Industry Leader Forum: ING U.S. Insurance
We’ve seen the statistics for a number of years now—Americans are less prepared than ever for the untimely passing of a family member. It’s troubling that the purchase of life insurance in our country continues to decline. According to recent LIMRA statistics, life insurance ownership is at an all-time low, with only 44 percent of U.S. households having individual life insurance. This is a discouraging trend, yet it should serve as a call to action for our industry.
The fundamental need for life insurance protection has not changed; in fact, most people, when asked, admit that they need this vital coverage. Individuals insure their homes, their cars, and even their pets, yet they often overlook and undervalue their most valuable asset—themselves.
There are a number of reasons for this gap in financial protection. One factor is the common but mistaken assumption that life insurance costs too much. The truth, however, is that policy rates remain at historically low levels. Another reason is that the pipeline of life insurance agents across the country is drying up. This means fewer agents are out talking up the value of life insurance and making important connections with consumers. The dwindling number of agents is a major issue for our industry.
Distribution Opportunities. Given this backdrop, expanding distribution networks and exploring new and different ways to go to market will be a key focus for insurers in 2012.
One segment that needs special attention is the middle market—families making less than $150,000 a year. Due to the decline in agents and economics of traditional life insurance sales, the middle market is largely being ignored. The only way to turn this around is to find innovative tools, resources and processes to reach them. Capable agents know there is ample room for opportunity.
This was a driving force behind our development of the ING For Life website, which provides practical, interactive, front-end education to consumers. The site can be an economical vehicle for agents to leverage in the middle market, informing consumers about life insurance and encouraging them to complete a pre-application that will link them to a producer or independent fulfillment center.
Another example is the emerging model of “captive independents” which is bringing new producers into the business. These are independent sales organizations that have niche marketing approaches directed specifically at middle market consumers.
As the number of agents shrinks, it is likely that more life insurance will get sold through the worksite. In turn, the lineup of products that companies offer to their employees will be looked at more closely than ever before. While voluntary benefits programs have typically included a static menu of products for years, there is now an opportunity to bring new and enhanced offerings to this channel, since many employers are shifting to view these benefits as more than just an afterthought. Employers are also asking for new options so that they can better meet the needs of a diverse workforce. Additionally, they are evaluating how health care reform may drive them to alter their medical package, and are seeking innovative ways to introduce voluntary benefits as part of this process.
On the marketing front, digital strategies will continue to expand in 2012, tapping the latest technology advances to help agents. Equally as important is the need for our industry, distribution and regulators to tackle social media. Social media is not a fad. It has changed the way information is disseminated and the way many Americans communicate. Many insurers have been dipping their toes in the water. If the industry wants to be serious about serving Americans better, we need to be where they are living and communicating. Building sound social media policies and creative initiatives will continue to be important in the year ahead.
The Product Landscape. In conjunction with creative distribution tactics, our industry must remain committed to developing innovative and relevant products. This does not mean introducing greater complexity. Rather, it means coming up with solutions that are in tune with evolving customer needs and the realities of the market.
For example, the low interest rate environment has made it increasingly important to reinvent products that generate growth. Accordingly, accumulation products will remain in the spotlight during 2012. A continued focus will be on indexed universal life solutions, which have gained impressive traction in the past year. These products can address a distinct need, offering financial flexibility to help meet future expenses such as college costs or retirement while providing downside protection and a death benefit guarantee. The fixed annuity arena faces the same low interest rate challenges, so new features that address rising rates, such as those that add a crediting strategy, will continue to grow.
Other product developments include those that can help employers reward their most valued employees. One example is the ING Life Companies S.O.L.A.R. (self owned life and retirement) life insurance arrangement. There is also renewed interest in indexed products with a secondary guarantee, although the trend of increased pricing continues. While current secondary guarantee products provide very little if any cash accumulation or future flexibility, newer versions with death benefit and accumulation features do have appeal. For a small increase in premium, our new Secondary Guarantee Index Product provides significant upside cash value and options in the future as needs change. This can be a help for distributors seeking to offer solutions with more flexibility and value for customers. We will also see universal life insurance without a guarantee continue to try to make a comeback in the industry. With the return of the estate tax, the same is true for second-to-die insurance.
It is no surprise that technology will remain front and center, as companies find ways to make it easier to do business. ING recently launched a tool—Life Illustration Express Mobile—that agents can use on their tablets and mobile devices to instantly run illustrations and compare premium quotes. With greater adoption of electronic applications we are also now seeing the industry shift toward automated risk decisions and electronic delivery of policies, providing real-time delivery to the consumer and agent—saving time and energy, and cutting down on paper flow.
Another product trend evolving through technology is simplified-issue life insurance. With this process, consumers answer a short-form application and the insurer quickly makes an underwriting decision (sometimes in minutes) after reviewing the responses. The consumer pays a slightly higher premium for the convenience of not having to take a medical exam and related medical tests. Technology today is providing greater underwriting intelligence for insurers and some have explored automated underwriting to be even more precise. We’ll be sure to see more insurers experiment in this area in the year to come.
While talk is good, action is better. As our industry looks to 2012, this “top ten” list can be a road map to helping reverse the lagging rate of life insurance ownership:
1. Serve the broader market with refined products and innovative new solutions, without ignoring the mass affluent market that remains underinsured.
2. Focus on the middle market, finding alternative sources of distribution and using technology smartly to help agents find their place in this market.
3. Develop products that address the low interest rate environment and provide accumulation potential, such as indexed universal life.
4. Enhance worksite offerings, as more life insurance is sold through the workplace and voluntary programs gain importance within the overall benefits framework.
5. Use technology to make it easier for on-the-go agents and consumers to manage their insurance needs.
6. Bring new agents into the insurance business.
7. Help agents economically serve the middle market, providing front-end education, training, sales and prospecting support.
8. Continue to expand term insurance distribution networks, particularly quote shops, which give easy access to lower-cost insurance options.
9. Employ digital marketing strategies to expand the reach of producers to businesses, client organizations, banks, credit unions or even in retail opportunities.
10. Use every opportunity and avenue to convey the value of life insurance, partnering with industry organizations and embracing national campaigns such as September’s Life Insurance Awareness Month. [DB]
January 2012 Issue of Brokerworld Magazine. Author’s Bio Donald W. “Butch” Britton, FSA, MAAA CEO, ING U.S. Insurance