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Simple Life

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There was a time–and it wasn’t all that long ago–when the word “simple” carried a largely pejorative meaning. For instance, when the word was used to describe someone, most of the time it seemed as if the additional word “minded” was implied, even if left off.

No more, however. Now, simple is in, simple is cool, simple is good.

Especially, I might add, in the life insurance business, where admonitions to be simple, quests to attain simplicity and the desire to come across as simple are fairly bursting out all over the place.

Some of this is simply a reaction to how seemingly complex the world has become, especially since we can be in constant communication with the rest of humanity 24/7. Life has become complicated even for couch potatoes who can have, if they so choose, a bewildering array of TV channels to surf (not to mention a plethora of La-Z-Boy recliners to choose from).

But for sheer bewilderment, not to mention an almost unparalleled ability to induce severe glazing of the eyes and brain, nothing comes close to annuities–especially variable annuities with all those “G” acronyms attached.

Let’s face it, a lot of people are just no good when it comes to moving parts, and in today’s variable annuities, there are many moving parts. They may not be complicated enough to boost a rocket into space, but given the choice most people would probably rather try their hand at rocket science than annuity math.

Simply put, this presents the life insurance business with one heck of a problem. Annuities have been a mainstay of the business for years, but with demographics being what they are, the future looks incomparably richer–if only those 77 million boomers can be persuaded to buy into income annuities! And there, as an annuity producer in Shakespeare’s time used to say, “lieth the rub.”

The total number of boomers who have the patience to wade through the interaction of moving parts in income annuities, equity index annuities and (undoubtedly) annuities still to be created could probably fit comfortably in a police lineup.

What is the industry to do? Well, the message is starting to get deafening–annuities need to get simple.

That message came across loud and clear at the recent marketing conference of the National Association for Variable Annuities. You can read Linda Koco’s reports on pages 10 and 42 in this issue.

“There has to be a trade-off between the benefit and simplicity,” said Robert C. Pozen, chairman of MFS Investment Management, Boston. Urging the audience to work on the products, he said, “The simpler, the better.”

Mark Mackey, NAVA’s president and CEO, had a similar message. All too often, he said, “our customers feel like they need to have an MBA to understand what they’re looking at.”

Other speakers at the meeting echoed these sentiments, as well.

And let’s not forget that the word “annuitization” has not even been uttered yet.

It’s pretty clear that the scramble to be simple has begun in earnest but is still in a relatively early stage. I predict that the company that is able to make annuities simple and digestible will someday be awarded the Nobel Prize in Economics. Not to mention a pile of money in the meantime.

Steve Piontek



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