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Evolutionary, Not Revolutionary, Changes Seen For Financial Services

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A panel of experts foresees little significant change to the financial services landscape by 2010, says Ram Gopalan, assistant vice president and head of research outreach, LIMRA, Hartford, Conn.

“That doesnt mean there will be no changes. There will, but they will be evolutionary, not revolutionary; they will be slow, not dramatic,” he says.

Gopalan presented the panels findings at LIMRAs recent annual meeting in Boston. The panel of about 40 people included senior home office executives from LIMRA member companies, academicians, heads of other trade associations and outside consultants.

The panel speculates that because the Hispanic population will make up 14% of the entire U.S. population by 2010, there will be significant areas of growth in serving this sector, Gopalan says.

“Hispanics currently own very few insurance products compared to the rest of the population,” he says. And, surveys show Hispanics are interested in buying financial services products.

In 2010, opportunities will also exist in the pension-rollover market, he says.

“Boomers will begin retiring around 2010 and 2011. They have a huge amount of money in 401(k) plans–an estimated $200 billion,” Gopalan says. “Somebody has to help them manage the money to plan for retirement.”

The long-term care insurance market will also be significant in the future, he says.

Driving the opportunities for growth are the aging of the population and consumers attitude toward how they want to buy financial products, Gopalan says. By this he means that in general, consumers will continue to want to buy products from someone face-to-face, and not over the Internet. They will, however, use the Internet to gather information.

“Companies need to understand changes taking place and make changes in the way they market the product. They need to understand what the customers preferences are in order to be more efficient than in the past in reaching the customers and serving them,” he says.

Preferences are effected by market climate, Gopalan says. Now that the stock market has been in a state of decline for two years, consumers are more interested in traditional protection products than they have been in the recent past. And, theres been a parallel shift away from variable products, he says.

Because of the demand for traditional products, the panel of experts foresees substantial growth in annuities because they guarantee income for the rest of ones life, he says.

But, the way consumers react and the types of products they will prefer eight years from now will most likely be a reflection of the stock market, he says.

“There is a high correlation between variable life sales and stock market indices, annuity sales and stock market growth,” Gopalan says. “As the stock market grows, so do variable products, that we know because of history.”

Another important market will be women, he says.

“Lots of people are saying women will be a significant market, women live longer than men so whatever we say about aging of the population is even more applicable to the womens market,” he says.

“In many cases they are the ones who take care of aging parents,” he says, “so they have to worry about themselves and parents, and they have to conserve their assets for more years than men.”

Although most experts agree there are huge opportunities in the womens market, they concede that financial services companies will not likely spend more marketing dollars to reach them.

Gopalan speculates this is because companies know women make most of the financial decisions in their families, so spending money to reach them would be wasted on a market already involved in buying financial products.

Reproduced from National Underwriter Life & Health/Financial Services Edition, November 11, 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.