The Big D (Disruption) Is Coming

PONTE VEDRA, Fla. -- The “disruption” that is surely coming to the financial services industry really hasn’t started yet, a LIMRA researcher said.

The only real example is regulation, in the form of the Department of Labor fiduciary rule, said Eric T. Sondergeld, vice president of strategic and technology research for LIMRA.

During today's LIMRA 2018 Distribution Conference for Financial Services, Sondergeld will be joined by colleague Scott Kallenbach, director of strategic research for LIMRA, for a session on the “D word,” disruption.

“I would say largely (financial services) has not yet been disrupted,” Sondergeld said. “The Department of Labor fiduciary rule was disruptive even before it was in effect. The mere threat of a regulation put annuity sales in a very bad place. There was so much uncertainty about what was going to happen.”

Fixed annuitiy sales fell by 8 percent to $108 billion in 2017 over 2016, noted the forecast by insurance ratings house A.M. Best Co. Variable annuity sales dropped 9 percent, LIMRA reported. Many manufacturers and distributors are trying to transition to fee-based annuities, but with mixed results.

In addition to regulation, disruption is expected from two additional factors, he added, technology/changing consumer and new market entrants.

“Part of understanding disruption is it’s in the eye of the beholder,” Sondergeld said.
What one segment of the industry considers a disruption, another might not. One thing is virtually certain: “disruption” is going to be bad news for someone.

“The word disruption is a negative word. It’s only a positive thing if you’re the one doing the disrupting,” Sondergeld explained. “But I think there are opportunities. Innovation is obviously one. As long as the industry continues raising the bar, then it’s going to make it less interesting for someone else to come into the industry and do something they’re not doing.”

The session will include 10 actionable items firms can do to better prepare for disruption, or head it off before it starts.

While financial services isn’t known as the most nimble industry on the planet, Sondergeld doesn’t believe it has to be in order to thrive.

"The industry is just bombarded with all these things they should do,” he said. “It’s like ‘Wait a minute, how can we do all this stuff and is it really going to make a difference?’ I’m sure they get into this paralysis analysis.”

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]. Follow him on Twitter @INNJohnH.

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