It Was A Very Good Year For Innovation By Life Carriers

By Cyril Tuohy

The challenge of generating lifetime income for underprepared retirees, combined with low interest rates that slowed life insurance sales in 2015, were among the top concerns of the financial world in the past year. So it’s no wonder that annuities often dominated the news about innovation in financial products.

However, the life insurance side also saw noteworthy developments in 2015. These advances slipped into the marketplace relatively unnoticed, perhaps, yet bear closer scrutiny than the ball drop in Times Square.

When a risk-averse mutual insurer like Guardian Life decides to gussy up whole life products, it’s like the first confectioner to add a sprinkling of toasted almonds to plain vanilla ice cream - it’s worth taking notice.

The most noteworthy example of this was Guardian Life’s release of an Index Participation Feature (IPF).

Index features are designed to give policyholders exposure when the market rises while protecting them when the market declines. These features have long a staple of universal life insurance policies, but they aren’t offered with more conservative whole life policies.

In September, Guardian Life issued the index participation rider allowing whole life policyholders to link a portion of the policy’s cash value to the performance of the Standard & Poor’s 500 index.

With interest rates so low, financial advisors and policyholders find riders attractive, said Michael Ferik, Guardian Life’s executive vice president of individual life and wealth management.

Dividends on additional premium paid for the rider are adjusted based on the S&P 500 performance, subject to a 12.5 percent cap and a 4 percent guarantee floor. In addition, policyholders can change their IPF allocation, the company said in a statement.

The usual caveats apply: IPFs are available for an additional premium, but might not be available for sale in every state. In addition, IPFs are only available on some of the company’s whole life policies and only at the time of sale, according to Guardian.

When a large mutual insurer that has traditionally sold products through a captive agency force decides to invest in an online-only term insurance carrier with a completely separate sales channel, it’s time to take notice.

This was the case in May, when Haven Life, a wholly-owned subsidiary of MassMutual, launched a website allowing consumers to buy fully underwritten term life entirely online.

Yaron Ben-Zvi, Haven Life co-founder and CEO, said there’s no reason for the life insurance buying experience to lag other forms of retail purchases. Certainly, consumers see no reason why they can’t buy life coverage entirely online.

A survey commissioned by Haven Life found that 78 percent of consumers believe — erroneously — that a medically underwritten term life can be bought entirely online.

Haven Life even promises to cover approved applicants right away and directs buyers to term policies offered by other insurers.

Haven Life’s survey findings point to the need for life carriers to improve the consumer experience “and to truly empower them to make a confident and convenient decision,” Gareth Ross, senior vice president of advanced analytics and data science at MassMutual, said in a statement.

“We need to adapt and ultimately resonate with buyers who are intimidated by the process,” he said.

Initially available only in Massachusetts, Haven Life announced in the fall that it had expanded into eight other states.

Of particular interest to agents was the mid-2015 announcement by MetLife that it was changing the way it planned to compensate agents selling the company’s Premier Accumulator Universal Life (PAUL) product.

Agents have the potential to earn compensation through an asset trail based on the policy’s cash value, “making it one of the few (insurance products) with this structure in the life insurance industry,” MetLife said in a statement.

The strategy changes how to determine the combination of premium-based commission and trail-based commission that flow to the agent, a process known as “levelizing” compensation. Agents get paid less upfront but “potentially” more over the life of the policy, MetLife said in a release.

MetLife’s experiment is what the company calls “flipping the script on traditional life insurance.” It’s worth a closer look because Jackson National tried a similar initiative about 20 years ago, according to Tony Steuer, an Alameda, Calif.-based author, speaker and industry consultant.

Jackson abandoned the program after agents showed little interest. But that was at a time when interest rates were higher, life insurance sales volumes were greater, and agents weren’t exposed to competition from Internet-based distribution.

Rounding out the last of the products and strategies from 2015 is John Hancock’s deal with the global wellness company Vitality Group to experiment with post-issue underwriting by applying credits to the cash value of policies.

Rolled out in April to term life policyholders, the company has since expanded to the program to include several universal life products.

Industry experts are watching the initiative closely as they expect the strategy will be in data-collection bonanza for John Hancock’s actuaries and underwriters. Data are collected through a Fitbit band worn on the wrist.

“With Fitbit, the amount of data they get is astronomical and everybody’s rushing to see what they can do with it,” said Ron C. Sroka Jr., chief operating officer and general counsel of Evolve Consulting Group in Crofton, Md.

“People who are going for this are going to succeed so it’s a healthier pool and so the question (for John Hancock) is whether this is a pool they want,” he said.

A 45-year-old couple displaying average health metrics buying Protection UL with Vitality life insurance policies of $500,000 each could save more than $25,000 on premiums by the time they reach 85 if they reach “gold status” every year, the company said.

Vitality is available with term, Accumulation VUL, Protection Universal Life, Protection IUL and Accumulation IUL.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].