With Halloween around the corner, here are five things that scare me about the future of the life insurance industry right now, culled from my ongoing six-part series The Fight for Independents, which examines a variety of threats to the long-dominant independent life insurance distribution channel.

1. Consumers believe life insurance costs nearly three times what it really costs. This finding, from LIMRA’s 2012 Insurance Barometer Study, undoubtedly deters people from getting the coverage they need. Beyond “other financial priorities,” the second most common reason survey respondents mentioned for not obtaining more coverage is that life insurance is “too expensive.” Survey respondents were asked to estimate the annual cost of a 20-year, $250,000, level-term life policy for a healthy 30 year old. The actual cost is roughly $150, but Americans estimate the cost at $400. Younger adults, who are most likely to qualify for preferred pricing, overestimate the cost by nearly seven times the actual cost. If consumers are this misinformed, how can anyone expect life insurance will become a bigger priority for them in the coming years?

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scared man2. Life insurance products could lose their long tax-advantaged status to a federal government desperate for new sources of revenue. If the inside buildup no longer accrues tax-free and death benefits become subject to federal income tax, life insurance becomes significantly less attractive to consumers. Fewer people would buy it, and even fewer people would be selling it. Don’t think that just because it’s always survived challenges in the past, it will automatically remain protected when Congress gets down to the business of cutting the deficit in 2013. If Mitt Romney wins the election, he hasn’t specified which tax loopholes he would seek to close, but would it be surprising if life insurance was one of them?

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scared family3. By 2027 — 15 years from now — more than half of today’s active producers will be retired. Where will the next generation of producers come from? The median age of a life insurance agent is 56, while the median age of the U.S. worker is 37. What is being done to attract new talent to the industry? Not enough. Producer Don White Jr., CLU, ChFC, AEP, an MDRT member from Florida, says, “As an industry, we have done a very poor job of advancing life insurance as a career. When was the last time you saw a commercial advancing life insurance as a career? In my lifetime, I can’t ever recall seeing one. Why is that? Why aren’t we at every single college campus, promoting this as a career? I’ve got to believe there’s a lot of talent out there. We should be cleaning up.”

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scared man4. The SEC could impose a universal fiduciary standard, affecting the business models of commission-based life insurance producers. While some form of universal fiduciary standard may be coming at the hand of the SEC, it remains unlikely that such a standard would mean an outright ban on commissions. Still, the current suitability standard that traditionally has applied to insurance producers is very much in danger, and a fiduciary standard could very well lead to much higher compliance costs and reduced choices for consumers.

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scared man5. By 2027, more people could buy life insurance through their banks than from independent life insurance producers. Banks have an opportunity to grow into a significant player in the life insurance product distribution mix. Most younger consumers have no existing relationship with a life insurance agent or financial advisor, and they are very open-minded about buying a product like life insurance from their financial institution. A recent LIMRA study, “Bank On It! Opportunities With Today’s Bank Consumer,” found the majority of Gen X and Gen Y consumers would consider buying life insurance from their bank while only about one-third of the members of older generations would.

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