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MAIN EVENTSin the
Life Insurance Marketplace
Walter H. Zultowski, Ph.D. WZ Research + Consulting, LLC
SOA Life and Annuity Symposium May 21, 2012
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Business 101: Successful businesses are those that respond efficiently and effectively to changes in their external environment.
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External Environmental Influences
The Life Insurance
Marketplace
More Predictable Less Predictable
Demographics
Technology Regulation
The Economy
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Demographics
• Retirement Security• Health Care and Long-Term-Care
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1) Continued Aging of the Baby-Boomers
• Theoretically, should be a boom for life insurance• May still be a positive• Delayed household formation; different buying behavior
2) Gen X and Gen Y Coming to the Forefront
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Demographics (cont’d)
• Continued decline of husband-wife families• Growth of non-traditional families of all types
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3) Changing Family Structures
• Hispanics and women• Immigration and population heterogeneity
4) Increasing Diversity
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Demographics (cont’d)
• Greying of the sales force; succession planning• Difficulty attracting Gen X and Y to the business• A force driving interest in non-agent distribution
channels
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5) Impacts on the Field Force Also
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Technology
• A tool for information vs. direct selling?• High tech vs. high touch
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1) Continued Pervasiveness of the Internet
• A tool for recruiting vs. direct selling?• Democratization of information and opinion• The need to get marketing and compliance on the
same side of the table
2) Social Networking
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Technology (cont’d)
• Would seem to address the high tech/high touch challenge• Not new: “Is the agent of the future human?” (Zultowski)
“Comp-phone-a-vision” (Baranoff)• An issue of critical mass of the technology itself
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3) Hybrid Technologies
• Simplified issue (agent vs. consumer driven?)• Predictive modeling and analytics
4) The Underwriting Revolution
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Technology (contd’)
• Longevity (has it peaked?)• Genetic testing
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5) Medical Technology
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The Economy
• Uncertainty• Continued low interest rate environment• Market volatility; cost of hedging
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1) Hangover from the Past Decade (at the company level)
• Job instability, wage stagnation, loss of confidence, desire for guarantees
• Disappearance of government and employer-based safety nets
• Changing views on investments (a positive?)
• “The New Retirement: Working”1
2) Hangover from the Past Decade (at the consumer level)
1 12th Annual Transamerica Retirement Survey. Transamerica Center for Retirement Studies. May, 2011
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The Economy (cont’d)
• At the corporate level (e.g., exiting certain lines of business)
• At the product level– Stagnant product lines (e.g., fixed annuities)– Disappearance of product lines (e.g., financial guarantees,
standalone LTC)– Growth in hybrid products (e.g., life/LTC combos)
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3) “Rationalization” of the Business
• Internationalization of regulation (e.g., Solvency II)• New market opportunities
4) Results of Industry Globalization
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The Technology (cont’d)
• Debt crises, defaults of economies, wars, political upheavals, new international powers, nuclear proliferation, price of oil, etc., etc., etc.
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5) The Geo-Political Environment
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Regulation
• Gridlock in Washington• Undoing of actions taken
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1) Political Uncertainty
• New sources of revenue: taxation of the inside build-up
2) Budget Deficits
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Regulation (cont’d)
• Cost• Impact on the health insurance business• Potential source of new life agents?
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3) National Health Care
• 2010 tax law expires in 2012• If no action, returns to $1M exemption and 55% tax rate• Unlikely, but stranger things have happened
4) Estate Tax Legislation
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Regulation (cont’d)
• European models• New York State Regulation 194
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5) Commission Disclosure
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