Customers Flew To Fixed Options, Guarantees

It is “exciting” to see so many new faces in the field today, Parks says, but adds that “many producers need a lot of education, especially on how to integrate DI into the rest of their practice.”

Shifting distribution arrangements in 2002 resulted in a different kind of problem for some producers and carriers: This is the massive proliferation of marketing materials concerning products. Producers repeatedly say they feel as if they are being buried in an avalanche of e-mail, snail-mail, faxes, forms, applications, new product kits, support service brochures and more. They want it to stop.

Safeco heard those complaints, too, and decided to do something about it. A few weeks ago, the Seattle company debuted a new Web site that lets agents elect to see only the parts of the site they want to see and the tools they actually use.

Earlier in the year, Safeco also put many immediate annuity sales documents on its producer Web site. That was an improvement because “selling immediate annuities had become a very paper intensive process, involving the products, illustrations, faxes, and so on,” says Leroy Brashears, director of communications, life and investments marketing. “Agents wanted to run from it like a thief.” Now, he says, “most everything is online, including updates.”

These changes have “filtered out some of the clutter” for producers, says Rudy Erb, e-commerce manager, life and investments. Do producers notice or care? The response to has been “overwhelmingly positive,” Erb says, adding that has been “rewarding” to see. “Now, we know we were on the right track.”

Product maturity gained momentum in 2002, as well. Take VAs. In the 1980s and 1990s, modern VAs went through infancy and adolescence, contends Pamela Moret. She is senior vice president, marketing and products for Thrivent Financial for Lutherans, a Minneapolis fraternal formed out of the January 2002 merger between Aid Association for Lutherans and Lutheran Brotherhood.

“But in 2002, VAs became more mature,” Moret continues. “For instance, they are no longer fixated on accumulating funds for retirement.”

Now, says Moret, VAs offer more liquidity options, fixed account options and flexibility in income options than ever, in recognition of the fact that more and more people will keep their annuities for all of their lives.

Thrivent has such a multi-feature VA, Moret notes, and consumers are moving money into it from brokerage accounts, wrap accounts and managed mutual funds. The corporate scandals of the past year have made people rethink their investment strategies, she indicates, and the newer VAs provide more options and protection.

LTC policies have hit a new maturity level, too, according to Jesse Slome, president of Sales Creators in Westlake Village, Calif. The industry has entered a new stage in the product maturation cycle, he says, explaining that insurers did such an “incredible job” of educating their target market about the product that many people bought, and the original target market is now largely saturated.

The next step, Slome says, is for insurers to expand their reach into the mass market. To do that, he says companies will need to simplify products in a way that will appeal to a broader market.

Unless and until this happens, he cautions, there will be more agents chasing fewer viable prospects and that will hinder widespread LTC sales.

CI insurance has also turned a corner, according to Daniel Pisetsky, a CI insurance marketer and the managing director of US Living Benefits, Manchester, Conn. For instance, he says he no longer encounters questions about whether CI should be a part of a clients portfolio, nor does he get calls from skeptical people. In addition, he says, “the product has become commonplace in many worksite programs, and some A+ rated carriers have entered the market, as well.”

What about annuities? The market is currently “circling the wagons,” looking for fixed products and for guarantees in variable products, says Frank T. Gencarelli, president of Retirement Services Group, Wealth and Income Management for GE Financial, Richmond, Va.

This is a reaction to the fear and distrust that consumers and producers feel in response to the bursting of the equity market bubble and the continuing low interest rate environment, he contends.

As a result, producers and consumers now want guaranteed returns over a fixed number of years, he says. “Its a mandate from the market.”

For this reason, he says GE Financial is pushing to develop various income solutions, including those using annuities. The goal? “To provide products that will help consumers lock in what theyve accumulated,” Gencarelli says, and “also to help them learn how to manage that money so they can live comfortably in retirement and leave a legacy.”

In short, 2002 marked the beginning of the return of protection-oriented products, says Gencarelli. Income annuities, LTC policies, and single-premium variable life are examples of products that are rising in public favor.

In 2003, he predicts, “income solutions will explode.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 30, 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.