If You Provide Choices To Clients, The Hottest Product Shouldn't Matter
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The life insurance industry has a long history of hot product offerings. It makes you wonder, what will be the next hot product?
To probe that question, lets review the hot product history of the past several decades.
First, the hot products were whole life and term. Then, in the 1970s, universal life rocketed onto the scene with a plan from E.F. Hutton Life. (Remember them?)
Then, there was the advent of insurance illustrations run off a personal computer. That prompted many customers to snap up ULs (often replacing existing WLs) for the illusion of earning 15% to 16% compound interest crediting rates. (And who, back then, didnt believe short-term rates would continue to stay that high? After all, mortgage rates were never going to drop below 10%, were they?)
But, interest rates suddenly did plummet, in the late 1980s. That gave way to a new "produit de choix"–variable universal life. The stock market was in a Bull Run that seemed to have no end, so the major concern of most clients became whether to invest in "value," "balanced," "growth," or "aggressive" insurance protection. They wanted to reap market returns within a life policy, and those 12% annual illustrated returns sure looked good. The VUL euphoria was so overwhelming that many industry observers started forecasting the end of products such as WL.
That was before. This year, its a different story. According to LIMRAs second quarter 2001 U.S. Individual Life Insurance Sales report, "two products are showing improvements in sales–universal life and whole life. Annualized premiums for these products are up 10% and 2%, respectively, compared to second quarter 2000."
So the question once again is: whats going to be the next "hot" product? In 2002, what will be the new UL or VUL twist? The new too-good-to-pass-up opportunity for life insurance buyers?
My take is, no new product chassis will be developed next year. This may be inside the box thinking, but it would seem that term, WL, UL, and VUL variations pretty thoroughly and adequately cover the entire basis.
If that is true, and if there is no new permutation on the horizon, which chassis will be most successful in 2002?
It depends on a number of factors: stock-market performance, interest rate levels, consumer confidence, and more importantly, consumer education.
The fact of the matter is, there is a place for all types of permanent protection productsWL, UL, and VUL. No one product provides a magic bullet for the industry or a particular company. I predict that final industry and company sales results for 2001 will bear that out.
