Kicking off the Insured Retirement Institute’s second annual conference on Monday, Dennis Glass, CEO of Lincoln National Corp., made the case for life insurance and annuities in general.
He said the industry now has “the best management teams in place in America,” competing no longer on “price and benefits” as was the case in the past, but instead competing “smartly.”
That management strength and change in focus is crucial, he said, since the industry “plays a critical role in the American economy,” and to consumers, “we provide safety, guaranteed incomes and peace of mind.”
Speaking to an IRI audience that included representatives from the asset management industry and heavy hitters from the independent broker-dealer industry such as CEO Larry Roth of Cetera Financial Group and President Robert Moore of LPL, Glass focused his remarks on the life insurance industry, which he said serves 75 million Americans with insurance and annuities. While 20% of Americans’ long-term savings are in insurance products, he noted that 30% of Americans still have no life insurance; only 13% have defined benefit plans, and for those with defined contribution plans, the average employee has saved less than $50,000.
“We have a big problem with retirement; the retirement readiness gap is large,” he says, but it presents “a great opportunity for the industry to resolve the gap.”
Citing data from McKinsey & Co., Glass said that “demographics are a big tailwind for our industry,” noting that the industry “sells into two age cohorts” today. The first is the 45- to 65-year-old group, whose numbers will grow only 4% over the next decade, while their wealth is expected to grow 42% in 10 years. The second cohort, the 65-plus age group, will grow significantly by the year 2030.
Consumer demand has changed since the financial crisis, he said, from “investing in mutual funds” to grow assets to looking instead for guarantees in investing. That’s where the life and annuities industry can step up, but Glass said there are headwinds as well for the industry.
The first big headwind is no longer state regulators, but the federal government which is now layering on “secondary regulation; the first time the insurance industry has had to face that,” he said, mentioning the Federal insurance office and the “too big to fail” regulatory approach.
The Dodd-Frank Act’s Collins amendment in particular, he said, “is being interpreted” by regulators in a way that instead of measuring an insurance company by “insurance metrics,” they’re using bank metrics. Such an approach “doesn’t make sense,” he said, and “would be a spectacularly bad result for the insurance industry.” Then there are the SIFI-designated insurance companies — “AIG, Met, likely Pru” — which face extra capital requirements.