View From the Top

Top Life Executives Give Their Take on the State of the Industry
by Leila Morris

In part one of our View From The Top article, life insurance executives give their take on everything from emerging products to the economy. The life insurance industry is not among the industries suffering amidst the economic downturn. In fact, one executive said that the market is booming. The difficult climate for other financial products makes consumers appreciate the conservative nature of life insurance. However, in this economy, retail customers may not be as willing to reposition assets or income to purchase life insurance.

Now is a good time for agents to call on new prospects because their current financial advisors may not be talking to them.

On the product side, universal life continues to grow in premium and policy count. Executives predict growing sales of survivorship universal life and variable survivorship life. There is also a growing interest in long-term care riders on permanent life insurance products. In the VUL marketplace some of the annuity living benefits may begin to get more traction as more companies begin offering such riders.

What’s on the horizon with new products? Here’s a look:
• Hybrids that address life insurance, tax planning and savings in one package.
• A non-par whole life product that offers higher, guaranteed cash values without losing the strong death benefit guarantees.
• Products designed for ages 50 to 70.
• Alternatives to life settlements, such as enhanced death benefit settlement options and increased liquidity options.
• With the transition to the 2001 CSO products, products designed for accumulation.
• Various annuity strategies that soften the irrevocable nature of SPIA distributions.
• Simple, transactional traditional life insurance products.

1. Is the life insurance industry doing in 2008? What are the effects of the current -economy?

Jeff Koll, assistant vice president of product development for life products, Colonial Life: Any economic changes have not had a significant affect on Colonial Life’s sales, persistency or claims activity so far.

Mike Rodman, CFP, president, Advanced Planning Services, San Diego: The life insurance industry is booming. Up to now, the current economy has had a minimal effect on sales. This is especially true in the high-net-worth market where people have many needs that can be addressed through advanced planning.

Lynne Rosenberg Kidd, Chief Executive Officer Innovative Solutions Insurance Services, LLC (ISIS): The current economic slowdown has not had a negative effect on my agency’s business. Life insurance is not a highly cyclical business. If anything, a difficult climate for other financial products makes consumers appreciate the conservative nature of life insurance. In fact, the negative economic turn has uncovered wonderful candidates for employment. The banking industry’s issues have provided me with some wonderful employees.

Peter A. Golato, CLU, ChFC, senior vice president Nationwide Financial Services: Overall, the life insurance market is relatively flat for the first half of the year. With the current economy, we believe that the industry must do a better job of educating consumers about the importance of life insurance and how it is a worthwhile investment.
On the product side, universal life is the product that continues to grow in both premium and policy count. We continue to see a trend in the decrease in the premium cost of products, especially UL with death benefit guarantees, and term insurance. Both our VUL and UL product lines saw an increase in premium for the first part of the year. Additionally, the increase for the first half of the year for both of our product lines outpaced the industry.

Paul A. LaPiana, CFP, national sales manager, Life Insurance at MetLife: From a life insurance sales perspective, we feel the industry is going to have a modest single digit growth rate and year to date the industry is up 1%. This is driven primarily by universal life sales (up 6% over Q1 2007) and a resurgence in second to die life insurance sales, both through survivorship universal life and variable survivorship, which are up 14% and 33%, respectively, although representing a smaller base of overall industry sales. That said, volatility in the equity markets has hurt variable sales, down 7% from the previous year, while both term and whole life sales experienced modest declines.

Other industry trends include, premium per case and face amount per case going up while policy counts are going down. What’s driving this trend is the sale of policies to older age clients to meet wealth preservation and wealth transfer needs. However, this trend underscores what the industry has been attempting to address the growing underserved middle-market.

Regarding the current economy, I can’t comment on other companies, but due to MetLife’s diversified lines of business and sources of earnings, we are positioned well. In times like these it is very important to have a strong balance sheet and market leading positions domestically and internationally.

We do see the current economic environment starting to create some uncertainty with retail customers and affecting their willingness to irrevocably reposition assets or income to purchase life insurance. Clients typically are less likely to make these types of gifts when their current asset levels are depressed.

Another market that may be affected by the current economic environment is business related life insurance sales (key person, buy sell and executive compensation). These types of planning strategies are very important for recruiting and retaining key employees as well as protecting and transferring the interest of the organization. That said, many business owners will put off making these types of decisions in times of uncertainty.

Lastly, many financial advisors are being reactive about talking to their clients at this time due to the current performance in client account balances. However, right now is a good opportunity for them to increase communication and activity to deepen their client relationships and protect those relationships from competitors. It’s also an opportunity to now call on new prospects because their current financial advisors may not be talking to them.

Ray Trueblood, Jackson National Life: The economic environment over the past 18 months has been characterized by uncertainty and increasing instability. For Baby Boomers, the declining economy is yet another challenge that threatens to dash their dreams of a secure retirement. What this means for the life insurance industry is that there is a growing need for financial advice and advisors are in a prime position to make life insurance an integral part of the holistic financial planning process. To help clients not only protect their assets (through a standard death benefit), but also to potentially grow the assets that they have accumulated over the years, many advisors have expanded their product offering beyond term life, to include universal life (UL) and variable universal life (VUL).
The most significant challenge for life insurance companies in the United States is how to reach the uninsured and underinsured. According to the latest data from LIMRA, some 68 million American adults have no life insurance coverage. Of those who are insured, just over half have adequate coverage to meet their families’ continued expenses when they die. The root of the problem is that the number of agents selling life insurance products continues to decline. LIMRA’s data shows that the majority of the middle market prefers to buy life insurance in person from a financial professional. The need is there, but it is not being met due to a shortage of life insurance producers in the US.

Jim Jacobsen, vice president of product for CIGNA Group Insurance: Consumers are faced with financial challenges that can often make life insurance a lower priority. For example, rising energy costs, growing credit card debt and interest rate pressures continue to erode disposable income levels. As employees’ disposable income decline and salaries remain stagnant, sparing money for even the most inexpensive benefits will become even more difficult, particularly those seen as more discretionary by the employee. In light of these trends, consumer education about the importance of life insurance is critical. Rates in this segment are rising, contributing to the increased volume.

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?

Ray Trueblood, Jackson National Life: Market volatility and economic uncertainty have caused some customers to seek the relative safety of fixed-rate products as opposed to equity-based products. Although we continue to see increased sales in our variable products, our UL product sales have increased more dramatically. I should point out that our sales trends have not been reflective of the overall industry, where sales have been relatively flat. We continue to see innovation in the area of product design – particularly with hybrids that are designed to address the core life insurance, tax planning and savings needs of clients in one package. At the same time, insurers are working toward simplification by developing term products with lower face amounts and a shorter underwriting process, in an effort to make life insurance more accessible for consumers.

Paul A. LaPiana, CFP, MetLife: Not really, with the exception of universal life with secondary guarantees focused on the older age market. Again, these are typically higher face amount sales and larger premiums cases, which have been driving growth in the industry. Term and whole life sales have been flat, except we have seen a lot more activity around return of premium term sales. Equity product sales have been driven by market activity over the last 18 months resulting in relatively flat results overall. So it’s been a pretty stable environment, except for the proliferation of the secondary guarantee products.

According to industry reports, over the last 18 months the market share of UL products is up 3.8%, VUL is down 1.8%, term is up .6% and whole life has been flat. JSUL is up 1.2% and VSL is up .7%, but the base for these products is relatively small in relation to overall industry sales. We are seeing in 4Q ’07 and 1Q ’08 an increase in the sale of survivorship products. These product sales may be due to a growing confidence that we may see a responsible estate tax reform versus a full repeal given our country’s current budget deficit.

The other thing that we are seeing is a growing discussion in the industry around cash value accumulation in addition to the death benefit guarantees in product design. We are seeing an increase in cash value within secondary guarantee UL products. Also, we are hearing a renewed interest in whole life but haven’t seen the sales as of yet.

Lastly, we are also seeing equity indexed UL products with double-digit growth rates over the last 18 months, though many of these product sales are tied to premium finance transactions. That said, with the current credit market, this is a rapidly changing market.

Ray Trueblood, Jackson National Life: Market volatility and economic uncertainty have caused some customers to seek the relative safety of fixed-rate products as opposed to equity-based products. Although we continue to see increased sales in our variable products, our UL product sales have increased more dramatically. I should point out that our sales trends have not been reflective of the overall industry, where sales have been relatively flat.

We continue to see innovation in the area of product design – particularly with hybrids that are designed to address the core life insurance, tax planning and savings needs of clients in one package. At the same time, insurers are working toward simplification by developing term products with lower face amounts and a shorter underwriting process, in an effort to make life insurance more accessible for consumers.

Lynne Rosenberg Kidd, ISIS: The bulk of our premium dollars remain in guaranteed universal life. With the low interest rates in current assumption UL, it is hard to justify making a greater outlay for a non-guaranteed product, even if the projected cash values are better compared to guaranteed UL. However, we have been promoting a relatively new non-par whole life product from one of the leading insurance carriers. This product offers a way to show higher, guaranteed cash values without losing the strong death benefit guarantees. The interest in survivorship policies has increased as well; with the realization permanent estate tax reform is unrealistic.

Mike Rodman, Advanced Planning Services: Product mix continues to be defined by the market. Typically, the young buy term insurance, those with a risk tolerance will purchase variable life, and the 50-and-older market buys universal life for the most part—trends that should continue. I also see a growing interest in indexed life products.

Jim Jacobsen, CIGNA Group Insurance: There have not been any significant changes in the group life insurance product mix itself over the past 18 months. However, it has become more common for insurers to provide value-added programs and services with life plans at no additional cost. Some examples include will preparation services and resources for beneficiaries by way of legal, financial and bereavement counseling. In addition, some employers have begun to offer life insurance on a voluntary basis. As a result, employees appreciate the group rates and the convenience of payroll deduction, and employers can maintain a competitive benefits package.

3. Do you see growth in particular niche markets?

Peter A. Golato, CLU, ChFC, Nationwide Financial Services: The Small business market continues to be a focus for us as we continue to see 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 continue to be a major driver of the life insurance market. We believe their needs for protection-oriented products as they head into retirement are behind the seemingly ever-increasing need for secondary guarantees.
Nationwide is focusing on the middle market in particular, which is a highly underinsured segment of the population, by developing mass customized solutions supported by low cost distribution.

Paul A. LaPiana, CFP, MetLife: We see an overall focus on core markets of affordable death benefit protection products, accumulation oriented products to address the supplemental retirement funding opportunity and guarantees to continue to support the wealth preservation market. We feel that the mandatory transition to the 2001 CSO mortality tables allows carriers to sunset many of the niche products and to focus on a core set of products and build scalable operational and technology platforms to support those products.

That said, due to the changing demographics driven by the retiring Baby Boomer generation and the changes with the Pension Protection Act, we do see an opportunity that may be emerging around split funded defined benefit pension plans using whole life insurance as a funding vehicle. Also, there is a growth in interest of positioning life insurance as an asset rather than an expense. We see this in the wealth preservation market by focusing on the internal rate of return of the death benefit in secondary guarantee UL and in the retirement accumulation market by focusing on internal rate of return on the cash surrender value in the policy.

Jeff Koll, Colonial Life: Colonial Life is primarily focused on the worksite market, which continues to have strong growth in recent years. Our market research indicates this trend should continue into the foreseeable future.

Mike Rodman, Advanced Planning Services: Estate planning and wealth transfer continue to grow. Plus, carriers have, to some extent, priced programs to be attractive to those between 50 and 70.

Jim Jacobsen, CIGNA Group Insurance: According to LIMRA, (Group Life Insurance: Factors Affecting Industry Prospects 2006) while penetration into the employer market has continued to increase and group coverage has increased overall, there has been no gain in the percentage of adults covered by either individual life or group life since 1998. This appears to be due to a shift occurring in the coverage held by employees. In the past five years, the percentage of workers participating in a group life plan has declined -- especially in the middle to large employer market. This is being attributed to the changing employee base -- seasonal, part-time and contract workers, who have no or limited benefits eligibility. That is becoming more common.

Ray Trueblood, Jackson National Life: We’ve seen growing interest in index products, as well as an increased demand for secondary guarantees, stemming from the influx of retiring Baby Boomers. As we move into the future, the service industry, which typically relies on seasonal workers and traditionally offers fewer benefits than goods producing employers, is expected to see the largest job growth. A National Compensation survey by Bureau of Labor Statistics indicates that only 48% of employees in the service industry have access to life insurance benefits, so offering a low cost, flexible product portfolio that meets the changing workforce’s needs will become key.

Lynne Rosenberg Kidd, ISIS: Our world is multicultural. ISIS mirrors this world; we are using our talents in many languages to reach out to other markets, such as Hispanic and Asian insurance producers, which offer very attractive opportunities for sales growth here in California. As a multicultural agency, we are well suited to dive into these markets and have received tremendous carrier support for our efforts.

Peter A. Golato, CLU, ChFC, Nationwide Financial Services: We have seen growth in the amount of interest generated by Long-term Care riders on permanent life insurance products. In the past few years, many companies have introduced a greater variety of long-term care benefits on a growing number of policies. This will continue to gain popularity due to the aging Baby Boomer demographic and the customers’ concerns about planning for their future health care needs.

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?

Peter A. Golato, CLU, ChFC, Nationwide Financial Services: Our Grow Life initiative represents a renewed focus on selling more life and financial products through our exclusive property/casualty agents. This includes introducing a whole life product offered with a property/casualty sale. We’ve also introduced a merchandising campaign called “What’s Your Life Story?” to help agents generate life insurance conversations.
Within the Nationwide Financial Network, our affiliated distribution channel, we are hiring across our exclusive, career and general agency systems. As of June 1, we have added 148 agents.

Jeff Koll, Colonial Life: Our agency force is growing. Colonial Life tracks recruiting results closely and these results have been strong recently and especially in 2008. In fact, a weaker or uncertain economy tends to help our recruiting as people look for new opportunities where they have more control over their destiny.

Mike Rodman, Advanced Planning Services: In addition to our core business, Advanced Planning Services—an advanced sales fixed product wholesaling operation—we have multiple distribution systems that we segregate based on each producer’s needs as well as the needs of our broker dealer and IMO clients. Our producer group, Best Practices of America, is booming, as top producers want a feeling of “membership” combined with independence. Our broker dealer, USA Advanced Planners, anticipates a 300% growth rate over the next three years, led by our wholesaling division, which serves other independent broker dealers. The broker-dealers’ insurance division has become our hottest commodity. We are also attracting top independent brokerage general agencies through our affiliate brand, Underwriting Services of America (USA). As a value-added insurance marketing organization (IMO), USA is attracting brokerage general agency heads in droves because we are the only organization of its kind that can help them take maximum market share in their local markets—having done it ourselves. Thanks to the synergy among all these entities, our distribution system is firing at all cylinders.

Ray Trueblood, Jackson National Life: Jackson’s distribution strategy is based on building relationships with independent advisors in advice-based channels. In the first half of 2007, we expanded our external wholesaling force by 25% and increased the number of distribution territories, giving each wholesaler the opportunity to develop deeper relationships with advisors. We organized all three wholesaling teams – independent, bank and regional broker-dealer – under the same leadership. We also completed a number of initiatives to make our wholesalers more efficient, such as adding functionality that allows them to access the company’s customer relationship management and sales tracking databases with handheld portable communication devices.

Our captive agency, the JNL Southeast Agency LCC, was formed after Jackson’s acquisition of Life Insurance Company of Georgia in 2005. Originally formed to focus on retaining in-force business, the Southeast Agency has developed into an important distribution channel for Jackson’s traditional life insurance products. The experienced group of more than 100 career agents targets the vastly underserved middle market. In 2007, Jackson launched a traditional whole life insurance product designed specifically for sale through the Southeast Agency. The product has been selling extremely well and has helped increase Southeast Agency sales by 47% in 2007 over the prior year.

Lynne Rosenberg Kidd, ISIS: In the BGA market, we are always recruiting. The margins continue to shrink due to our competitive marketplace. We have shifted our thinking from quantity to quality. We aim to recruit and maintain producers who value our value proposition. Through technology and A-players, we believe we can continue to grow our business, both within our existing producer base and with selective new producers.

Jim Jacobsen, CIGNA Group Insurance: CIGNA does business primarily through independent agents, brokers and consultants. We believe in establishing strong relationships with intermediaries - brokers, consultants, general agents - because that enables this important community to understand what we do and how we do it. This also helps us communicate to the employers, employees, and others that we serve. In addition, CIGNA has been successful in growing its sales and account management teams because we have a very strong value proposition in the market. As a result of our commitment to hiring the best people, and rewarding them fairly, we have been able to reduce our attrition rate. There is a lot of competition for the best talent, and a lot of competition in our business. We are always aware of the value of our distribution channels, both internal and external, and we also think about how we can deliver our products and services as efficiently as possible.

Paul A. LaPiana, CFP, MetLife: MetLife is committed to both affiliated and independent distribution systems. We are seeing growth in sales in both distribution systems. Our affiliated distribution group of career agents (MetLife and New England Financial) continues to grow and experience strong retention, which is above the industry averages. Recruiting efforts are geared to experienced producers providing full financial planning to retail clients, multi-cultural agents and strong college graduates. Our independent distribution group distributes MetLife life insurance products through two wholesale channels. Our Brokerage Channel represents 75% of our independent sales and focuses on independent marketing organizations as well as one retail producer group. We also have a National Accounts Channel representing 25% of our sales, which focuses on a select few broker dealers direct.

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)?

Jeff Koll, Colonial Life: Brokers are very important in the distribution of products in the worksite market. Colonial Life has been focused on improving its penetration with current brokers and developing new broker relationships, and we’re seeing improved results in recent years.

Peter A. Golato, CLU, ChFC, Nationwide Financial Services: Nationwide has a long history of distributing life insurance products through banks, wirehouses and independent broker dealers. Stockbrokers and banks are core to our non-affiliated life sales, not just an alternative distribution system for us. This has been driven by our commitment and strength in variable universal life. We have seen an increase in brokerage general agencies working with many of our distributions, helping with the complexity of life insurance. In the last two years, we have made a big push into the brokerage general agency market with a no-lapse guarantee universal life product.

Lynne Rosenberg Kidd, ISIS: Our production sources are very diverse, including career distribution companies that endorse ISIS, individual career agents, independent life producers, CPAs, P&C agents, banks (in our niche markets) and independent financial planners and their broker dealers. We do not work with wirehouse producers. Frankly, there are fantastic sources locally that focus solely on that market.

All of these sources of production have their own business cycles and are affected by factors we can’t control, like the competitiveness of career companies’ products, or opportunities for P&C agents to find other lines of business. I have always believed in diversification. When one segment is flat another may be up. Diversifying and managing our customer base is imperative to sustaining growth in our industry.

Ray Trueblood, Jackson National Life: Customers’ needs continue to grow more complex as they make the shift from asset accumulation to income distribution. As a result, we’re seeing more brokers and agents expand their professional expertise to include financial planning certifications and other industry designations so they can be in a better position to address their clients’ needs.
Mike Rodman, Advanced Planning Services: Advanced Planning Services has continued to work and grow with individual life and annuity producers, as well the general agency and brokerage general agency marketplace. At the same time, we’ve branched out into the alternate distribution systems, such as broker dealers, to help them with the insurance planning for their clients.

Paul A. LaPiana, CFP, MetLife: As previously stated, in our Independent Distribution Group we have two channels of distribution. The Brokerage Channel, which is focused on serving independent marketing organizations, select brokerage general agents and independent insurance based advisors. The other distribution channel is the National Accounts Channel, which is focused on serving securities based advisors in a select group of regional broker dealers, banks and national wirehouses.
These institutional firms consist of securities - based financial advisors, who have strong relationships with their clients and large amounts of assets under management. The financial advisors in these firms are focusing on wealth management solutions for their clients. However, often times they need assistance when presenting and implementing protection product solutions.

One of the keys to having success in this environment is the ability to provide well-trained insurance professionals who can provide point-of-sale assistance to financial advisors in these firms.
We are seeing an ongoing trend of brokerage organizations and independent marketing organizations evaluating the alternative distribution systems or increasing the investment and resources if they already are active in these channels. The sales opportunities in the institutional marketplace can be a new source of revenue and growth for these organizations.

Jim Jacobsen, CIGNA Group Insurance: There has been some consolidation in the producer community, and this has meant somewhat fewer, though larger, brokers. Also, brokers have been focused on developing additional products and services that they can add to their mix to provide a better experience for their customers. In the group channel, there has not typically been a direct distribution model through banks, stockbrokers or others, though of course some financial institutions have bought benefits brokers.

6. What regulatory or legislative changes are you concerned about?

Jeff Koll, Colonial Life: National health insurance is the big one! This potentially has significant implications for supplemental health product offerings. We could also be affected by changing regulations in the long-term care market.

Mike Rodman, Advanced Planning Services: Whether Congress makes the tax cut permanent and where the estate tax guidelines will end up are both issues we’ll have to address with clients when working on their estate plans. We hope these issues are resolved in the near future. In addition, as carriers adapt to using the 2001 mortality table, products will continue to change to some extent, which can affect product focus.

Ray Trueblood, Jackson National Life: While it doesn’t have a direct affect on Jackson, the widespread concerns regarding stranger-oriented life insurance (STOLI) are certainly on our radar screen. We feel that the current efforts to curtail abuses of STOLI are good for the industry and vital to protecting the best interests of customers.

The debates surrounding the optional federal charter for insurance regulation and the call for principles-based reserving also continue to top our watch list of regulatory and legislative issues.

Jim Jacobsen, CIGNA Group Insurance: There are not any legislative or regulatory issues that specifically relate to group life insurance that we would consider especially important right now. We do believe there is clearly a need to reform the American healthcare system, and that private health plans should continue to provide innovative solutions that create individual responsibility for health, wellness and financial security and that achieve cost savings. At CIGNA, we do our part by offering additional programs and services that promote healthy lifestyles and encourage people to reach their fullest health potential.

Lynne Rosenberg Kidd, ISIS: We look forward to a final regulatory decision on the parameters of acceptable life settlement business. We want to work within the rules, but no one knows what the ultimate rules will be. In any case, it seems clear at this point that appropriate life settlements will continue to offer a significant business opportunity for BGAs like us. Additionally, the STOLI issues need to be clarified.

The estate tax issue still remains an unknown, but as I said earlier, I cannot imagine complete repeal. I support the Agents for Change initiative to modernize insurance regulation and the benefits of an optional federal charter.

The SEC regulation of equity-indexed annuities will certainly change the way we market these products. More importantly, the question remains on how the insurance carriers will handle this change: will they maintain their commitment to BGA distribution of equity-indexed annuities? Or will they take equity-indexed annuities the same route as variable annuities thereby excluding the BGA. This question has tremendous ramifications for BGA/Carrier relationships.

Paul A. LaPiana, CFP, MetLife: There is a tremendous amount of activity in the regulatory and legislative environments today. It is a very important time for us to be involved within our industry associations at a national and local level. Through MetLife’s own Government and Industry Relations Department, we continue to focus on the issues, both at the federal and state levels, partnering with industry counterparts to provide lawmakers and regulators with industry insight to assist in reasonable outcomes. For instance, we are actively involved with others in the industry working towards a responsible estate tax reform that provides certainty to business owners and families as they do their planning.

Another important issue for our industry pertains to preparedness for potential tax reform proposals that could affect our products, whether directly or indirectly. The perfect storm that is brewing involving expiring tax cuts, the federal deficit and debt, and entitlement program crises that could converge to cause Congress to revisit the existing tax code as a means of raising revenue, or in the name of reform. We must consistently remind policymakers of the vital public and tax policy justifications that underlying protection and retirement savings products. In addition, we should all be aware of the Optional Federal Charter proposals, which, if implemented, would change the way our industry is regulated by creating a single federal regulator. This policy debate will be a multi-year process and occur against the backdrop of the current state-based regulator.

Also, there are many industry associations, financial professionals and carriers working to protect the life insurance industry from improper sales stranger owned life insurance (STOLI) allowing investors to initiate life insurance coverage on individuals and circumvent state insurable interest laws. We need to be mindful here not to cross the treacherous line that makes life insurance resemble more an investment than fundamentally a protection product. Lastly, we are also working towards educated and reasonable solutions regarding legislation involving annuity and life insurance sales to seniors.

Peter A. Golato, CLU, ChFC, Nationwide Financial Services: We continue to put a lot of resources toward compliance with the 2001 CSO Mortality Tables. We’ve redesigned nearly our entire life insurance product portfolio to replace our current offerings, allowing us to create innovative new solutions for the market. Along with others in the industry, we have observed the changes in Congress during the past year and, as a result, are anticipating a low likelihood of total federal estate tax repeal.

Investor and stranger owned life insurance continues to concern us. Although we were instrumental in changing the STOLI law in Ohio recently, we know that this practice will continue in other states where we do business, and we’ll be working to put an end to it wherever possible. If life insurance is used as an investment product by third parties, it drastically increases the possibility of taxation on inside build up, which is another concern of ours. We need to preserve the favorable tax treatment on life insurance. We’d like to see passage of the Optional Federal Charter, which will make it somewhat easier to operate under one uniform set of regulations versus the state-by-state system currently in place.

7. Which emerging products do you see as becoming popular?

Paul A. LaPiana, CFP, MetLife: We feel consumer demand is what drives product innovation. As 77 million Baby Boomers prepare for and move into retirement, the products that have the ability to bridge the accumulation phase to the payout phase, combining the two into one offering, may become very popular.

Also, in the VUL marketplace some of the annuity living benefits may begin to get more traction as more companies begin to offer such riders. This combines the advantage of turning taxable assets into a tax preferred accumulation and income product while maintaining the wealth transfer aspect of the death benefit coverage. Long-term care insurance riders are likely to continue to be attractive to baby boomers giving them additional protection options within their life insurance contract.
In addition, as companies continue to look for ways to address the retirement income market place and provide alternatives to life settlements, you may see enhanced death benefit settlement options and increased liquidity options in new product designs.

Lastly, with the transition to the 2001 CSO products, you may see increased marketing activity on 1980 CSO products designed for accumulation. This is due to the definition of life insurance and the definition of a modified endowment contract. These definitions use formulas that are based on the current CSO table. As carriers transition to the 2001 table products, this means that more death benefit will be required for every dollar of premium increasing the net amount at risk and potentially lowering internal rates of return on cash surrender value.

Mike Rodman, Advanced Planning Services: Index universal life is becoming more popular, probably due to low fixed interest rates combined with people’s reluctance to play the risky stock market. Now, indexed life may be the only choice left.

Jim Jacobsen, CIGNA Group Insurance: At CIGNA, we continuously evaluate value-added services that align with life insurance and promote healthy lifestyles and offer insurance plans that include many value-added benefits to help people maintain their health, well-being and security throughout their lifetimes.

We are committed to helping people stay healthy and proactive through various health and wellness programs; helping people in a time of need by offering accelerated benefits that can be added to a life policy and offer early payout options of life insurance proceeds should an individual become terminally ill or be diagnosed with a critical illness such as cancer or heart attack; and we help beneficiaries cope with a loss through comprehensive counseling and support services.

Lynne Rosenberg Kidd, ISIS: We are watching the development of various annuity strategies that soften the irrevocable nature of SPIA distributions. Guaranteed income options from deferred annuities and various kinds of liquidity features in SPIAs may help grow the market for the kind of retirement income products that Baby Boomers will soon need. We are also excited about LTC options in life insurance. The LTC market is important and the product much needed. I am a believer in linked benefits.

Ray Trueblood, Jackson National Life: I think long-term care (LTC) insurance products will start to come to the forefront as Boomers enter retirement and begin to face longevity issues. However, I feel this will require more education on behalf of the industry for advisors to understand the changing needs of their clients and start making LTC an integral part of their overall financial plan. Advisors have been focused on accumulation, and many of them do not recognize that their retiring clients are in a much different stage of their lives, financially and emotionally.

We are already seeing increased innovation with long-term care insurance, as several insurers incorporate LTC components into traditional life products and annuities. As the retirement income market evolves, I believe LTC will evolve into a core component of an investor’s retirement portfolio.
As previously mentioned, 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.

Peter A. Golato, CLU, ChFC, Nationwide Financial Services: In certain distribution channels, we are seeing a move toward simple, transactional traditional life insurance products. Additionally, the focus on Death Benefit Guarantee products has increased in response to consumer desires.
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Leila Morris is editor of California Broker Magazine.
editor@calbrokermag.com