MAIN EVENTSin the

Life Insurance Marketplace

Walter H. Zultowski, Ph.D. WZ Research + Consulting, LLC

SOA Life and Annuity Symposium May 21, 2012

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

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

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

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

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

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

Technology (contd’)

• Longevity (has it peaked?)• Genetic testing

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5) Medical Technology

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

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

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

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

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

Regulation (cont’d)

• European models• New York State Regulation 194

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5) Commission Disclosure

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