Challenging 2020 Pulls Industry Together, Sharpens Focus On Mission

In January, members of LIMRA, LOMA and LL Global were ready to tackle one of the industry’s biggest problems, low interest rates. By the end of March, they were likely pining for the good ole’ days of January and its simpler problems.

As 2020 dawned, David Levenson was looking ahead at his second full year as CEO of LIMRA, LOMA and LL Global, ready to take on the traditional challenges facing the life insurance industry. Of course, 2020 decided to throw in a whole bunch of unprecedented tribulations at the industry, from product manufacturer all the way to the agent at the kitchen table -- or, the agent formerly welcome at the kitchen table.

Instead of replacing the traditional difficulties, such as low rates, slow technology acceptance and an aging workforce, the conditions created by the novel coronavirus multiplied the stress on these weaknesses.

Shaky third-quarter earnings reports are trickling in, along with multiple layoff notices, making it clear that it has been a historically rough year. Nobody could say what each new day would bring, but one thing was clear – the industry had to face its longstanding issues.

As Levenson opens LIMRA’s 2020 annual conference virtually, it is against that backdrop that he plans to outline the urgency of the industry’s agenda and what the association and its members are doing about them.

Part of that challenge was the clarity that problems could not be handled separately. They were now one huge knot of trouble.

“Frankly, it was hard at points to separate low rates from some of the COVID knock-on effects,” Levenson said to InsuranceNewsNet before the conference. “So, we really tackled it all.”

The association already had the structure prepared to address some challenges, such as low rates. That task force was in place in late January, after the association conceded last year that rates were destined to remain low for years.

“We had the infrastructure in place when the market started going crazy and the 10-year treasury bond yield went from 191 to sub-50 basis points,” Levenson said. “It enabled us to work very closely with ACLI [American Council of Life Insurers], our friends at Oliver Wyman, 40 of our member companies, 120 executives, and really think this problem through as an industry issue.”

Along with that enormous undertaking were the immediate problems facing carriers, distributors and advisors. Coalition-building helped tackle those as well.

“Our industry has done a really good job pushing through things like how we deal with a challenge to get wet signatures when we're in a world of social distancing,” Levenson said. “ACLI brought that to the NAIC [National Association of Insurance Commissioners] and that was all part of this broader project working together.”

It became clear as the country was starting to shut down in March that every aspect of the industry would be affected. Companies pulled together to share information and practices that would help the industry continue to do business.

Within six weeks of the mid-March shutdown, the association had pulled together 11 teams of up to 50 senior officers, such as underwriters, human resource officers, actuaries, investment officers and financial officers.

Another signal of industry unity is the annual conference itself, with about 1,500 registrants, almost double the 800 who attended last year. Many of the presentations focus on the work the association has done, including even more research, with 53 reports on top of the usual 84 that the association produces in a year.

Low Rates Go Even Lower

This industry challenge is just getting more challenging, forcing carriers to look at products and positioning differently.

“Around low rates specifically, I would say that we've seen a lot of expectations of our member companies fairly well-tempered,” Levenson said. “When you look at the sales numbers, most companies are hanging in there OK. On the life side, I'd say sales were flat for most of the year, maybe down slightly. And then the last three months we've actually seen sales on life products be fairly robust and that's after repricing to ensure that they could make their margins on what they were selling.”

Annuities have not rebounded similarly but are improving, he said. Companies have changed products, analyzed asset liability management and cash flow testing to preserve capital.

Before March, low rates were considered a “tail event,” or basically that rates had hit a floor and would slowly rise. But since March, number-crunchers have been in overdrive modeling a range of situations, including negative rates, which may now be the new tail scenario.

“I think the industry preparation and understanding of the balance sheets is probably better today than it's been in a long time because of all the analysis companies are doing, Levenson said.

Helping Distributors Distribute

One of the few encouraging consequences from COVID-19 is a greater consumer awareness of mortality, and with it the need for life insurance.

That demand draws the industry to focus on protecting families.

“That's what we're all about, right?” Levenson said. “This gives us the opportunity to reach into the uninsured and the underinsured population in a greater way today, just because the consumer is much more aware of the need. And I think that's a strong positive for us and will be probably for the next year plus.”

The challenge is connecting with consumers when they don’t want to meet with advisors or submit to medical exams. That challenge hit the industry right in its weak spot, the slow uptake of technology.

In that sense, the pressure to accelerate tech acceptance and upgrades is another part of the silver lining.

“We came out with things that were a lot more customer-centric maybe more quickly than we would have otherwise,” Levenson said. “That ranges from a suite of digital tools, to extended use of accelerated underwriting, to other uses of technology.”

The acceleration is pushing the industry closer to what Levenson called an ideal client experience with digital tools, such as the expansion of automated underwriting and electronic delivery of policies.

Those are some welcome changes with the momentum for more going into 2021, he said.
“I think financial advisors and agents have become better users of technology and communicating with their clients,” Levenson said. “That creates an efficiency that is good for the customer and is good for our industry.”

Next Step

The association is now expanding its efforts across the industry, looping in other groups.

“It's in early stages, but we are working with our peer trade associations and working with all of our member companies to focus on our mission, which is to protect American families,” Levenson said. “Anything we can do to improve the protection of those 60 million households that on average are $200,000 under insured.”

The group has not crafted plans or goals yet, but Levenson said the effort would span the process from product to sale. Although it is too early to set benchmarks, he said it is clear that there is a lot of work ahead for next year.

“This is a really unprecedented time in world history,” Levenson said. “It's a time when trade associations have a responsibility to step up and help our industry and help our member companies. And I'm very pleased with how we've been able to do that. But that said, we still have a lot of work to do. I'm looking forward to that work.”

Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at [email protected].

© Entire contents copyright 2020 by InsuranceNewsNet. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.