CORRECTION: Due to an INN technical glitch, an earlier version of this feature sent to LIMRA attendees misattributed a quote to Mark Pfaff, executive vice president and head of agency, New York Life. The quote is identified in the list. InsuranceNewsNet regrets the error. The quote shown in the version of the newsletter sent separately to InsuranceNewsNet readers was correct as published.
Low interest rates, product trends and the great American retirement crisis were top of mind during the Life Insurance and Retirement Industry conferences April 15-19 in New Orleans. Contributing Editor Linda Koco was on the scene and taking the pulse of the industry. Here is a compilation of quotes from the week:
Question: What life insurance trends concern you and encourage you the most?
“The concern is the very low-interest-rate environment. Insurance companies need to invest profitably and when they do, they can pass that on to policyholders. But when rates are restricted, as they have been, that impacts what carriers can offer to policyholders, and that impacts retirement savings, policy sustainability and many other areas. What is encouraging is the development of indexed-based products, because the products have a floor as well as a limited upside potential. That helps keep people with the industry and/or helps get them back (if they left). People are still gun-shy about the stock market, with a lot of portfolios now only level with where they were before the crash, so the safety these products provide is important. In addition, there is a new generation of savers—Generations X and Y — who are facing limited Social Security and will need education about saving, investment and diversification. This will be an opportunity to educate on insurance as the safe part of the portfolio.
--Jane Upton, vice president-Foresight product management, Insurance Technologies, Colorado Springs, Colo.
EDITOR’S NOTE: An earlier version of this item was misattributed to Mark Pfaff, executive vice president and head of agency, New York Life
“The biggest concern for us is how deeply carriers will get involved in mobile technology. It seems that is takes a longer time for carriers to develop tools for laptops and smart phones than it takes banks, mutual fund firms and investment companies. Yet use of mobile devices is rising exponentially, so carriers will need to be able to provide the right tools. What is needed are mobile adaptations of basically anything the advisor can find on a carrier’s website, such as illustrations and product nuances, so that it’s easier for advisors to work on the go. Advisors can always use laptops, although most advisors don’t take laptops with them everywhere they go — but they do take their smart phones and tablets. What encourages us right now is that carriers are recognizing what is at stake, and they are making changes so their websites to render in tablets. Many are even promoting this on their websites, to build awareness that they have the capability.”
--Ian Lundahl, senior analyst, Corporate Insight, New York City
Question: Which life insurance product lines will be the strongest sellers this year?
“It’s tough for carriers due to the interest rate environment and general economic conditions. In this market, I see the strong sellers as being products that address issues other than interest. A good example is equity indexed products. They suggest that a greater return is possible above than what is available in products that focus on interest rates. Combination policies--life insurance with long term care benefits -- will also have strong sales. Combination policies are already popular without indexing, and they promise to be more so in when the life insurance portion is indexed. In those policies, buyers see that the insurance is no longer a use it or lose it proposition; the policyowner can leverage the life policy and the get it back in long-term-care benefits or death benefits.”
--Cary Lakenbach, president, Actuarial Strategies, West Hartford, Conn.
--Eugene Choate, president, Bankers Fidelity, Atlanta
“Probably term life insurance will be the top seller, in terms of volume of written business. I am from Canada but it will probably be the same in the U.S. market. That is due to the continuing stress in the economy, the low interest rates and the volatility in the market. Many people will look for a term life solution because of the lower price and because it is a wait-and-see approach, but they will look for permanent solutions down the road. From the perspective of permanent life insurance, the lead seller will be whole life and indexed life, because they are managed solutions — the policyholder doesn’t have to make decisions about the investment as they do with variable life. In general, people will be more cautious about variable life, but if they have a good advisor, they might choose that as well.
--Heather Shaw, vice president-distribution, Transamerica Life, Toronto, Canada
Question: What does the future look like for producers who hold state insurance licenses only and no securities license?
“We have asked that question a lot ever since [the battle over proposed Securities and Exchange Commission Rule] 151A ended. [That rule would have required fixed indexed annuities to be treated as securities and thus required the sellers to have a securities license.] Now, we see the insurance products of the future as becoming simpler, so it will be easier for the industry to reach the middle market. This means that there will be a bright future for the insurance producer who can sell these products. These will be simple sales of simple products. The industry has been killing itself by offering products that are more complex. Yes, there is a market for complex products, but it’s not the middle market. For insurance-only producers in the middle market, there is an incredibly huge potential — provided that the carriers provide the simpler products.”
- Andy Ferris, senior manager, Deloitte Consulting, Chicago, Ill.
“There is plenty of opportunity for insurance-only agents to sell insurance, although the producers will be somewhat limited by not having access to the securities market. Their opportunity is in the middle market. People in the middle market don’t have a strong need to get into the securities market, but they do need whole life insurance or term life insurance. LIMRA’s research shows that many people in the middle market do know they need life insurance but they don’t buy it. It also shows that the number of life insurance agents is declining. So for the insurance industry to sell more life insurance to meet the middle market need, we need more agents in the middle market. That means the insurance-licensed agents do have opportunity — in the middle market. If they want to go into the affluent market, they will also need a securities market so they can meet those needs too.”
- Dan Theobald, director-product management, Thrivent Financial, Minneapolis, Minn.
“The opportunities for growth will be difficult for insurance-only producers to create because they will have a limited customer base and limited products. That is, growth will be limited unless insurance producers branch out into other markets or demographics. My company is primarily a worksite carrier. We have a career force of 12,000 producers, but brokers, IMOs and sometimes individual agents are involved in 70 percent to 80 percent of all our business. This means the brokers, IMOs and agents work on the accounts with our producers. That is an example of branching out, in this case branching out to the worksite market. Agents can also use broker relationships to branch out, so if they don’t have a broker relationship now, they should get one. In today’s environment of heightened regulation, those relationships can be very important. Everything is much more complex today. As Carolyn Johnson, executive vice president and COO of Protective Life Corp., pointed out this morning in citing a Wall Street Journal article, even credit card content is more complex — the language runs 20,000 words today compared to just 400 words in 1980.”
- Chris Kimery, assistant vice president-underwriting, Colonial Life, Columbia, S.C.
Question: What retirement issue or trend do you want to learn more about at the Retirement Industry Conference or during the year?
“As an actuary, I have an insurance company perspective on the retirement market. So I am looking to get the prospective of the producer. I will be moderating a panel on that topic here, and I am interested in what the producers have to say. I would think that being an agent right now is potentially very rewarding. For instance, the number of deferred income annuities is rising, and sales of single premium immediate annuities are doing better. But this must also be a very difficult time for producers. The low interest rate is affecting what they can sell; the variable annuity carriers have been peeling back on their annuity guarantees as fast as they can; and some carriers have left the market. So agents may be wondering if their carriers will be the next year, or be there in the same way? It will be refreshing to get their perspective on this.”
--Timothy C. Pfeifer, president, Pfeifer Advisory LLC, Libertyville, Ill.
“As an actuary, I want to know what products are out there that we don’t know about. We stay on top of products but I always want more product information as well as information about innovation. This applies to all products, because they feed off of one another. For instance, the innovations in variable annuities with guaranteed lifetime benefits carried over to traditional fixed annuities and fixed indexed annuities. And when the variable annuity carriers see innovations outside of their product line they will put their own innovative spin on it for their own products. I’m also interested in seeing the distribution statistics that LIMRA has developed as it relates to retirement trends.”
--Kevin Cloud, vice president and actuary, Creative Marketing, Leewood, Kansas
“Retirement income products. For instance, how are companies positioning their retirement products, especially their single premium immediate annuities and deferred annuities? In addition, how are companies responding to the low interest rate environment? My interest is from both a product development perspective and competitive positioning perspective.”
--Robert Chamerda, assistant vice president, Guardian Life, New York City
Question: What will it take for agents to move more strongly into the retirement planning and retirement income market?
“It will take a simplified product design plus enough education so that the agents understand how to build a solutions-based approach to me the market and to specific client needs. Agents will need to adopt a long-term perspective for meeting client needs—not a commodity approach. In view of that, the companies will need to create a way to compensate agents for that long-term horizon.”
--Ronald Kuehn, second vice president and associate actuary, Ameritas Life Insurance Co., Lincoln, Neb.
“To be more involved in the distribution phase of clients’ lives, agents need to be more involved in the accumulation phase. A good way to do that is to work in the retirement plan market, such as 401(k)s for small- to medium-sized companies. This will help them establish relationships with 10 to 50 or more employees per case and that will enable them to build trust over the years, especially if they take a holistic approach and as retirement approaches, help them with issues that surround retirement (setting a budget, paying off credit cards, deciding on health care, etc.). Upon retiring, some of those employees will turn to the agent for retirement income and post-retirement planning services. Even before retirement, some of the employees will turn to the agent for assistance with other needs. In short, agents should view the accumulation phase as the relationship-building years, and the accumulation phase as the time when they serve as the retirees’ trusted advisor.”
--Vince Giordano, vice president-sales, Securian Retirement, St. Paul, Minn.
“The major thing is education and awareness of the client needs. The advisor needs education that will help them become more open minded about the life cycle of the client, and what the needs are at different ages and stages. That will help them develop more of a distribution mindset when working with clients in and around retirement. The education might lead them to do a gap analysis for client healthcare needs not met by insurance. Or they might use income planning tools that their firms provide. This is important because the client needs someone to eliminate the clutter; there is so much retirement information out that they need an advisor to look at their needs and provide advice using a holistic approach. To make this work, advisors need to adopt a trusted advisor mentality.”
--Mark Merritt, managing director-relationship strategies, Nationwide Financial, Columbus, Ohio