By Steven A. Morelli
EDITOR'S NOTE: This is an extended version of the Perspectives interview featured in April's InsuranceNewsNet Magazine.
American College President Larry Barton is known for his straight talk from his perch as the head of insurance’s leading educational institution. He was in top form when he spoke at his college’s online town hall earlier this year, where he said he was very concerned about the industry and companies in particular. In a discussion with InsuranceNewsNet, he discussed what is concerning him about the industry and how independent insurance producers can thrive in today’s economy.
INN: In your Town Hall presentation, you seemed to have some concern about companies. Why is that?
BARTON: I think our country is in the middle of a colossal failure when it comes to protecting financial literacy, and specifically building financial strength for the future when it comes to products. And the reason is, obviously, you have broken social security systems. You have Medicare, which is extremely complicated for the average consumer. The good news is that roughly a quarter of all working people are still covered by a traditional DB (defined benefit plans). And you have about three-quarters of workers that are involved with some type of 401K or 403B. So you have some people that are in moderately good shape. But we know we have tens of millions of people at high risk because their primary source of income is Social Security or SSI.
I’ve never worried, nor do I think any sane person should worry, about the ultra-affluent. They have the tax advisors, the products, the structures, and the tax shelters to help them, and most important of all, they are diversified. They’re savvy people in terms of being able to invest in real estate or gold or mutual funds or whatever it might be that protects them. I’m more concerned about the middle and lower class where the products are often priced at a point that is difficult to attain. We’re in the middle of this very serious quagmire where a couple of interesting things are going on.
First, the actual cost of product has come down when it comes to life products, which is something that the industry has done a lousy job of advertising. A term policy is somewhere between 30 and 50 percent cheaper than it was 10 years ago. Cheaper!
INN: Do companies not advertise term because they don’t want to sell more?
BARTON: That certainly plays a role in it. But the reality is that a term product is appropriate for many people. Secondly, there are huge exceptions, but the industry could be far more aggressive in talking about the benefits of whole life. We have somehow become intimidated, maybe by legislative pressure, to not talk about the benefits of tax-free buildup. But the benefits of tax-free buildup largely benefit the middle class and the people at risk. We should rally around and celebrate the fact that they can access that money, that it does grow over time and that it is forced savings.
We have one month a year now called life insurance awareness month, and they do a pretty good job, but it’s only one month of the year. This is not the Jerry Lewis Telethon. We should be out there not once a year – there should be a yearlong massive effort to say to the country that there are life and annuity products that can help you. Because if you rely upon the government to take care of you in your golden years, they will not be golden but copper, and you’re going to be lucky to get copper.