This month, I want to begin my worksite product discussion a little differently than in past columns. Well get to the trends, but first I want to bring up a topic that is really disturbing for the insurance industry.
This disturbing topic is the climate the industry has been developing as of late. Its in what I call a "Do-Nothing Mode."
We know there is a lot of money sitting around, earning 1% to 2% in money market funds. Its not being spent. Virtually no one is buying big-ticket items. At best, only a very few are doing so, relative to the moneyed population. There has been a slowdown, for example, in purchase of real estate in certain areas. According to people with whom I speak around the country, the underlying mood is very pessimistic.
In the insurance industry, this Do-Nothing Mode is really intense. Let me give a few examples.
The wrecking of the industrys mortality studies has gotten even worse than when I first wrote about in the March 25, 1996 issue of National Underwriter. (Thats when NU showed the wrecked Dunskey Castle in Scotland to illustrate the problem.)
Distressingly, the castle-wrecking has now extended to the insurance industrys product development centers. More and more of these centers are being closed down. In some cases, of course, this is the result of continued company mergers. But I am seeing it even within companies, as product development is being slowly squeezed into a back seat position.
That is very disturbing because there are many, many markets the industry serves. So it needs many, many product development centers, each one dedicated to its own market. These centers need to compete with each other; thats the way the system is supposed to work. It produces better products that way, and faster, too.
Another disturbing trend: Many insurance companies are still very nervous because of litigation menaces (alleged market misconduct, alleged universal life malpractices, alleged racial profiling, etc.).
No wonder the companies are in a Do-Nothing Mode.
When will the business get out of the Do-Nothing Mode? Soon, I hope. And, judging by its history, it can and will.
After all, the life insurance and annuity industry survived the interest-sensitive craze of the 1980s. It survived the stock market craze of the 1990s. And it learned something from the aftermath of 9-11: That the insurance business really is in the human protection business.
