We all know that times change. The issue is not the changing times, because we can't change that. Rather the question is how we change with the times. The changes I've witnessed since my first days as a life insurance agent in 1965 truly bespeak a revolution in the life insurance industry. In just one short business lifetime (mine), the life insurance industry has evolved in a way that can only be called a revolution.
The names of companies regarded as industry icons at the start of my career are not even a memory for many in the business today. Those were days of mutual company domination, of captive agents selling the same product the same way it had been sold for 50 years.
It is clich? to say now, but the truth of the matter is that the life insurance industry I entered was predicated on "protecting against the economic cost of dying young." This was appropriate because as the industry developed, its customers were concerned with the financial impact of dying young. Unfortunately, the life insurance industry continued to focus on death benefits without realizing that the market itself was dying.
The life insurance industry was in the unenviable position of hoping that people would continue to die young, because if they didn't, there was little need for the industry's products. Unfortunately for the business side of the life insurance industry, people began to stop dying young. The dramatic extension of human longevity during the 20th century actually undercut the very reason for the existence of the life insurance industry.
As dramatic as this change may have been, in and of itself it was not a threat. Rather, it was an opportunity -- but an unrecognized opportunity for many. As the traditional products of the life insurance industry became more and more irrelevant to the needs of the consumer, near-sighted industry stalwarts hunkered down with the slogan, "Stick to the basics!" That is a great philosophy, but, unfortunately, when the basics change, sticking to the old basics exacerbates the problem. Such was the case for the life insurance industry. And for this recalcitrance to change, the industry paid a heavy price.
Yet it need not be that way. While change causes some to defend the entrenched, others see it as a springboard for new ideas. When embraced with an open mind, change becomes the catalyst for opportunity. Some saw the decline in the sale of life insurance and fretted for the future. Others recognized the declining death rate as a growing opportunity to provide income for living.
If I have learned one thing in my business career, it is that the future belongs to those who get there first. The future will belong to those in our business who recognize that the industry should not provide cash at death but rather income while living.
The 60 million baby boomers poised on the brink of retirement, with accumulated wealth estimated at $20 trillion dollars, represent the tip of an untapped market just waiting to be converted into a new golden age for our industry. But, like time, this opportunity waits for no one. The good news is that this opportunity is obvious, large, untapped, and available. In addition, the needs of this market are aligned perfectly with the expertise of the insurance industry and its unique ability to make guarantees. Only in this case the need is for a guarantee of income for life, rather than cash at death.
All that it will take to capitalize on this untapped market is a recognition that we live in a different world than we did at the start of my career. Yes, it is a changed world, but the good news is that we have the power to make it a better world.
Robert W. MacDonald is a 40-year veteran of the insurance industry and the retired CEO of Allianz Life of North America. He is currently president of CTW Consulting LLC. Mr. MacDonald can be reached by email at mac@cheattowin.com.
