Speakers: Life Insurance Needs to Evolve

ORLANDO -- Change is inevitable, as the old saying goes. But the life insurance market has not accomplished meaningful change in some time.

However, new threats from changing demographics, strong competition, regulations and a difficult economic environment are forcing an evolution, say panelists who will speak today at the LIMRA Life Insurance Conference.

“Lack of action from agents, advisors and clients is contributing to life insurance ownership rates dropping to historical lows in the U.S.,” said Steven Rueschhoff, senior product leader at Edward Jones. “Sitting on the sidelines is winning the day over having the discussion about consumers' needs to prepare for the unexpected and how life insurance can fit into their overall financial plan.”

Edward Jones is “taking a holistic view” of the business from end to end, Rueschhoff said, and putting resources behind technology, training, distribution support, measures, transactional process improvements and product design.

“All of these pieces fit together for a comprehensive strategy around life insurance growth, and we are seeing some early success with it,” he added. “Progress is slow, but we feel it is essential to be patient and take the long view.”

The attempts to evolve are sincere, Rueschhoff said. The life insurance industry has been very focused on product feature innovation over the last few decades – with mixed results.

“But life insurance industry sales overall have barely kept pace with inflation,” he added. “Meanwhile, the buying process for life insurance has not evolved much, and the consumer experience during acquisition is not great.”

A Booming Problem

Perhaps the most significant variable threatening the industry is the thousands of baby boomers hitting retirement age every day.

Consumers generally think of life insurance as term insurance covering the wage-earning years, said Paul Fedchak, consulting actuary at Milliman. What happens to that dynamic if “normal retirement age” is a wildly changing target, or if there are no plans to retire at all?

“What does it mean for life insurance when the average American dies with debt to be absorbed by his or her heirs?” he asked. “Companies are recognizing this, but there is no one-size-fits-all solution to the variety of post-retirement needs.”

It's not all bad news for life insurers and agents. In particular, indexed universal life shows no signs of slowing down, Fedchak said. Likewise, the final expense market continues to evolve to address senior needs.

“One particular trend is designing the product and marketing focus to a particular need of the target market – whether that would be to cover funeral expenses, beneficiaries’ education costs, long-term care expenses or similar senior needs,” Fedchak explained.

The big question remains how to capture the younger market, he said. Those younger generations like transactions done through technology and have little need for meeting in an office.

That’s a trend unlikely to change, Fedchak said.

“While the underlying products may not change materially,” he added, “the ability to attract the younger market through technology and streamlined processes - such as accelerated underwriting or online interface and application - seems inevitable.”

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].

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