As president and CEO of the Insured Retirement Institute (IRI), Cathy Weatherford’s mission is to educate the public, financial advisors and regulators about the importance of annuities in a retirement plan that is increasingly less dependent on company pensions and Social Security.
And she is uniquely qualified to lead that charge. Before she headed up Washington, D.C.-based IRI, a nonprofit group advocating proper retirement planning and the use of annuities and variable life products in those plans, she served as president of the National Association of Insurance Commissioners. She was also the first woman to head Oklahoma’s insurance commission.
LHP caught up with Weatherford as she presided over the organization’s 2012 Marketing Summit in New York City in early April.
In the first part of the conversation, Weatherford discussed why annuities are gaining in popularity, how they can fit into an individual’s retirement blueprint, and how insurers are managing risk in today’s volatile market.
In the second installment, she weighs in on the impact of several high-profile exits from the variable annuity business, how advisors can sell annuities to skeptical clients and the regulatory environment.
LHP: Some companies have actually left the variable annuity business. Can you comment on those developments?
Cathy Weatherford: They left the variable annuity business, but not because they went insolvent. They left the business because they decided to go in a different direction. I think that is very different from what we saw in the banking sector, where regulators changed the business strategies and models. The life insurance industry made its way through. I know we tend to have some angst around some of what I call strategic decisions to take their companies in different directions. They are still here, they are still standing. From a regulator’s perspective that’s pretty powerful.
LHP: Do you expect that more companies might leave the variable annuity business?
Weatherford: We have well over 40 companies right now. We are seeing new entrants into the marketplace. We are starting to see growth at the bottom. Let me give you my personal perspective around this. I was a regulator during Hurricane Andrewthe greatest losses the P&C industry ever saw. We saw some insolvencies and tremendous exodus away from coastal marketplaces. What did that industry do? They figured out catastrophe (CAT) modeling. They also figured out how not to have concentration in a single zip code. Everyone is back on the coast. The property and casualty industry has grown. People said the P&C industry will never be the same after Hurricane Andrew. We have the most vibrant P&C industry, it innovated and changed, and figured out strategies to come back to a marketplace. That is what American business is all about. You are not forced to be anywhere or in any product or any marketplace. In today’s environment, it’s incumbent on management and boards of directors to make strong, sound business decisions, and who’s to say that some of the retreats won’t be advancements in a few years.
The demographic is so powerful for this marketplace. The two generations coming behind [the boomers] could be even more powerful as a demographic because there is going to be less reliance on Social Security and company pensions. So self-financing and self-responsibility are only going to grow in America. I believe you have to take the long view here. In the short view, we’ve seen some changes in strategy, some changes in direction, but the opportunity is still here. The insurance industry has been doing this for 150 years and the life insurance industry knows how to have a long view in managing risk and delivering on their promises. I am an optimist. I believe this is going to be a very vibrant industry.