Walking The Tightrope Of An Improving, But Still Uncertain, Economy

Its really something to behold, when press releases arrive here saying, “We hired 20 new people this month.”

Given the dark clouds of unemployment that hung over most of the past 3 yearsand in many areas, still do–such announcements are the proverbial ray of light. The announcements also may become kindling for insurance and financial product strategies in 2004.

Before looking at those strategies, lets see whats going on. Every day, in some medium or another, some kind of news about new hires comes out. A survey in the November 2003 issue of Chief Executive Magazine, for example, said that 45% of over 300 chief executive officersmany from smaller and medium-sized businesses–intend to hire in 2004. Only 10% said they plan to reduce staff next year.

The Wall Street Journal highlighted the trend in its Dec. 4, 2003, front-page story, “Trickle Up: Small Companies Slowly Build Momentum in the Job Market.”

Naturally, these items bode well for the insurance sectoror, I should say, will probably bode well for the sector sometime next year.

Right now, the scuttlebutt Im hearing from producers is that many mid-income clients “arent there yet.” Employed or not, these individuals continue to prefer to buy insurance with low limits and low cost. Theyll go for guarantees, too, if they can afford them. And many still prefer the fixed accounts of variable products and 401(k)s.

High-net-worth households ($5+ million) do not live in financial straightjackets, but they, too, seem to be making cautious moves. In 2003, for example, they shifted 26% of their investable assets into managed accounts, up from 13% two years ago, reports Spectrem Group, Chicago. The reasons cited for this shift are telling: desire for “more control over their investments,” and “protection against receiving taxable distributions.” (Premium subscribers to National Underwriter can view our Dec. 2, 2003, Hot News report on these findings at our online archives.)

The implication is clear: At year-end 2003, many consumers kept on towing the financial line. My guess is, if hiring does spike in 2004, it probably will take awhile for the public mindset to catch up toand to trustthe change.

Therefore, in setting strategies for 2004, financial advisors and insurers will need to walk a tightrope.

Pulling on the one side will be the continuing need to present safe insurance and financial service offerings.

Pulling on the other side will be awareness that the financial fog is lifting and that financial needs and opportunities may be changing faster than many clients realize.

This tug-and-pull will raise several critical questions for industry professionals in the field and home office.

Some issues for advisors:

–Should I nudge my client to consider taking on more risk now, even though the client still is focused on building safety and security?

–If I do that and my client responds, what will be the consequences if the economy then takes another tumble?

–Alternatively, what will be the consequences, if I dont do that and if the economy then takes off, leaving my client on the sidelines?

–What if I present a range of options, from basic to rich, and just let the client decide what to take? What are the chances the client will later blame me for not giving a good recommendation?

–What is the cost of not discussing the changing job climate and economy at all with my clients?

–What types of products should I be learning about right now, to be ready for the changes likely to come?

Some questions for insurers include:

–Should we market as if most of our customers are already enjoying full(er) employment and the fruits of a newly revitalized economy?

–Should we approach employers who are once again hiring with offers of new types of group and worksite products and programs?

–Should we keep on emphasizing our product guarantees, as a point of stability in an employment world that now seems to be opening up?

–Or, should we debut new products with more moving parts, flexibility, choice and growth potential, as we did in the go-go part of the 1990s?

–Should we educate our distribution forces about the changing environment and the implications for their 2004 strategies? Or should we say nothing at all? What are our responsibilities, and opportunities, in this regard?

You can add your own questions to both lists. The point is, this is a good time to rethink current strategy.

While doing that, why not scan the products in the box on this page (arranged in alphabetical order)? These are “nontraditional” products in the sense that they are rarely found on the dance cards of most insurance marketers. Some hail from another financial sector but are now being positioned for possible distribution through insurance professionals. Others are relatively new products or programs built just for the insurance sector.

Keep in mind that many other products are floating around, just like these.

Now, ask yourself one last question: Might 2004 be the year youand your clients–pay one or more of these offerings some heed?


Reproduced from National Underwriter Life & Health/Financial Services Edition, January 2, 2004. Copyright 2004 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.