As the new year approaches, now is a fitting time to review some of the key drivers of product transformation in our industry over the past 12 months.
After all, these trends and developments carry the potential to continue shaping the life insurance, retirement planning, and accident and health markets in 2014. And the driving forces in our market and the ways carriers respond to them can determine how effectively we all provide the kinds of innovative solutions today’s consumers need and demand.
Here are five things to keep an eye on in the year ahead.
Enhanced guaranteed universal life products
We’ve all seen that access to the life insurance markets can be a challenge. For instance, given the mandate for increased reserves on guaranteed universal life (GUL) products, some carriers pulled back or withdrew completely from their commitments to the GUL market in 2013.
But along with challenges come opportunities — especially for carriers and distribution partners that are able to not only respond swiftly and effectively but also have the resources, experience, insight and vision to anticipate consumer needs and move proactively to fulfill them. Recent carrier contraction in the GUL market notwithstanding, enhanced GUL offerings have made their debut in the past several months, creating exciting, new solutions for clients and, therefore, new opportunities for distribution partners.
Retirement income innovations
A groundswell of consumer interest in ensuring sufficient income in retirement has also led to innovative product development and refinement, which promises new opportunities for agents, advisors and clients. As LIMRA President and CEO Bob Kerzner noted in his third-quarter industry briefing in August, “It seems as though retirement security and financial literacy are on everyone’s mind.”
In fact, nearly 40 percent of Americans surveyed recently by LIMRA said they were interested in learning about generating retirement income. And only 17 percent of the survey respondents said they were very confident they could achieve a secure retirement.
The LIMRA findings call to mind another recent, major body of research, the AIG Retirement Re-Set Study. This study found that Americans age 55 and beyond continue to be more interested in guarantees and financial peace of mind, and they believe achieving peace of mind is four times more important than accumulating as much wealth as possible.
The continued resetting of the consumer mindset — protecting assets is now eight times more important than achieving higher, riskier returns — has given rise to a new generation of solutions on both the retirement planning and the life insurance side of the industry. For example, new breeds of index annuities are available with guaranteed living benefit riders that give clients the very attractive opportunity to increase their retirement income potential. As can be expected, some limitations and conditions apply, but the advent of this new type of retirement savings product heralds a fresh, savvy solution for the need to help clients secure sufficient income for life.
On the life product side, innovative income riders are now available to help turn the life insurance benefit of certain universal life products into a guaranteed stream of retirement income. As 2014 approaches, there is ample reason to anticipate burgeoning consumer interest in highly flexible financial solutions such as these, which can help provide much-needed protection against the valid fear of outliving retirement income.
New life insurance riders
As I consider opportunities for all of us — carriers, agents and advisors — to serve client needs with the most conscientious degree of sensitivity in the coming year, it would be nearly impossible to overstate my enthusiasm for the newest designs in accelerated benefit riders.
I believe living benefit riders are an intelligent way to guide many consumers in buying life insurance. Historically, people have not always connected well to the more traditional life insurance products that pay out only upon death, but they can grasp the value proposition of a life insurance product they don’t have to die to use.
See also: 10 timely life insurance riders
I’m talking about a quintessential type of life insurance product, one that can meet clients’ evolving needs — or their children’s needs — over the years, one that can provide early access to the death benefit if needed, one that offers a longevity rider that can provide an additional income stream if the conditions of the policy are met.
This type of flexibility can be invaluable in helping to ensure that clients have solutions not just for death but also for life. After all, today’s middle-market consumers are frequently challenged to try to fulfill multiple types of needs with fewer products. However, even high-net-worth clients can appreciate contingency plans and may benefit from having access to their life insurance policy if, for example, they suffer a stroke and need extended care or have other expenses arising from their condition.
Regardless of one’s station in life, it’s sobering to know that 70 percent of people turning age 65 can expect to need some form of long-term care during their lives, as the U.S. Department of Health and Human Services has pointed out. It’s absolutely critical that our industry provide products structured with the flexibility to be a solution for that type of need as well as other needs. Every consumer ought to be able to have reliable protection for a lifetime.
Evolving health care needs
Opportunities in 2014 lie elsewhere, too. Many consumers and those of us in the industry continue to keep a watchful eye on the evolving health care landscape, given (among other factors) the uncertainty that exists regarding the full ramifications of the Affordable Care Act.
The time seems ripe, therefore, for carriers and distribution partners to leverage the public scrutiny over health care access and costs to deliver groundbreaking products that give clients affordable safeguards against the financial perils of unforeseen accidents and potentially devastating medical conditions. With the knowledge that medical bills are a contributing factor in nearly 60 percent of bankruptcies, according to a study in the American Journal of Medicine, all of us in the industry have an enormous role to play in protecting clients from the unknown.
Given the often daunting costs, both direct and indirect, of unforeseen accidents, supplemental accident products can be common-sense solutions for many clients. Of great importance, as well, are optional accelerated benefit riders on other products to help protect against critical, chronic or terminal illnesses. These types of riders on the right products can be key financial solutions for clients — and matching appropriate solutions to client needs is where all of us in this business must focus.
Middle market consumers
Do take a closer look at the aforementioned middle market and your opportunities to expand your reach there. The market environment over the past year, combined with the American Taxpayer Relief Act of 2012 (ATRA), which took effect Jan. 1, 2013, have generated some robust opportunities to help clients adapt to the evolving economic and tax landscape. As a result, agents now have easy, online access to a wealth of carrier-produced materials that support life insurance planning in the new economy.
Some of the most pressing needs today include basic survivorship planning and helping clients determine whether the amount of insurance they purchased a few years ago is still sufficient to address their needs and objectives today. It is my belief that all of us in the industry bear the responsibility to help consumers hone in more closely on their needs, and determine the right amounts and kinds of products that can serve as solutions.
Carriers realize that producers focus intently on building out their own product packages and creating additional value for clients. Keep in mind that carriers with smart, nimble solutions can be terrific partners to enlightened brokers. We can best help you match specific products to consumer needs and drive your business if you invest the very worthwhile time to learn how the products work.
It’s also critical to understand with whom you are partnering — to take a close look at the balance sheets of the companies you represent. When I reflect upon the years that I served as a life insurance agent and then think about our industry today, the carriers that can meet the most stringent regulatory standards are the carriers that, if I were still an agent, I would strive to know more about.
As we all ride recent market developments and trends into the new year, I believe that the power to more strongly sustain and grow your business will likely correlate closely to the financial strength of your carrier partners and their ability to couple consumer-focused thinking with the design of superior, differentiated and flexible solutions for clients and prospects. If the emphasis is first and foremost on serving those who look to our industry for guidance by providing them with smart solutions for a lifetime, the challenges of today transform into the opportunities of tomorrow.
For more on the year ahead, see: