By Robert Dixon
Three in 10 American households are uninsured and half say they are underinsured. Lincoln Financial Group officials predict that 2013 will see the return of innovation in financial products as a result. Lincoln's forecasters cited competing financial obligations, perceptions about life insurance costs and lack of understanding about needs as reasons that may prevent consumers from purchasing a policy. The low interest rate climate has further complicated the problem by making many forms of insurance more expensive or unattainable for the average American. To bridge this gap, the insurance company predicts that innovative life insurance alternatives will emerge. The company envisions new products that will balance financial planning needs and offer flexible coverage and cost efficiencies.
"Financial security with flexibility, an evolving combination/long-term care product market, risk-managed strategies and tax deferrals" are among the trends that Mark Konen, president of Lincoln Financial Group's Insurance and Retirement Solutions business, expects this year. "With the realities of today's economic climate and our society's evolving demographics, we see continued interest in financial solutions that offer a level of predictability -- whether that's in the form of a death benefit, a living benefit, asset protection or the elimination of the 'use it or lose it' risk of some products," said Konen in a release. "As the industry works to deliver on these demands, we believe 2013 is primed to see the development of many unique solutions, while also seeing some once-popular products and features re-emerge."
The life insurance industry's product of choice in the 1990s, variable universal life, is primed for a comeback, Lincoln predicts. By balancing death benefits with market-driven cash value potential, these products can help consumers financially protect their families, while also providing a potential source of supplemental income, according to the release.
An estimated 70 percent of people turning age 65 are expected to need long-term care, according to a research paper cited in the release. As a result, life combination products continue to rise in popularity as alternatives to traditional stand-alone long-term care solutions that carry a "use it or lose it" risk. As this trend continues, Lincoln National said it expects to see increasing interest in linked-benefit products with long-term care riders offering premiums that can be paid over several years. Linked-benefit products with long-term care riders have historically appealed to older clients with the ability to pay a large sum. However, the option to spread premiums over time offers younger clients an opportunity to plan for and protect against the financial impact of a long-term care event.
Lincoln Financial also expects to see increasing demand for life insurance solutions with accelerated benefit riders. While linked-benefit products with long-term care riders are designed for clients who are primarily concerned with long-term care, accelerated benefit riders serve a growing market demand for clients who need death benefit protection, but are also concerned about the impact that a permanent chronic or terminal illness may have on their financial well-being.
People facing the likelihood of outliving their retirement assets will continue to drive the popularity of guaranteed living benefit riders with annuities, because they provide a minimum guaranteed lifetime income stream that doesn't require clients to give up control of their assets, Lincoln Financial said in the release. The insurer expects to see providers place added emphasis on risk management strategies built into products and their benefits. These strategies are designed to reduce equity risk during volatile markets and lead to a more consistent pattern of returns. The goal is to protect clients' account values and encourage them to remain invested. These risk management strategies also enable companies to continue providing compelling guaranteed living benefits, according to the statement.
With recent tax changes, Lincoln Financial expects to see a renewed emphasis on the tax-deferral aspect of annuities. Because annuity assets accumulate tax-deferred, there are no tax consequences until clients take money from their contract, often at lower tax rates during retirement.
Philadelphia-based Lincoln Financial Group is the marketing unit of Lincoln National Corp. and its affiliates. Lincoln Financial Group had assets under management of $178 billion as of Dec. 31, 2012. Lincoln Financial Group sells annuities; life, group life, disability and dental insurance; 401(k) and 403(b) plans; savings plans, and comprehensive financial planning and advisory services.
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