By Cyril Tuohy
Protective Life, one of the few life insurers with a consistent track record of successful acquisitions, is honing its life product portfolio to attract more of the mass affluent category of customers. The company is also reconfiguring its technology platform to get more feedback from retail customers.
The strategy, Protective Life executives said, is part of the company’s goal of what it calls a “much higher customer engagement model.”
“Our first retail initiative for 2014 is to strengthen our existing distribution and the goal there is really to get good, high-quality profitable growth, and mitigate some of the industry challenges we see, primarily commoditization,” said John Sawyer, Protective Life’s senior vice president of life and annuities.
The initiative will take two forms, he said. The first is to stop chasing whatever Protective’s distributors are telling them customers want.
“Traditionally in our business, we've always tried to match the customer segment that our distributors are pursuing, and with that strategy what you found from a retail business was that we were pretty broad because we were chasing a lot of different segments,” Sawyer said during an investor conference with analysts.
When company executives analyzed the strategy, they discovered that the most value Protective could impart was with the “mid to mass affluent market,” Sawyer added. “So that segment is where we really are going to be focusing on going forward.”
Sawyer said the needs of the mid to mass affluent market revolve around core protection and core accumulation products, so that’s where the company intends to focus its life insurance strategy in 2014.
Next year, Protective is planning to introduce an indexed universal life product and a variable universal life product, along with upgrades to “a couple of those products that are on the platform now,” he also said.
Protective Life expects life sales to crest at $152 million in 2013, an increase from $121 million in 2012, the company said. Two-thirds of the company’s life insurance sales are conducted through insurance agents, and one-third is through institutional sales.
Except for a change in the mix to emphasize a balance between the sales of fixed and variable annuities, total annuity sales are expected to remain stable at $2.5 billion in 2014, even with projected 2013 sales, the company also said.
Sawyer also said the company would begin to align itself more closely with distributors serving Protective’s core mid to mass affluent buyer, and that a “deeper and more meaningful relationship” with those distributors would ensue.
At a recent gathering of wholesale distributors, Sawyer said he sensed potentially significant change as several distributors complained about commoditization from agents. They spoke with him about working with a core group of carriers.
“We’ll see if that plays out, but I think it was a good indication that they are looking for quality partners,” Sawyer said.
Protective chairman and chief executive officer John D. Johns has decried the trend toward commoditization as it means distributors lump Protective with other competing life insurers: Lincoln Financial, MetLife, Principal Financial, Genworth, New York Life and Prudential.
He said commoditization does not benefit the carrier, broker or buyer, as price becomes the only differentiator in a sale.
In addition to tighter integration of the company’s retail business with its distributors, Sawyer said the company would also continue investing in its technology and life insurance platforms to deliver more efficient pricing.
With as many as 47 acquisitions under its belt and a strong institutional client base, it has been more difficult for Protective to develop the technology to collect direct customer feedback from the retail channel. That, too, is changing with these improvements and better systems will help with pricing, service and targeting products more efficiently, Sawyer said.
Future customers are already embedded into the current customer base, and the key for Protective is to find out what those customers need when they show a propensity to buy, Johns said.
Customers who have bought a universal life policy have told the company that for the next 40 years, “‘I put my trust in Protective that you'll protect my family when I'm not here anymore,’” Johns said. “We've treated that as a valuable asset” that needs to be “cultivated and nurtured.”
The past three years have seen Protective acquire three major insurers: Liberty Life, Mutual of New York (MoNY) and United Investors Life. The transactions have brought nearly 2 million new policyholders into the Protective fold.
Having digested these latest acquisitions, the pendulum has swung to the retail side of the business. It’s up to Protective to find ways to serve those customers.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at email@example.com.
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