trends in life insurance products “what’s now and what’s new?” timothy c. pfeifer, fsa...
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Trends in Life Insurance Products
“What’s Now and What’s New?”
Timothy C. Pfeifer, FSAPfeifer Advisory LLC
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2
(23) (41) (18) (3) 2 (14)
-30
-25-20
-15-10
-50
510
% ∆ (YOY)
UL VL VUL Term WL Total
Premium Change by Product Type
The 4th Quarter of 2008 Put a Somber End to the Year
Source: LIMRA
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3
(8) (33) (17) (1) 2 (7)
-25
-20-15
-10-5
05
1015
% ∆ (YOY)
UL VL VUL Term WL Total
Premium Change by Product Type
For All of 2008, Variable Life Sales Endured Biggest Wallop
Source: LIMRA
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Some Additional Thoughts on 2008 Life Sales
Policy Counts Dropped 10% (Q4)/4% (YTD)
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Some Additional Thoughts on 2008 Life Sales
Policy Counts Dropped 10% (Q4)/4% (YTD)2007 Sales Levels Created Tough
Benchmark
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Some Additional Thoughts on 2008 Life Sales
Policy Counts Dropped 10% (Q4)/4% (YTD)2007 Sales Levels Created Tough
BenchmarkLarge Mutuals Boosted Market Share
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Some Additional Thoughts on 2008 Life Sales
Policy Counts Dropped 10% (Q4)/4% (YTD)2007 Sales Levels Created Tough
BenchmarkLarge Mutuals Boosted Market Share
Is this really so bad?
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Other Elements Steering the Life Insurance Business
Mortality Experience continues to improve, but slope questions remain
Underwriting Practices evolving, particularly around older ages, teleunderwriting
Regulation Federal versus state showdown, tax benefits under microscope
Reserves/Capital
PBA slowly approaching realization – few LICs reflect now
Life Settlements
Report of its death are pre-mature, but wounded
Combo Products
Development activities continue, but sales slow to emerge
Reinsurance Hunger for bold reinsurer action in midst of retrenchment
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Traditional Whole Life Performing Well in Current
ClimateReasons
1. Perceived stability of mutual life insurance companies
2. Competitive dividend scales3. Strong sales forces4. Effective use of riders
Outlook
1. At least a 2-3 year period of rising market-share2. Dividend scales must be lowered3. Remains bread-and-butter of large mutuals, as long
as tax advantages remain
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Universal Life, Though Under Pressure, Continues to Lead
the Life Story
Largest market share Shadow accounts Capital costs/LOCs Older age focus
(IA=66) Lowest profit hurdle
Minority of market Difficult interest rates 2001 CSO constraint Relatively young IA Sharpest sales hit
Slightly below ULSG Strong story today Capital efficient IA = 62 Should see sales climb
ULSGCash
AccumulationUL
Current Assumption
UL
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Term Life has Proven to be Resilient, but Segments Face
Challenges• Twenty-year product key seller and rate
dropping locus• Dial-a-Term creates customization
alternatives• Reinsurers movements affecting long level
periods• Business arriving at end of level premium
period• Age extensions
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Return of Premium Term has Uncertain Future in Light of
AG CCC• Reached 15-20% of term market• Low lapse rates, mortality driven up ROP
surcharge• AG CCC mandates smoother grading to
“endowment value” (1/1/09 for new filings)• New product designs, remaining questions
on reserves, 7702• Responses may include higher premiums,
partial refunds, lower comp
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What are the Expected Future Waves?
1. Term market share strengthens, sales dominated
2. Capital/LOC solutions created unlevel field3. Some ULSG products disappear, watch CAUL4. Resurrection of non-par WL5. Favorable mortality patterns continue, but
slow6. Protection products jewel of acquisition deals7. Profit targets drop to maintain share,
cashflow
PREDICTIONS