This Too Shall Pass

On December 7th, I attended a dinner with some industry professionals and business media colleagues in which we talked about many of the tidal forces that are making life in this industry so turbulent. It was interesting timing that we had our dinner on Pearl Harbor Day, for Americans still look back on that terrible day with a collective sense of dread at having been caught so off-guard, having suffered such a brutal and unprecedented loss. We felt a bit the same way after 9/11, but still, Pearl Harbor remains in a class of its own as far as “black swan” events go, and for good reason.

The funny thing is the life & health industry has another reason to remember Pearl Harbor Day, but one year later. For it was on December 7th, 1942 that individual life sales hit what was then considered to be rock bottom. The numbers were about where they are today, but for different reasons. Back then, life insurance was just about the only game in town for retirement planning, but after Pearl Harbor, the government pushed hard for people to buy war bonds. This decimated life insurance sales, but once the war drive subsided, people returned to life insurance and the numbers rebounded.

When LIMRA published earlier this year that individual life sales had hit a 50-year low, and that only 44% of families had any life insurance beyond what their employers provided, it sent shockwaves throughout the industry. The reasons for this drop-off were different from WWII, though. The primary culprit was economic–people were mostly too busy paying down other debts to buy life insurance. After all, death is eventual, but surviving the Great Recession is immediate, right? But there have been other reasons, too, namely a reticence to discuss the need for life insurance (which, let’s face it, is a grim topic no matter how you approach it) as well as a lack of a good agent relationship through which to buy coverage.

The big difference between these two signal moments in L/H history is that while the ’42 bond drive was a market abberration, what people are facing now is a challenge to the nature and need of life insurance itself. We live in a world with many more retirement planning options, with a much greater focus on immediate gratification, and a growing cultural divide between the industry’s distribution system and those to whom it will need to sell to more and more…Gen Xers and the Millennials. As unruly as things have seemed over the last year, I suspect that 10 years from now, when many National Underwriter readers are within striking distance of retirement, the new middle market will look absolutely nothing like the old one, and the entire industry will face the kind of massive evolutionary opportunity that only comes around once in a lifetime, and leaves more than a few casualties in its wake.