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Life Health > Life Insurance

Road Rash

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As I write this, I am returning from my family’s annual vacation to Cape Cod, where you usually see a lot of motorcycle riders. At least, you used to. This year, I saw more trikes and than ordinary two-wheelers. And everybody on a trike was Boomer-age, presumably because the three-wheelers are safer to drive.

As it turns out, my observation belies a larger trend. Motorcycles have largely been a Baby Boom enthusiasm, and as Boomers themselves are hitting retirement age, some are getting out of riding altogether, while others are looking for nontraditional bikes that don’t lean over so easily. So while companies like Can-Am (maker of the Spyder reverse trike) are grabbing market share from a market already suffering entropy, custom shops like Mystery Designs are making a killing converting existing bikes into three-wheeled configurations for aging riders who aren’t ready to give up riding.

The numbers on this don’t lie here. The average age of a motorcycle rider went up from 41 to 49 from 2001-2010, (suggesting a static and aging customer base) while motorcycle sales themselves have slumped badly in this most recent recession. It is a toxic blend of market conditions: a product branded as a lifestyle, a luxury price tag that prohibits younger buyers from entering the market, and a boom market that is collectively starting to give up its riskier hobbies.

All of this adds up to a nightmare for companies like Harley-Davidson, once the king of road bikes, but now fighting a losing battle to maintain its sales and market share. In recent years, its sales have tanked as well as its stock price. In 2007, Harley bought Italian sport bike maker Buell for more than $100 million to break into the sport bike market dominated by Honda, Yamaha and Suzuki (where most young riders are these days). It was a disaster, with Buell shutting down in late 2009.

Harley’s problems are indicative of wider problems affecting all motorcycle makers: their best years were when the Boomers were old enough to afford a bike and young enough to be willing (and able) to ride them. Somehow the motorcycle industry just never seemed to see the Boomers’ age as an issue. But it is.

This all reminds me of how the life insurance business seems to have bet the farm on serving the Boomer market for the last 20 years, and now that the Boomers themselves are hitting retirement age, they are providing the life industry with a similar dilemma. According to the Insurance Information Institute, life insurance sales brought in less than 25% of the industry’s total revenue in 2010, making it a smaller market than health and disability insurance, and smaller by far than the sale of annuities, which accounts for nearly half of all industry revenue.

When LIMRA noted last year that individual life sales hit a post-WWII low, the industry seemed to collectively wince. Should this really have been such a surprise, though? And more importantly, if selling life insurance is becoming, as it appears to be, a far less compelling product to sell than annuities, what will happen if the Boomers themselves stop needing to buy annuities like they used to?

I hope the industry has some answers for this. After all, Harley-Davidson’s ride into the sunset has turned into a grisly case of road rash. If it happened to them, it can happen to this industry, too.


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