NUL Senior Editor Warren S. Hersch recently chatted with Doug French, a managing principal of the insurance services practice at New York-based Ernst & Young. The interview explored, among issues, prospects for advanced markets sales in 2013, the evolution of agent compensation and challenges that advisors will face in the year ahead. The following are excerpts.
Hersch: How would you assess prospects for advanced markets sales in 2013?
French: Advisors engaged in advanced markets will face challenges in the year ahead, including threats to the tax-favored treatment of life insurance products and low interest rates, which will force up prices to the consumer.
Also, advisors can look forward to product rationing. Low interest rates negatively impact insurers’ balance sheets, which in turn affect the companies’ ability to make good on product guarantees. So we’ll see a rationing of guarantees, both in terms of less generous living benefits and higher prices paid on GLBs.
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Hersch: What more can we expect from the carriers given current economic conditions?
French: If low interest rates persist, some carriers will decide to exit certain insurance markets, so we can expect further industry consolidation. There will also be a greater focus on trimming corporate expenses and, thereby, enhancing financial results.
Hersch: To what degree are technology advances, in particular the growing access to product information via the web, a threat to advisors?