By Linda Koco
If the current economy has you throwing your hands up, youre not alone. A lot of insurance people are flummoxed.
For many, the stock market roller coaster is the root cause. For others, its the shocking news of corporate misdoings (Enron, WorldCom, etc.) Though not insurance woes, per se, those have cast long shadows over insurance moods.
Still, the disturbance I hear about most often is closer to home. It goes like this: “Our business isnt doing much better than six months ago–despite the expense cutting, downsizing, marketing, promoting, value-adding,” etc.
These executives are all the more frustrated because various reports theyve seen in the past few months have suggested the exact opposite should be happening. They refer to reports like the June surprise that the first-quarter GDP grew “faster than expected,” or to figures showing that real estate sales are “holding up.”
Further, they say, interest rates are low, inflation is virtually non-existent, and certain competitors are winning new clients.
“So, what gives?!” they exclaim.
Naturally, not all insurance people are talking that way. A few even tell me things have been “good.” But enough are concerned to give pause. You see, the frustrated group represents a broad spectrum of professionals.
They include producers, who say its getting harder to find clients who will spend for anything but essentials.
They include consultants and executives of third party support firms, who see the same phenomenon among their own clients.
And they include insurance company loyalists, who tell tales of pressured staffers trying to do too much–to fill voids left by “downsized” colleagues, stir up interest in new markets, improve service, cut costs, and do snazzy sales campaigns–amidst falling numbers.
Is there any hope for turnaround? I think so, as youll see in a moment. But first, lets agree that, in assessing where the hope may lie, all should steer clear of old bromides like “Its darkest before the dawn.” Or, “When the going gets tough, the tough get going.” Or, “Maybe tomorrow will be a better day.”
Those platitudes may hint of hope, but they lack substance–and substance is what people are seeking today.
Lets also agree that the people who express worries about todays results are not simply wusses who are whimpering in a gentle wind. Most are concerned pros of some tenure and accomplishment who are weathering a real storm. They are speaking up, in hopes of sparking discussion that may lead to new understandings or strategies.
Now, heres the good part. In the products arena, there are definitely signs the business: 1.) is not dying; 2.) is redirecting to meet new needs; and 3.) is even innovating. Here are some examples:
- Product sales, though slow in some lines and sectors, are perking up in other areas.
Its true that variable annuity sales have been hard hit, but fixed products are doing better. In fact, LIMRA has reported that individual universal life, whole life, and term life sales are up; group life, disability and long term care premiums are up; and fixed annuity sales are up. The Advantage Group says equity index annuity sales are up, too.
- Some designers and manufacturers have moved ahead on product promotion, even though others have pulled back.
You can find report after report of product activities in Hot News, the daily online news service offered by National Underwriter. Yes, there are fewer rollouts of, say, new subaccount additions to variable products than came down the pipeline two years ago. But there are also more rollouts of upgraded fixed annuities, new guarantee features for UL and variable UL, new LTC policies, and similar items.
- Sales, though they have slowed or re-directed, have not stopped.
This is a biggie for VA pros to keep in mind. When you see all those minus signs, it doesnt mean the entire market has gone AWOL and that no sales are occurring. Check the industry numbers, and youll see some buyers are still out there, dollar cost averaging, reallocating, and buying new, while others are exploring other types of financial products–ones with fixed returns or guarantees, for instance. The smart marketers are retooling accordingly.
- Some insurers are forging ahead with new strategies, products, and business units.
Okay, some debuts are only housekeeping changes or minor product fixes. But that is the case in every market. The thing to note now is that you can find some serious innovations in the mix, too–a new income annuity design here, a VA re-think there, a new LTC over there, etc. (See articles on the following pages.) You wont find as many of these as you did in the mid-1990s, but you will find them. Thats important, because: 1.) it shows long-term commitment on the part of the players; and 2.) it assures that, when market expansion begins in earnest, the industry will have “new ideas” to offer.
- In many insurance lines, product menus still have depth.
Ive heard scuttlebutt to the effect that certain players are “pruning” offerings, but as far as I can tell, this has been spotty. Carriers may have whittled back a bit in bloated product lines, but most still offer ample choice in product classes. That means producers still have plenty to work with. For instance, if a client doesnt want a VL right now, the multi-product producer can easily suggest alternatives–a UL or WL, or perhaps a starter term policy with, say, a conversion option. Or a fixed annuity, to build up savings. Ororits a long list.
In sum, if you view the products scene as a barometer, its pretty clear that the insurance sector is not on life support. I wouldnt blow any trumpets about a turnaround just yet. But it wouldnt hurt to get them out.
Reproduced from National Underwriter Life & Health/Financial Services Edition, August 5, 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.