A panel of top life insurance executives speaking at last week’s LIMRA annual meeting agreed it’s a great time for the industry right now as the first wave of boomers is about to start retiring. On the other hand, many producers are also on the verge of retirement, presenting the industry with an emerging need to replace agents and advisors, they noted.
Thomas M. Marra, president and chief operating officer of Hartford Financial Services Group Inc., said his company has responded to the boomer challenge by intensifying product development and raising the value of its services.
To execute successfully, however, the industry needs to expand recruitment, he added. “We need to make the industry attractive to young people to enter the business,” Marra said.
Hartford’s efforts to increase distribution, he continued, have included attempts to get P/C agents to think more about selling life insurance to their clients. “Right now, we’re 0 for 7″ in that effort, he acknowledged.
Scott F. Powers, CEO of Old Mutual (USA), said his company is working to expand the number of independent reps who sell its products. “It’s always a challenge to make sure you get production” from independents, he said.
Stuart H. Reese, chairman, president and CEO of Massachusetts Mutual Life Insurance Company, said his company has expanded its sales force to 4,200 from 3,700 within the past year and a half.
Boomers’ retirement is both “an opportunity and a challenge as they start drawing down their assets,” Powers said. Many of those on the verge of retirement have not invested enough and are in danger of outliving their resources, he added.
For financial advisors, the problem presents a need to educate consumers, he said.
Old Mutual is also pushing carriers to develop innovative products that can help advisors serve customers’ needs to preserve capital, secure income for life and provide for possible long term care needs, he observed.
Reese concurred that mass retirements present “multiple big opportunities” for the industry. Although the retirement groundswell is going to be immense, he predicted it also is likely to be delayed for a while as many people realize they have not accumulated enough assets.
Among openings that present, one is for sales of more whole life products as people work longer, he said.
The panelists agreed combination policies would be a growing factor in the business.
Marra saw promise in annuities with a living benefit option that accelerate benefits if there’s a long term care need. “A lifetime product with long term care features is very attractive” to many looking ahead to retirement, he said.
Powers agreed, calling combination products a chance for carriers to go on the offensive against competing financial products by offering customers exposure to equity markets. Packaged products that meet changing needs over a lifetime have real competitive advantages, he said.
Asked about the industry’s need to educate its market, the executives saw a need to teach not only consumers but also producers.
Powers said all levels of distribution are looking for help in learning how to position products in customers’ minds. “We need to educate financial advisors about providing value-added services,” he said.
The agency system has been evolving toward including more financial planning, Powers observed. He urged advisors either to learn how to do financial planning or to collaborate with financial planners.
Consumers’ need for education offers an opportunity for advisors to get to know customers’ financial situation more deeply and help them decide where whole life insurance can help, he said.
Turning to technology, the panelists agreed the role of the Internet in selling life insurance will continue to grow.
Reese observed it’s relatively easy to distribute term life over the Internet but that more complex products may need to change to be suitable for online sales.
“The extent that products can be simplified will influence the extent they can be sold online,” Powers agreed. “I don’t think [the Internet] is going to replace the role of advisors for more complex financial services.”
Marra said the Internet offers a chance to cut down on the time it takes to process applications. “The time to policy delivery is too long,” he said. “Technology can help.”
High not-taken rates show the industry is not working expeditiously enough to reduce the time for approving applications, he said. “You’d have a significant competitive advantage if you could crack the code to reduce the time for processing applications.”
Turning to principles-based reserving, panelists disagreed on both its need and its impact.
Reese called himself a “skeptic” on principle-based reserving, which would allow companies to consider their own claims experience in addition to GAAP guidelines when determining the amount of reserves to set aside.
Principle-based reserving might allow some firms to increase their growth numbers without adding a lot of capital, Reese said. At the same time, the practice would have a different impact on different companies, depending on the types of business they do, he said.
Marra predicted PBR would “get us to the right number” for reserves.
“Regulators put us in a bad place with Triple-X [reserving requirements developed by the National Association of Insurance Commissioners] because the reserving requirement is just too high,” he said. Principle-based is the best way out. It’s needed because we have a mess. We wouldn’t have reinsurance and capital-based solutions without Triple-X.”
Other topics covered by the panelists included these:
Life settlements: Stranger-owned life insurance was one concern, but the executives concurred that life settlements served a need.
“There’s no easy answer to life settlements,” Reese said. He thought a ban on life settlement was doubtful, but progress is likely against STOLI arrangements, particularly with larger states.
“I continue to believe we need to work on all fronts to prevent STOLI while allowing life settlements under legitimate circumstances,” he said.
Segmenting markets. Marra thought mid-America was under-penetrated by the industry.
Powers saw significant growth of demand for insurance products from the Latino community. “It’s projected to hit about 20% of the U.S population by 2050,” he said. “I see it continuing to grow. It’s already significant.”
Reese said his company, too, was promoting its products more heavily to different ethnic groups and was also seeking to grow sales among women.