View from the Top Tracking the Life Industry's Crosswinds With Insider Interviews
by Leila Morris
Welcome to Part I and II of our interviews! (August and September Issue 2007)
1. How is the life insurance industry doing in 2007? What are the effects of the current economy?
Don Dady, Founding Partner, Annexus Group:
The annuity segment is doing incrediibly well. The economy is not affecting that segment. As a tool for risk management, indexed annuities are growing in popularity and are playing an increasingly important role in a clientÕs retirement plan.
Marian Sole, Senior Vice President, AXA Equitable Life Insurance:
Industry data from LIMRA shows that the life market is up. AXA Equitable out-performed the industry in universal life (UL), VUL, and fixed life sales. Many people are still skittish about the equities markets. Adding guarantees is making them variable products more interesting.
Marc Padilla, Director Advanced Sales, The Fraser Financial Group:
The life insurance industry is alive and well. The Fraser Financial Group, which is a general agency for MassMutual, is on target for double-digit growth for 2007. Once again, upward trends in interest rates and the stock market returns are making par dividend whole life policies and variable universal life policies viable options for supplemental retirement benefits. We are also experiencing increased activity in the senior market. This market ranges in ages from 65 to 90. Rates in this segment are rising, contributing to the increased volume.
Butch Britton, Head of ING Life Business Group:
The industry is still relatively flat. To combat this lack of growth, we continue to see commoditization of our products with respect to price and underwriting. The economy has been more favorable for variable products, as equity markets have done fairly well.
C. Ray Trueblood, CLU, ChFC, CFP, vice president for Life Insurance Marketing Strategy at Jackson National Life Distributors LLC:
Innovation is being driven by intense competition in a highly fragmented market and the demand for customized financial and retirement planning solutions for Baby Boomers. Advisors have a tremendous opportunity to help Baby Boomers navigate the financial planning process and realize their retirement dreams.
Life insurance products are well positioned to help clients reach their financial planning goals. They are becoming a more significant part of the holistic planning process. Investors have been forced to facilitate their own asset accumulation for retirement due to the decline in traditional pensions and possible reduction in Social Security. Many advisors have expanded their product offering beyond term life to include UL and VUL. This helps clients protect assets (through a standard death benefit) for their heirs, and potentially grow the cash value for their own needs. The good news is that these products are being designed with more customer-friendly features. Insurers are enhancing their marketing support to help advisors explain the productÕs features and benefits. The most significant challenge for life insurance companies in the U.S. is reaching the uninsured and underinsured.
Jeff Carroll, CLU, principal, Leisure Werden & Terry Agency:
The life insurance industry is doing well in 2007. There is a lot of opportunity to sell products. When the economy is a factor, we see slow sales. WeÕre not seeing that.
Wm. Scott Page, president and CEO of The Lifeline Program:
The life insurance settlement industry is having another banner sales year in 2007. Though our industry has been in the news in recent months, we are not seeing any negative effects. The perception of an economic slowdown has helped our industry because, during such times, potential clients realize that they have untapped wealth in their life insurance policies.
Michael Burns, Senior Vice President, Life Product Management, Lincoln Financial Group:
Life industry sales were flat for the first quarter. However, we've seen growth in all areas despite our merger last year. Our sales are up all across the board. A few companies have dominated universal life including Lincoln. Two or three years ago, there would have been a substantial difference in pricing between companies. But, they are generally pricing to similar levels. From LincolnÕs perspective, the convergence benefits our sales opportunities. The leveling out of price points means that advisors and customers are looking more carefully at the full value proposition offered by each company.
Peter A. Golato, CLU, ChFC, Senior Vice President, Nationwide Financial Services: Universal life has the highest growth in terms of premium. Term is highest in policy counts. Accumulation VUL sales have been flat or declining for the past several years with most companies reporting declines. Nationwide is one of the few companies fortunate enough to grow premium in this product, which is one of our flagship offerings.
Bruce Parker, CEO, Old Mutual Financial Network:
The insurance industry continues to benefit from demographics. Many Baby Boomers are realizing that longer life spans may make it necessary to find guaranteed sources of retirement income. Although the U.S. economy is slowing, wages in many sectors have risen, which gives families more discretionary income to purchase insurance products.
Matthew Purington, Director, Life Products, Unum:
The industry seems to be exhibiting limited growth due to challenges in the benefits industry in general and the health insurance industry in particular.
2.Has there been a significant change in product mix over the past 18 months in terms of guarantees, variable, or term? Do you see that changing again?
Don Dady, Annexus Group:
There have been two big changes in the annuity marketplace. The most significant is the introduction of an interest crediting strategy inside of an index annuity, called the "balanced allocation strategy." In just over a year, it has become the fastest growing product and one of the top five selling products in the industry. A breakthrough hedging technology allows one of the best combinations of guarantees, growth, liquidity, and flexibility inside of an annuity.
In the past 18 months, enhanced guarantees have become much more common in the indexed annuity arena. The guaranteed minimum income benefit and the guaranteed minimum death benefits are in demand with clients and advisors.
Marian Sole, AXA Equitable Life:
The appetite for VUL is coming back, especially for products that offer extended no lapse guarantees. There is growing interest in return-of-premium term products. Hybrid long-term care/life insurance offerings are gaining traction, especially as the population ages and the media and consumers focus on ways to protect against healthcare costs in retirement.
Kay Dempsey, CLU, ChFC, CLTC president of the Dempsey Companies:
The emphasis on guaranteed premium and guaranteed death benefit products continues in the individual and survivorship market. Term insurance sales continue to climb, with the trend of higher average face amounts for the business market and for personal needs. Variable life still plays a major role in the corporate benefit arena for supplemental retirement planning through deferred compensation or bonus arrangements.
We notice an uptick of interest in guaranteed premium and death benefit products with greater cash accumulation potential. The need continues for careful analysis of matching guarantees to flexibility of accumulation. One solution may be in estate-liquidity riders with a refund-of-premium without escalating costs. These are found in traditional return-of-premium riders. This allows the individual, business, or trustee to recoup premiums if the need for insurance changes. First and second-generation lifetime guaranteed universal life products provided lower amounts of cash accumulation. This is the trade-off for guaranteed premiums and death benefits.
Term will continue to be significant in the life insurance industry as producers help clients prioritize their needs with cash flow. Term will also allow producers to continue to educate clients on the merits of permanent insurance protection when appropriate.
Marc Padilla, The Fraser Financial Group:
Life insurance carriers have been co-centrating on pricing issues for guaranteed universal life insurance in the individual and survivorship markets. Higher rates are particularly evident in the 70-year-old and above market. Some carriers have limited underwriting classes. Others left the market altogether. It really drives home the value of dealing with a stable carrier that's in this business for the long haul.
C. Ray Trueblood, CLU, ChFC, CFP, Jackson National Life Distributors LLC:
The product mix had remained relatively consistent. Universal life continues to experience strong sales across the board. Variable universal life products are gaining momentum, especially with the recent gains in the stock market. Some providers are offering new VUL products. They are also enhancing their VUL products with guaranteed minimum withdrawal benefits (GMWBs), which are similar to those available in variable annuities. GMWBs are designed to generate a guaranteed income stream for the policy owner.
Providers are offering longer guarantee periods with UL products in order to diversify their product mix. Many are allowing the policyholder to choose from a menu of guarantee periods. Equity-indexed universal life (EIUL) is slowly gaining traction. However, with gradual interest rate increases in the market, EIUL may lose appeal with investors if the potential gains in the index are less attractive than the guaranteed fixed rate offered on the contract.
We're continuing to see an under-served middle market. To help reverse this trend, insurers are focused on clearing up investor misperceptions about life insurance and educating the public on how life insurance can protect their families. With lower face amounts and a much shorter underwriting process than traditional term products, simplified issue whole life products can help make life insurance more attractive for more consumers. Insurers understand that competitive pricing is the foundation of their survival in todayÕs market. But, the depth and breadth of the product line and the quality of education and support for advisors will continue to separate the top providers from the underperformers.
Jeff Carroll, CLU, Leisure Werden & Terry Agency:
There has been a significant change in the product mix. Because of the vast number of non-recourse loan sales, we have seen a heavy shift away from term and guaranteed universal life to non-guaranteed universal life. These products are a better fit for the non-recourse sale. Although I suspect there was some growth in the variable area, we did not experience any significant growth. It was not a large part of our product mix.
Michael Burns, Lincoln Financial Group:
We're seeing an ongoing redefinition of variable life. As a guaranteed protection product, it can be used for accumulation needs and supplemental retirement income security. Also, indexed UL products are emerging. Life insurance is being enhanced with acceleration of benefit riders and linked-benefit (combination) products, such as a universal life insurance policy with a long-term care rider.
Peter A. Golato, CLU, ChFC, Nationwide Financial Services: Nationwide continues to see a shift in interest in products with guarantees and simplicity, such as UL with lifetime secondary guarantees. We have also seen a shift from asset accumulation-oriented products back to protection-oriented products. Policy management is one trend in product simplification. Another popular area of simplification is with the underwriting process.
We've been known as a variable product company, but we recently developed new UL, term, and whole life products in response to high demand from our distribution channels. We have included innovations in guarantees, living benefits, and policy maintenance as well as tools to improve ease of use.
Bruce Parker, Old Mutual Financial Network:
The biggest change has been the growing adoption of income riders and long-term care riders across product lines. We should continue to see increased use of these riders as Baby Boomers move toward or into retirement.
Matthew Purington, Director, Unum: There are no significant changes. Among individual life offerings, whole life continues to be a popular offering. Voluntary term life continues to represent a higher percentage of sales among group lines.
3. Do you see growth in particular niche markets?
Don Dady, Annexus Group:
We definitely see growth in manufactured products (also known as structured, hybrid or indexed annuity products). These products can clearly complement the client's core investment strategy. We see them playing an increasingly important role in wealth management. Manufactured products provide market exposure with a risk/return profile that used to be reserved for institutions and extremely high net-worth individuals. This strategy is now accessible to everyone thanks to new hedging technology and product designs.
Marian Sole, AXA Equitable Life:
Every company is racing to capture the Baby Boomer market. It's a matter of how best to put the protection and the variable annuity expertise together.
Kay Dempsey, the Dempsey Companies:
We see growth in the small case COLI market as well as BOLI business in community banks with separate account product availability. Multi-life individual long-term care policies for businesses and professional carve outs will flourish. Conversely, the voluntary market for long-term care has had poor results. The solution is a core plan provided by the employer for the rainmakers, with the option of a buy up of additional benefits paid for by the employee.
Marc Padilla, The Fraser Financial Group: We see growth in the older market. The ability to purchase life insurance and liquidate it, at a profit, is very compelling. The producer is looking at high target premiums even if the policy is relatively small. In addition, to new funding sources, it creates a lot of opportunity.
C. Ray Trueblood, CLU, ChFC, CFP, Jackson National Life Distributors LLC: We've seen growing interest in simplified issue whole life, as well as increasing sales of VUL.
Jeff Carroll, CLU, Leisure Werden & Terry Agency: I think we will see growth in the premium finance marketplace with innovative ways to finance life insurance policies. I also think we will see growth with indexed universal life and indexed annuities.
Wm. Scott Page, The Lifeline Program: We are seeing steady growth in the sale of whole and variable life policies as well as significant increases in policies purchased to fund buy/sell agreements and key executive insurance. We are also seeing growth in life settlements from jumbo polices that exceed $5 million.
Michael Burns, Lincoln Financial Group: The biggest growth opportunities still come from the Baby Boomer market. There is a bunch of niches in the Boomer market, such as the womenÕs market, the Hispanic market, and the children with special needs market. The Boomer market provides an opportunity to get back to basics and leverage life insurance as a vehicle for retirement income security. Retirement income security is the next great opportunity for life insurance products.
Peter A. Golato, CLU, ChFC, Nationwide Financial Services: The Small Business Market continues to be a focus for us. We continue to see the demand for insurance-based retirement plans and many small business based applications for life insurance. Nationwide continues to see growth in rising affluent minority populations, particularly Asians and Hispanics.
Aging Baby Boomers are behind the seemingly ever-increasing need for secondary guarantees. Nationwide is focusing on the highly underinsured middle market by developing mass customized solutions supported by low cost distribution.
Bruce Parker, Old Mutual Financial Network: We should continue to see a great deal of growth in the Hispanic market due to the emergence of middle class Hispanic families and a growing interest among producers to serve these prospective customers. This large and fragmented market is not easily penetrated, but carriers that make a long-term investment in the infrastructure to serve this segment will have a significant market opportunity.
Matthew Purington, Director, Unum: Group voluntary life continues to grow faster than other products, which is a trend we expect to continue.
4. What is happening with your distribution systems? If you have an agency force, is it growing, are you hiring, and this there more attrition than usual?
Don Dady, Annexus Group: Our distribution systems are growing by leaps and bounds due to innovative product design, which helps advisors assist clients with their retirement strategies.
Marian Sole, AXA Equitable Life: Wholesale life is a key part of the company's growth strategy. We entered the life insurance wholesaling business after the acquisition of MONY Life Insurance Company in July 2004. In three years, our life insurance wholesale organization has grown from a staff of 30 to 150. Our total wholesale life sales were up 70% for 2006, resulting in improved market share of 4.5%. We're leveraging our successes from the variable annuity side of the house. Growth of life insurance sales has been sluggish in the retail channel at 4%. Many companies are even phasing out career systems, but AXA Equitable is countering that trend. We're committed to retail distribution. We're focused on recruiting, training and developing new and experienced financial professionals and enhancing our practice growth and support offerings to attract and retain veteran producers. On the wholesale side, we're adding wholesalers and advance case specialists to support sales through the career channel.
Kay Dempsey, the Dempsey Companies: The emphasis is clearly, less is more. The emphasis is on stronger relationships and referrals to key producers. We continue to hire sales managers.
Marc Padilla, The Fraser Financial Group: Our agency force is expanding. We are focused on recruiting.
Butch Britton, ING Life Business Group: Our three-channel model continues to generate year-over-year growth. We're seeing movement towards older-age affluent markets in all channels. Our alternative distribution, such as term quote shops, is doing very well in the middle market.
C. Ray Trueblood, CLU, ChFC, CFP, Jackson National Life Distributors LLC: Our new distribution strategy provides a full range of fixed annuity and life insurance products to guaranteed product wholesalers. This approach has helped Jackson strengthen its relationship building process in light of the declining number of life-only agents in the market. Our captive agency force will spearhead the sales and marketing of JacksonÕs simplified issue whole product, which we launched in early June. Our captive agency was borne out of our acquisition of Life Insurance Company of Georgia in 2005.
Jeff Carroll, CLU, Leisure Werden & Terry Agency: Competition in the brokerage marketplace seems to pull brokers from agency to agency. Maintaining relationships is harder than ever. Also, we are seeing less qualified new producers on an ever-increasing basis.
Michael Burns, Lincoln Financial Group: We continue to see a migration to indpendent thinking among brokers, which means that companies must have a compelling value proposition.
Peter A. Golato, CLU, ChFC, Nationwide Financial Services: On the wholesale side we have increased our involvement with large producer groups and brokerage general agencies. This is in addition to our more typical brokerage channels of independent broker/dealer firms, wirehouses, and financial institutions. Recruiting is a major initiative in our retail distribution channels, particularly with niche markets.
Bruce Parker, Old Mutual Financial Network: We are focused on growing our universal life and variable annuity independent distribution outlets. We continue to contract agents on a regular basis through our independent network of MGAs. Agent attrition remains well within past norms.
Matthew Purington, Director, Unum: We continue to train and develop our group brokerage distribution sales force to meet the increasingly complex challenges of our customers and the brokerage/consultant community.
5. Is there any change in the brokers you are dealing with? Are you more or less active with alternative distribution systems (banks, stockbrokers, direct)?
Don Dady, Annexus Group: NASDÕs Notice to Members 05-50 in August of 2005 encouraged broker/dealers to supervise index annuity sales being executed by their registered reps. Since then, there has been a lot of confusion, which has affected indexed annuity sales. The issuance of 05-50 forced the insurance industry to stand back and better define how an index annuity can be useful in the broker/dealer marketplace. More importantly, the NASDÕs Notice is leading to products that are priced and positioned for the broker/dealer marketplace. As a result, we see a significant opportunity in the registered rep market and we are developing a distribution system to serve this market.
Marian Sole, AXA Equitable Life: WeÕre leveraging the successes of our variable annuity organization. WeÕre beginning to develop life wholesale programs with stock brokerage firms.
Kay Dempsey, the Dempsey Companies: There is an emphasis on corporate accounts, such as independent broker dealers, wirehouses, and benefit specialists inside property and casualty firms. An important growth area is in financial service professionals and employees of CPA firms.
Marc Padilla, The Fraser Financial Group: We work directly. No third party or boutique brokerage agreements are in place.
Butch Britton, ING Life Business Group: While there hasnÕt been much change in our brokerage business, weÕve expanded very nicely with alternative distribution. This includes term quote shops, specialty marketers through banks and stockbrokers, and other distributors that donÕt fit our basic three-channel model. WeÕre using alternative distribution to serve middle market customers, especially with the burgeoning term and return of premium term market. The alternative distribution channel is better prepared to work within the economics of middle market selling.
C. Ray Trueblood, CLU, ChFC, CFP, Jackson National Life Distributors LLC: More brokers and agents are expanding their expertise to include financial planning certifications and other industry designations to address their clients' complex and specialized financial needs. Jackson continues to attract higher-end brokers to its distribution model.
Jeff Carroll, CLU, Leisure Werden & Terry Agency: We have tried to enter new arenas on several occasions with limited success. We have found that the best way is to capitalize on a relationship between two carriers to market each otherÕs products. Wirehouses and bank business seems very difficult to develop if you were not participating with the entity from the very beginning. Having said that, I still believe that we must consider every alternative until it is discounted as such.
Peter A. Golato, CLU, ChFC, Nationwide Financial Services: Compared to the rest of the industry, we are more balanced between sales through career agents, independent broker/dealers, wirehouses, financial institutions, and brokerage general agencies/large producer groups. Our peers are much more heavily weighted on the career agency side, followed by independent broker/dealers with a smaller portion of premiums coming from wirehouses and banks. Because we have these varied distribution channels, we have had to make tough decisions in terms of prioritizing the solutions we are developing.
We are committed to customizing our launch approach to the appropriate channels. One change that we are seeing with individual producers is the increased demand for ease of doing business and transparency. If we donÕt make it easy for brokers to compare our products, they will pay a third party to do so. Nationwide is striving to make it as simple as possible to understand the target markets for our products, where they perform, and where they donÕt fare as well as the competition.
Michael Burns, Lincoln Financial Group: As we expand product solutions for retirement income security, we are pursuing growth in all distribution channels including alternative channels.
Bruce Parker, Old Mutual Financial Network: We have not seen significant changes in the composition of our broker base. The exception is that we are establishing more relationships with Hispanic brokers and other brokers who seek to reach out to Hispanic customers.
6.What regulatory or legislative changes are you concerned about?
Don Dady, Annexus Group: We are keeping a close eye on how NASDÕs Notice to Members 05-50 plays out in the market. NASDÕs Notice was really a recommendation to broker/dealers to supervise sales by registered reps. Will it become a hard-and-fast rule or will it be ignored? This is of great interest to us. The SEC is determining whether indexed annuities are fixed or registered products. How the SEC rules on this will determine how aggressively broker/dealers implement the NASDÕs Notice.
Marian Sole, AXA Equitable Life: WeÕd love to see the passage of the Optional Federal Charter legislation, which was recently introduced to Congress. Nationally uniform regulation is needed so that AXA Equitable and all our competitors are competing under the same rules and consumers are equally protected.
Marc Padilla, The Fraser Financial Group: An extremely important issue is retaining the tax-deferred cash build-up inside life insurance policies.
Butch Britton, ING Life Business Group: Enforcing a national charter would be a positive change for the life insurance industry, but we continue to be wary of two competing systems. Either go with one federal program or continue with the governance of the separate states; it canÕt be both.
C. Ray Trueblood, CLU, ChFC, CFP, Jackson National Life Distributors LLC: At the top of our watch list is debate over the optional federal charter for insurance regulation and the call for principles-based reserving. We are also monitoring the adoption of the 2001 CSO mortality table and its affect on the pricing of life insurance products. We are closely following the industryÕs discussion about new foreign travel rules for underwriting and how they could affect the underwriting process.
Jeff Carroll, CLU, Leisure Werden & Terry Agency: Obviously, the estate tax situation has everybody's interest. Beyond this, I am most interested in legislation and regulation and life settlements and premium finance on the heels of the non-recourse loan era.
Wm. Scott Page, The Lifeline Program: We are watching closely how regulators, state governments, and state courts are analyzing insurable interest issues with regard to some life settlement policies.
Michael Burns, Lincoln Financial Group: We see the driving factors as reserve issues, reinsurance issues, and general pricing consistency among the industry.
Peter A. Golato, CLU, ChFC, Nationwide Financial Services: The biggest regulatory issue on our plate is responding to 2001 CSO mandates and determining how it affects our product portfolio and new tables on our existing suite of solutions. All companies are in the same boat in that our current stable of products expires on Jan. 1, 2009. We are all in a race to create innovative solutions as replacements to our current offerings prior to that deadline.
We are anticipating a low likelihood of total federal estate tax repeal. We continue to be concerned about investor-owned and stranger-owned life insurance. The Pension Protection Act of 2006 presents many new opportunities for insurers. These opportunities include: the permanence of increased elective deferral limits and increased contribution limits for IRAs and Roth IRAs, catch-up contribution limits on traditional and Roth IRAs for individuals age 50 are older, direct rollovers to an IRA in 2008, a plethora of other changes for Roth accounts, and changes to defined benefit and defined contribution plans.
Bruce Parker, Old Mutual Financial Network: We are closely watching the legislative progress of the Optional Federal Charter, which we strongly believe could improve the delivery and regulation of insurance. We also remain diligent in monitoring the National Association of Securities Dealers (NASD) 05-50 Notice and opposing it.
Matthew Purington, Director, Unum: We are following efforts by industry organiztions to modernize regulations and standardize and update state insurance laws to reflect market demand.
Part II
7. Which emerging products do you see that you think will become popular?
Don Dady, Annexus Group:
Indexed products havegrown in popularity in the private sector as individuals look for guarantees, diversification, and more flexibility and control over their retirement savings. Structured products are the fastest growing asset class in the U.S. They provide benefits that havenÕt been available to Middle America.
Marian Sole, AXA Equitable Life:
Packaged life products are becoming popular. These include life insurance products that offer additional guarantees, such as VUL with an extended no lapse guarantee, UL with lapse protection riders and long-term care riders. UL in general is very popular. Indexed life products are gaining momentum.
Kay Dempsey, the Dempsey Companies:
Variable life with lifetime guarantees should be explored for suitability. We believe caution is needed in showing index universal life and the use of modest, conservative assumptions of interest crediting rates. Beware of illustrating a level loan rate since many products have a variable loan rate. Disclosure and client understanding will be hurdles to face in the sales of index life products.
Marc Padilla, The Fraser Financial Group:
We expect more interest in dividend participating whole life insurance for a variety of compelling demographic and planning reasons. We also expect continued growth in long-term care insurance. Media and public scrutiny of long-term care policies reinforces the importance of dealing with a reputable agency and a solid, reputable carrier.
Butch Britton, ING Life Business Group:
Indexed products are picking up more and more share and return-of-premium term is becoming more popular. We've also heard a lot of buzz around some interesting designs that involve putting guarantees into variable and indexed products.
C. Ray Trueblood, CLU, ChFC, CFP, Jackson National Life Distributors LLC:
I'd have to say simplified issue whole life, VUL with guarantees, and equity indexed universal life are becoming more popular in the marketplace.
Jeff Carroll, CLU, Leisure Werden & Terry Agency:
I believe life settlements will become more and more popular as they already have over the past three or four years. I also think that indexed universal life will grow in popularity. Finally, I think there is a real market for products that combine universal life and a long-term care rider.
Wm. Scott Page, The Lifeline Program:
While we have seen life settlements grow steadily in popularity for many years, we expect their popularity to continue to grow in popularity.
Michael Burns, Lincoln Financial Group:
Products that leverage protection, accumulation, and financial security via cash value build-up or linked benefits to help offer solutions for retirement income security are the emerging and popular trends. There's more focus on the right combination of product features and pricing with an emphasis on responsible risk management.
Bruce Parker, Old Mutual Financial Network:
We would not be surprised if HSAs and Life and long term care compensation plans begin to gain significant traction.
8. Which new product types does you company have on the horizon?
Marian Sole, AXA Equitable Life:
We've just added our long-term care rider to our new universal life series, so now it's available on both our UL and VUL. We also just enhanced our UL offerings, with a DB and an LPR product. We're introducing return-of-premium term this summer. On the horizon, we're continuing to put all our new business products onto the 2001 CSO table. Index products are interesting and we're looking into whether we might do that. In general, we're looking into developing products that give consumers additional choices. For instance a UL LPR product that may offer guarantees and additional cash accumulation potential.
Marc Padilla, The Fraser Financial Group:
MassMutual is rolling out a new table 2001-compliant whole life insurance policy and an enhanced disability insurance policy. We think both will provide some advantages that will help us to continue strong sales performance. In 2008, we expect MassMutual to introduce a dividend participating long-term care product that also will be an important addition to our portfolio of products, particularly as consumers increasingly look at long-term care issues.
C. Ray Trueblood, CLU, ChFC, CFP, Jackson National Life Distributors LLC: We've expanded our product line over the past couple of years to include a VUL contract with no surrender penalties, which is a unique product in the industry. In addition, we have recently introduced an enhanced UL product, which offers a shorter surrender charge period. Jackson continues to work closely with producers to determine the types of products and features that their clients are looking for. When we see a strong demand for a product, we have the expertise and technology to move quickly through the product implementation process to get agents, advisors, and their clients what they need in a timely manner.
Michael Burns, Lincoln Financial Group:
Our MoneyGuard Reserve product offers a good example of this. The challenge we face is how to increase the process speed without compromising the integrity of the data, in order to make appropriate decisions. We look to increase the process speed where itÕs most appropriate with our MoneyGuard Reserve product, we were able to decrease the process time from a typical six to eight weeks down to a mere six to eight days.
Peter A. Golato, CLU, ChFC, Nationwide Financial Services:
We see secondary guarantees in high demand. In addition, we see an increased need for convenience and simplification features, such as policy management services and expedited underwriting. Insurance policies offering long-term care riders, along with other accelerated benefits, are also in high demand because they afford the client the flexibility to purchase the product with or without the additional feature. States like California differ in their requirements for insurance companies who wish to offer these types of features in their jurisdictions. We are very happy to be one of the few companies with an accelerated benefit rider for health care in California. Equity indexed products are also increasingly popular, although this is not a market Nationwide has chosen to pursue at this time.
Bruce Parker, Old Mutual Financial Network:
Our newest product types are a series of Variable Annuities and Universal Life with income riders.
Matthew Purington, Director, Unum:
More versatile and flexible offerings to provide more choice for employers in designing and funding their benefit programs, and for employees to purchase the coverage that meets their benefit needs.
9. What are you focusing on, as a company, to stay healthy and preserve market share in the coming years?
Don Dady, Annexus Group:
We believe that the new technology available in the marketplace will foster an explosion in manufactured products because it allows us bring a more comprehensive risk management approach to the client's wealth management strategy. Manufactured products can provide efficient market exposure and complement a core retirement strategy by providing a risk-return profile that was only formerly available to institutions and high-net-worth individuals. Manufactured products are only now beginning to be embraced by the marketplace, but they are the fastest-growing asset class out there. As this trend continues and advisors begin to use it more as a component to a wealth management strategy, we see this becoming a significant factor in fueling our growth.
Marian Sole, AXA Equitable Life:
Within the life wholesale operation, we're playing to our strengths of scale, retention, higher-age expertise, and the success of our variable annuity side. Within AXA Equitable, we're deepening our market penetration through the wholesale annuity and life channels and the AXA Advisors retail sales force, which is supported by best-in-class products and service.
Kay Dempsey, the Dempsey Companies:
We are focusing on the customer experience to preserve market share in the coming years. We are focusing on continued learning of new ideas, and learning solutions to help the producer win with the client. We are focusing on the producer's challenges, strengths, opportunities, and the vision for the future of his or her practice.
Marc Padilla, The Fraser Financial Group:
We're very focused on growing our field force. We want to add new recruits and experienced agents, we want to provide them with the support and training they need to succeed, and we want to equip them with products and solutions that will help them solve our clients' most pressing concerns.
C. Ray Trueblood, CLU, ChFC, CFP, Jackson National Life Distributors LLC:
Jackson continues to be well positioned in its chosen distribution channels. Our relationship-based approach to wholesaling provides the value that agents and advisors require to meet the complex financial and retirement planning needs of their customers. As more advisors shift to a holistic planning approach that often involves a combination of retirement products, they need enhanced product support and dedicated customer service from insurers.
Jeff Carroll, CLU, Leisure Werden & Terry Agency:
We will continue to focus on a high level of service. Since most of our competitors have the same carriers and products, service will differentiate us from the others. We are also trying to focus on specific programs, which include life insurance products to grow our sales.
Wm. Scott Page, The Lifeline Program:
To stay healthy and preserve market share in coming years, we will continue to encourage progressive industry change by way of transaction transparency and compensation disclosure. These could very well be the foundations of our industryÕs success as they advance the industry and its participants as well as encourage responsible practices.
Michael Burns, Lincoln Financial Group:
Secondary guarantees in UL designed for low cost death benefit protection; an emergence of similar VUL plans, and emerging income guarantees on VUL products.
Peter A. Golato, CLU, ChFC, Nationwide Financial Services:
Nationwide has had two patents pending in the past couple of years Ð one for our innovative wealth guard feature (sold in conjunction with our accumulation VUL product) and another for our automated premium monitor (offered in conjunction with our no-lapse guarantee UL product). We are committed to continued innovation around ways to make the buying experience more simple and easy for our customers and producers.
Bruce Parker, Old Mutual Financial Network:
OMFN continues to focus on the middle class market. We have made a great effort to create products that address middle class needs and preferences. In addition, by increasing our attention to the Hispanic market with our OMFN En Espa–ol brand, as well as our entrance into new markets such as the variable annuity space, we feel we are following a diverse and balanced strategy to not only stay competitive, but also be the insurance provider of choice for both our agents and consumers.
Matthew Purington, Director, Unum:
Innovation, superior products, and outstanding service
10. Are there any other trends that you see in the life-insurance industry that agents should know about?
Don Dady, Annexus Group:
What we see more and more are agents who are taking a risk management approach to wealth management, which is a more comprehensive approach to financial planning. In the past, many agents focused on product sales only, but it's not about that any more. It's really about building a comprehensive plan for the client and helping the client execute it. There is still a product emphasis in the market today, but we definitely see that changing in the years ahead.
Marian Sole, AXA Equitable Life:
The consolidation of companies. Usually it's more beneficial for an agent to be affiliated with an acquirer, not an acquiree.
Marc Padilla, The Fraser Financial Group:
We think agents should be familiar with the life settlement market. If they're not, they should begin to get a handle on the unique issues in that space.
Wm. Scott Page, The Lifeline Program:
By far, the most significant trend in the life settlement industry is the move toward transparency and complete disclosure of commission fees. We embrace and advocate these trends and believe that 2007 is the year that transparency will make a strong mark on the industry.
Michael Burns, Lincoln Financial Group:
The continuation of historically low interest rates takes away the attractiveness of current assumption products such as non-guaranteed universal life. What we're seeing is the redefinition of variable. An example of this is Lincoln VULONE, which is being offered as a guaranteed protection product. It can be used for accumulation needs and supplemental retirement income security. We are also seeing the continued emergence of indexed UL products.
Peter A. Golato, CLU, ChFC, Nationwide Financial Services:
Nationwide is making its products simpler and more transparent. We want to focus on the underserved middle market by making life insurance easy for the producer to sell and easy for the customer to buy. Examples of this strategy in action include our "Nationwide Appvantage system," which makes it fast and intuitive for agents to issue term and whole life products to customers on a simplified underwriting basis. In addition, we continue to seek ways to make policy management, underwriting, and other aspects of our offerings more agent-friendly and consumer-friendly.
Bruce Parker, Old Mutual Financial Network:
Clearly, there is greater media scrutiny on agent sales practices, especially within the elderly segment. This will continue and grow more vociferous as plaintiff attorneys seek to use the media as an extension of their law practices.
11. Has your company taken any measures recently to speed up the underwriting process?
Marian Sole, AXA Equitable Life:
We're studying our workflow and the successes our variable annuity colleagues have had with straight through processing. We're looking at ways to speed up underwriting but also at different ways to enhance total cycle time.
Kay Dempsey, the Dempsey Companies:
As a brokerage general agency, we have redoubled our efforts in file building on the local level, and the orderly procuring of all medical records, exams, inspections, MVRs so that the home office underwriter has all the requirements to make the decision. We have a contract-underwriting consultant who reads attending physician reports, summarizes, in detail the impairments, and then works with home office underwriters in getting the most competitive offers for the client.
Marc Padilla, The Fraser Financial Group:
Underwriting is a challenge, particularly in the older age markets. Less reinsurance capacity and ensuring policies issued and placed have insurable interest takes time and resources. To address those challenges, MassMutual is bringing in additional underwriters.
C. Ray Trueblood, CLU, ChFC, CFP, Jackson National Life Distributors LLC:
Jackson's proprietary fax-in, imaging, and online processing systems have increased the companyÕs efficiency and accuracy in processing and underwriting life insurance contracts. The paperless environment has enabled more than 70% of applications to be processed underwritten and approved within 30 days.
Wm. Scott Page, The Lifeline Program:
We have improved the custom Lifeline Application and implemented a new ShareFile system, which provides faster and more secure processing/underwriting and increased confidentiality.
Michael Burns, Lincoln Financial Group:
Similar to pricing, we're seeing general tightening of underwriting practices in the industry and hardening in the reinsurance market compared to several years ago, leading to greater industry consistency. For similar reasons to pricing issues, we believe this has had a positive impact on our sales as advisors and customers are looking more carefully at the full value proposition offered by each company.
Peter A. Golato, CLU, ChFC, Nationwide Financial Services:
Broadly speaking, today's potential clients are more concerned with outliving their savings than premature death. This is largely due to the aging population and rising healthcare costs. In addition, debt levels are at an all time high. Their most valued asset has shifted from something monetary to time. Time, pure and simple, is most elusive for all of us nowadays. In this age of information overload, consumers want simplicity. At Nationwide, we want to make it easy for them to do the planning they need to do.
Bruce Parker, Old Mutual Financial Network:
Pursuing opportunities to enhance speed and efficiencies is a continual process, which is driven by technology to a considerable extent. We also place a great deal of value on our outsourcing relationships. Two recent outstanding examples of both of these commitments are the announcement of OMFN utilizing Skywire Software's IDX program to enhance data management and communication and the naming of OMFN and Perot Systems as the 2007 Best Partnership by Outsourcing Center.
Matthew Purington, Director:
The increasing availability of guarantee issue to avoid excessive medical underwriting.
12. What types of guarantees are selling today and what are the newest innovations?
Don Dady, Annexus Group:
We're seeing a greater demand from consumers for more client-friendly products that feature enhanced guarantees. Guarantees like minimum death benefits and minimum income benefits are growing in popularity. They are being viewed as an important part of a sound, long-term financial plan.
Marian Sole, AXA Equitable Life:
Secondary guarantees on life insurance are doing very well. Lapse protection riders are a strong sell. We just introduced a new UL LPR this summer with an optional long-term care rider. Return-of-premium term is very popular.
Marc Padilla, The Fraser Financial Group:
Typically, we see many requests for guaranteed death benefit universal life. The draw is the low rate and guaranteed benefit; however, these policies lack cash value and the ability to draw upon cash values on a favorable basis. In response, MassMutual and other carriers are designing new whole life policies, which can be tailored to the clients' needs for cash value, death benefit guarantees, and still offer access, under the specified conditions, to tax-free income.
C. Ray Trueblood, CLU, ChFC, CFP, Jackson National Life Distributors LLC:
Jackson's proprietary fax-in, imaging and online processing systems has increased the companyÕs efficiency and accuracy in processing and underwriting life insurance contracts. The paperless environment has enabled more than 70% of applications to be processed underwritten and approved within 30 days.
Jeff Carroll, CLU, Leisure Werden & Terry Agency:
The best selling guaranteed product today would be guaranteed universal life. I think there is been a small resurgence of participating ordinary life with its underlying guarantees. However, we do not see anywhere near the demand for that product as we do for the guaranteed universal life.
Michael Burns, Lincoln Financial Group:
Honesty and integrity with a strong drive to help find solutions to meet clients' financial needs. Acting across all relationships with integrity and honesty.
Peter A. Golato, CLU, ChFC, Nationwide Financial Services:
Absolutely! In March of this year, Nationwide introduced new and improved preferred risk guidelines for blood pressure, cholesterol, and HDL ratios. The underwriting process has been made easier for producers and clients by eliminating the need for chest X-rays for non-tobacco users and by not requiring stress electrocardiograms for clients who want a death benefit up to and including $10 million. Nationwide is one of the few companies that continues to offer a table shave program and we pride ourselves on enabling producers to access an underwriter quickly and easily.
Bruce Parker, Old Mutual Financial Network:
Guaranteed minimum withdrawal benefits and the guaranteed minimum death benefit are proving to be very important innovations.
13. How will the interest rate environment affect the various life insurance products?
Marian Sole, AXA Equitable Life:
Interest rates are just one component to consider. One has to look at cost of insurance and expenses. The current interest rate environment is still relatively low, so the impact of rates going down is diminished. Also, in this day and age, people have more choices in products and ways to protect against interest rate fluctuations. For instance, new UL products with lapse protection riders offer premiums that are guaranteed not to increase as certain requirements are met regardless of changes in interest rates or policy charges. The lapse protection rider alleviates the premium payment sensitivity associated with current interest crediting rates, cost of insurance charges and other policy expenses traditional UL policies have. Variable life may be least affected by interest rate changes because the individual can choose which funds they wish to select for the underlying investment. A company offering a wide range of fund types helps policyholders hedge against interest rate fluctuations.
Marc Padilla, The Fraser Financial Group:
Rising interest rates will have a negative affect on the financed premium cases. Fixed Rate Policies that are designed to accumulate cash will do well.
C. Ray Trueblood, CLU, ChFC, CFP, Jackson National Life Distributors LLC:
I think it's possible for the interest rate environment to hurt sales of life insurance products, but itÕs not likely that the industry will see this unless there is a sustained period of rising rates, which hasn't occurred yet. The market downturns are typically etched in consumers' memories for the long term and there's still an element of uncertainty among investors to jump into the equity market, despite the recent upturn. Therefore, while there has been a measurable increase in sales of VUL across the industry, I believe that over the near term, consumers will still be looking at universal life as an asset accumulation vehicle with guaranteed returns and death benefits.
Jeff Carroll, CLU, Leisure Werden & Terry Agency:
The majority of our UL sales are sold on the guarantee and the interest rate environment has little to do with those sales.
Peter A. Golato, CLU, ChFC, Nationwide Financial Services:
There has been a continuation in the shift toward life products with lifetime secondary guarantees as well as guaranteed minimum accumulation and income benefits on the VUL side. Universal life insurance with living benefits is NationwideÕs prediction for high growth over the next few years.
Peter A. Golato, CLU, ChFC, Nationwide Financial Services:
There's no doubt that risk management is challenging when it comes to offering all of these popular guarantees in today's interest rate environment. It is something that the entire industry is dealing with.
Bruce Parker, Old Mutual Financial Network:
The recent increase in yields followed a long period in which the yield curve was inverted or flat. This should benefit customers who are interested in income.
Matthew Purington, Director, Unum:
As interest rates increase, permanent life sales will be challenged, and carriers will be forced to enhance their products to make them more competitive and attractive.
14. What do you think of the current underwriting and reinsurance market and how is it affecting sales?
Marian Sole, AXA Equitable Life:
It's putting great pressure on smaller companies. Our high retention rate at AXA Equitable allows us to control our own destiny and handle jumbo cases, without having to go to the reinsurance market. This allows us to have greater control and flexibility. It's an important differentiator for us.
Marc Padilla, The Fraser Financial Group:
They're definitely having an impact. Trust ownerships are being reviewed very, very closely because underwriters and reinsurers are trying to separate real cases (those that have insurable interest) from third party deals and financials. This has slowed down the average time it takes to get a case done. That and the ever-shrinking reinsurance market have made it more difficult to place cases with underwriting challenges.
Ray Trueblood, CLU, ChFC, CFP, Jackson National Life Distributors LLC:
Insurers may be more likely to assume the related underwriting risk than they were a few years ago because their reinsurance partners are using new methods of underwriting, which are designed to accelerate the approval process, such as in the case of simplified issue products. This trend could have a significant impact on the life insurance industry. As more reinsurers consider products like simplified issue whole life, weÕre likely to see more of these products being manufactured. As a result, a broader range of consumers will be in a position to benefit.
Jeff Carroll, CLU, Leisure Werden & Terry Agency:
I believe that the underwriting and reinsurance market has had a large effect on insurance sales. Many carriers have found that their underwriting has been tightened up due to reinsurance concerns. From a field standpoint, it becomes necessary for us to identify those carriers that have not been significantly affected by these reinsurance concerns. The bottom line is that we are seeing a wide variety of offers depending on which carriers are being most tightly controlled by their reinsurers.
Peter A. Golato, CLU, ChFC, Nationwide Financial Services:
Insurers are introducing In the products consumers are demanding now, are those products with secondary guarantees and living benefits. They are designing the solutions and then finding themselves in the precarious position of developing attractive underwriting guidelines and convincing reinsurers while balancing profitability requirements. Today, reinsurance is about more than mortality risk. There is also longevity risk with the new features like long-term care riders. Guaranteed minimum accumulation benefits are about equity risks. Insurers have to decide which risks to hedge on their own and which risks to reinsure. It has become more complicated with Triple X and A Triple X and the additional reserve requirements. New underwriting demands also play a part. Nationwide has expanded its product offerings to some breast cancer and prostate cancer patients who would have been subject to years of waiting periods for insurability or forced to pay higher premiums. Nationwide used a pool of reinsurers to create their new initiative.
Bruce Parker, Old Mutual Financial Network:
The underwriting and reinsurance market has improved significantly compared to 2006 and we expect that this will help to prompt higher sales levels.
15. What qualities separate the really successful life agents?
Don Dady, Annexus Group:
Successful agents are closing the gap between product specialists and financial advisor. Rather than simply selling a life policy or annuity product, a true financial advisor looks at the big picture and creates a comprehensive plan to help the client define their retirement goals and then develop a comprehensive plan to reach those goals.
In the coming years, the needs of the Baby Boomers are going to require more than single product solutions. Trillions of dollars will be in motion over the next 20 years. Consumers are better educated, more sophisticated, and they take a much more hands on approach to their financial plans than generations past. It's a great thing for the industry as it raises the bar. However, this will increase the demand on the agent. But today's successful advisor sees these opportunities on the horizon and is already preparing for them.
Marian Sole, AXA Equitable Life:
Having a long view. Agents that build thriving, sustainable practices operate with a long view of what's in their customers' best interest. Short-term greed only tarnishes reputations and the industry.
Kay Dempsey, the Dempsey Companies:
The following qualities that separate the really successful life agents:
¥ The ability to question and read between the lines. Caring to serve first rather than making a sale first.
¥ Genuine concern for the client's best interest regardless of the insurance sale.
¥ Leaving the client better off having met the producer.
¥ The ability to listen with eyes and ears.
¥ Attention to detail.
¥ Doing what you say you will do.
¥ The ability to network and prospect for new business.
¥ Clarity of vision of the future and how to get there.
¥ Honest evaluation of current clients, and whether they are cloneable. Do they refer you to other new clients. Do you enjoy your time with them?
¥ A healthy attitude about rejection.
¥ The ability to communicate rather than just inform through e-mail.
¥ A sense of humor.
Marc Padilla, The Fraser Financial Group:
Two important attributes define successful agents. First, they are technically proficient. They know this business inside and out. Second, and just as importantly, they are tireless in advocating for their client. The best agents nurture their relationships through the years and through all of life's stages. The client relationship is paramount.
Jeff Carroll, CLU, Leisure Werden & Terry Agency:
I believe the single most important quality that separates the really successful life agent from those who simply sell life insurance is the confidence they have in their ability to deal with their clients. The most successful life agents attack their business with a confidence that allows them to be objective as to how the policy will be underwritten and presented to their client. They sell and service from a standpoint that the client is just as lucky to be doing business with them as they are to be doing business with the client. A lot of less successful producers feel more subservient to their client and thus lack the confidence that I described above. Wm. Scott Page, The Lifeline Program: The most successful life agents can truly see all aspects of their clients' financial goals. Life agents that include life settlements in their arsenal have the most options available to their clients and can successfully expand their book of business.
Peter A. Golato, CLU, ChFC, Nationwide Financial Services:
Really successful life agents need to be great at more than just crafting relationships with potential clients. They have to be experts at diagnosing the wants and needs of their various target markets. Baby Boomers have one set of needs and certain viewpoints, whereas Gen Xers and Gen Yrs are beginning to save at a much earlier age and have different goals and attitudes.
As consumers demand solutions that are easier to understand and easier to buy, life agents have to learn to adapt to the technologies that bring these sorts of innovations. For example, Nationwide's new Appvantage system is technology-based. If a producer wants to take advantage of the ability to issue a policy in as little as ten minutes, they must be willing to use a computer. Admittedly, they can still get answers to questions on their trusty yellow legal pad and have someone at the office enter all the information in later but then that necessitates a follow up call. In the meantime, their clients may have purchased a policy from someone else online.
Bruce Parker, Old Mutual Financial Network:
Over and over again, we see that the most successful life agents are focused first and foremost on their clients' current and future financial well being and they are willing to be educators rather than simply salespeople. They must be committed to considering their client's future from a holistic perspective and not base the relationship on a single product approach.
