Forget the fiscal cliff. Forget demographic shifts. Forget legislative change.
Leadership conundrums, distribution challenges, consumer education and building trust between carriers and BGAs all surfaced as primary concerns for the industry at NAILBA 31 today as a panel of experts discussed these issues and more.
The panel was gathered by Prudential to discuss the state of the industry, and on it were Mark Hug, Prudential head of individual insurance; Art Jetter Jr., CEO of Art Jetter & Company; Jim Kerley, President of LIMRA Services; and Michael Babikian of Transamerica Life Insurance Company. And while all had different takes on what is driving the industry today, they were of a single mind on what the core issues are.
1. A totally different leadership environment. Look back 10, 15 or 20 years ago, and major concerns for carriers were distribution growth, hiring the right people, building out the brokerages and keeping good products on the street. There were more mutual companies, the brokerage system was fledgling, carrier systems still ruled, and you built products around that. There were a lot of whole life policies. Products were straightforward. The biggest issue on risk was declining interest rates and mortality. But today, things are considerably different. Interest rates are the fuel that underlies any life insurance company now. But those interest rates are at all-time lows, which means the fuel for the industry’s profitability is also getting low. This, at a time when insurers are trying to put out products that consumers want to buy and producers want to sell, all while in a risk-rich environment, calls for a different sort of leadership.
2. A “just in time” world. In the past, products were typically created “just in case” there was a need for them. Now, with so much information at anyone’s disposal, the pressure is to develop products on a “just in time” basis. The panel did not feel that the industry was reacting to that challenge particularly well, and it is creating a lot of “white noise” between producers and carriers.
3. Marketing. With the world in information overload, delivering a pinpoint marketing message is very difficult. Your message needs to be focused, tight and just in time. To do this, insurers need to be much more responsive to marketing opportunities. They need to understand that today’s consumers don’t want to be marketed to as much as they want to be marketed with. Marketing needs to make better use of customer data on hand, and not run as much on carriers’ gut feelings. The fact that most life insurance marketing never actually addresses the need for life insurance head-on remains a challenge.
4. Distribution. There are huge market opportunities at the moment: there has been virtually no growth in the compounded annual growth rate of number of policies in nearly 50 years. IUL sales are up 29 percent this year along. And there is slow, steady growth on the compounded annual growth of premiums. What the industry needs is more people to sell. There are 313,000 producers in the business at the moment, some 149,000 of which are independent. Many producers are aging and the 25-34 year-old market group remains virtually untouched. The bottom line is the industry needs more people, it needs to train them properly, and it needs to do this now.
5. Washington. With the re-election of President Obama, the industry needs to brace for possible tax changes, even to traditionally safe things like inside buildup of life insurance and estate tax levels. Any change in the taxation of life products could create a short-term rush as clients seek to get grandfathered products before new tax laws take effect. (And even grandfathering is not guaranteed.) But with all challenges come opportunities: a higher tax regime does make anything with deferred income more attractive, which is good news for permanent life, annuities and retirement plans. Should inheritance tax levels change, come January 1, there will be lots of new life insurance needs to fill as people re-evaluate their estate planning.
6. Technology. Despite the rise of online insurance transactions, the truth is that most people simply will not buy a life insurance product unless they are told, face to face, that their purchase is assured. And, they need to be told by somebody they trust that they need to make the purchase. Nobody gets this twin set of needs simply by reading things online, so there remains a need for personal interaction, and for those willing to integrate their online and call center efforts with face-to-face selling, the opportunities could be huge.
7. Trust gap. Across the board, there is a huge number of people who don’t own life insurance from all walks of life. A common misperception is that the products are more expensive than they really are, which highlights an education challenge on the part of the industry. But an even bigger challenge to overcome first is a trust gap. The vast majority of consumers feel less confident relying on their financial advisors as they did five or 10 years ago.
For more coverage from NAILBA 31, see: