Retirement Income Planning Challenges: What Insurers Need To Do
By William Boscow
For many generations, the financial services industry has focused the bulk of its collective resources on the development and delivery of products focused on the accumulation of wealth. Overall, the industry has delivered on its promise to help people build the wealth required to satisfy their financial needs.
However, as reported in the May 24, 2004, issue of National Underwriter, an undeniable groundswell of change is now thrusting itself upon the industry. This is coming in the form of rising demand for solutions that will help people manage cash flow effectively during retirement, a period that can easily last more than 25 years.
Given the tremendous potential of this market, in terms of assets and number of prospects, every segment of the industry must determine what is required to be positioned effectively to meet the challenges and opportunities. This article will examine what manufacturers must do to achieve this goal.
Based on my observation of numerous companies over the past 12 months, the needed changes fall into 3 key categories: organization, innovation and technology.
Organization: Most companies have historically followed the traditional organizational model of “channelizing” their efforts according to internal, ongoing processes. Obviously, a channelized structure is advantageous because it allows management to identify and evaluate with ease various measures that gauge productivity, profit, loss, etc. However, in many cases, this approach also deters responsiveness to end-customer needs.
As you will recall, the repeal of the Glass-Steagall Act of 1933, via the Gramm-Leach-Bliley Act of 1999, gave insurers new opportunities to provide customer-focused, goal-oriented solutions via a diverse portfolio of products. However, most insurers have yet to implement the organizational changes that pave the way for successful customer-focused platforms. This is especially evident in many of the retirement income-related efforts.
Also contributing to the need for organizational change are the key changes in consumer behavior shown in the box. These changes already have spurred a few innovative companies to reinvent their manufacturing models according to customer needs and demands. But other companies still need to give serious thought to changes they must initiate. Given the size of the retirement income market, if these companies wait much longer, it will become more and more difficult for them to play “catch up” when boomers increasingly seek income planning assistance.
Innovation: Most retirement-related marketing or sales literature in existence today treats retirement as an immediate, abrupt event. It assumes the retiree is forever banished to the golf course, bridge table, etc., never to be engaged actively in the workplace or overall society again.