The Challenges Just Dont Stop For Variable Product Sellers
By
Washington, D.C.
The riders, guarantees, and living benefits that have been added to variable insurance products in recent years are starting to be perceived as "real" benefits, agreed panelists at a conference here.
"For instance, people are starting to access the death benefits in the policies," said Richard Randa, senior vice president, First Union Securities, Richmond, Va.
And articles are starting to say things like, "Hey, there really is something to those variable death benefits," added Juanita Brown, vice president-marketing for the Insurance Services Division of Associated Securities Corporation, Los Angeles, Calif.
The two were part of a five-person Roundtable discussion that kicked off the regulatory affairs conference sponsored by the National Association for Variable Annuities, Reston, Va.
Though the panelists noted that variable products, and public perception of same, have grown tremendously in the last decade, they said the industry still faces challengesoften born of the earlier successes.
For example, though more people are accessing the variable policy death benefit provisions, some claims people dont know how to work with the provisions, said Randa. Some brokers have difficulty with the provisions, too, he said.
Similarly, product manufacturers have become "very aware of the street and of what people want," said Richard Choi, partner with Foley & Lardner, Washington, D.C. That puts the underwriting relationship on its head, he said, explaining that, increasingly, "the companies are developing what they think the street wants."
But, as a result, competition for market share is increasing, said another panelist. "The companies will match or beat the features that have been developed," just to get into the distribution firms, explained Jeffrey M. Green, senior vice president and product manager-estate and trust services, at SalomonSmithBarney, New York.
He said his own firm has good relationships with its carriers, and tries to keep the market share issue out of the relationships. But market share competition is nonetheless a factor in the broader marketplace, he contended.
From Randas viewpoint, the proliferation of features is having another effect–"I see producers exchanging policies (within the firm) to get (their clients) into the new features."
In introductory remarks preceding the Roundtable, Thomas Conner, general counsel and vice president of NAVA, said the variable business has more opportunities than when NAVA formed nearly 10 years ago, but it also faces new challenges.
For instance, the new insurance protections in variables, such as the enhanced death benefit provisions that have been coming out, have introduced new opportunities. "But that also presents a challenge, [which is] suitability," he said.
Similarly, Fred Bellamy, a partner at the Sutherland Asbill & Brennan LLP law firm in Washington, D.C., noted that variable annuity success brought new competitors into the business. That spurred development of many new features and, subsequently, the unbundling of those features. (Unbundling means offering features to variable clients on a pick-and-choose basis, each with its own premium charge.)
But that, too, poses new challenges–and new risks, he said.
