingly, the castle-wrecking has now extended to the insurance industrys product development centers. More and more of these centers are being closed down. In some cases, of course, this is the result of continued company mergers. But I am seeing it even within companies, as product development is being slowly squeezed into a back seat position.
That is very disturbing because there are many, many markets the industry serves. So it needs many, many product development centers, each one dedicated to its own market. These centers need to compete with each other; thats the way the system is supposed to work. It produces better products that way, and faster, too.
Another disturbing trend: Many insurance companies are still very nervous because of litigation menaces (alleged market misconduct, alleged universal life malpractices, alleged racial profiling, etc.).
No wonder the companies are in a Do-Nothing Mode.
When will the business get out of the Do-Nothing Mode? Soon, I hope. And, judging by its history, it can and will.
After all, the life insurance and annuity industry survived the interest-sensitive craze of the 1980s. It survived the stock market craze of the 1990s. And it learned something from the aftermath of 9-11: That the insurance business really is in the human protection business.
That rediscovery will, I believe, provide the business with the impetus to get back into a Do-Something Mode with its products and marketing.
With all of that as background, lets now turn to whats going on with worksite products. Despite the industrys troubles, these products have continued to march along, successfully. You could say that they represent a “Do-Something Mode,” especially since product development work has continued in this field, despite the economic slowdown and the unsettling events of last year.
I base that assessment on the results of my third poll of some leading worksite product insurers, conducted earlier this year. The other two polls, also conducted by me for my NU worksite review, were done in 1996 and 1999.
In each survey, I found signs of gathering success. This time is no different. A majority of the 2002 respondents have indicated that 2002 sales are up, in fact. (The minority reported them as flat.) This is a pretty good finding in the present climate!
The chart shows worksite product categories, in rough order of their popularity, and in numbers of products offered. Look at it, and I think you will agree the product options are numerous and also quite varied.
Of the entire list, the critical illness insurance products represent the newest line, in product development terms. From what I am hearing, these products have been gaining in popularity in this market–a turn of events that echoes my personal belief that the human protection business is now more about health expectancy than it is about life expectancy.
A final note: In this years survey, I detected some great ingenuity in the use of guaranteed/simplified issue rules for worksite products. For instance, a typical rule now says persons who havent been in the hospital or missed work for more than five days in the past six months could qualify for guarantee issue. Previously, worksite insurers often used the broader group insurance rules (e.g., actively at work plus participation).
Speaking of rules, whatever the industry leaders do about their products in the future, they would be well advised to follow the old rule for getting out of difficulties: Make Something Happen.
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 protected]
Reproduced from National Underwriter Life & Health/Financial Services Edition, June 17, 2002. Copyright 2002 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.