Life insurers should look beyond today's rocky financial environment.
Gary Bhojwani, president of Allianz Life Insurance Company of America, Golden Valley, Minn., and Catherine Smith, chief executive officer for U.S. insurance at ING, Amsterdam, gave that assessment here during a life insurance industry executive conference.
The conference, the 19th in an annual series, was co-sponsored by Dewey & LeBoeuf L.L.P., New York; Ernst & Young L.L.P., New York; and Summit Business Media L.L.C., New York, the parent of National Underwriter.
Bhojwani noted that the current volatility in the investment market is a 3 in 10 million to a 1 in 1 trillion event, 5 to 7 standard deviations from the norm.
In the last 60 to 90 days, the investment banks that usually fixed crises appear to have caused the crisis before disappearing, Bhojwani said.
Despite the current turmoil, there will be tremendous opportunity over the next 5 years to change the lives of consumers in need of life insurance products, Bhojwani said. For example, he said, by 2020, the number of Americans in retirement will grow by 30%.
A total of $25 trillion in retirement money is getting ready to move, Bhojwani said.
Both Bhojwani and Smith said the value that life insurers provide in uncertain times is the certainty offered by products such as life insurance that offer a high degree of safety.
But Bhojwani said business leaders still need incentives to think in terms of 5-year to 10-year time horizons, rather than seeing the world from a quarter-to-quarter perspective.
The quarter-to-quarter approach creates "stupid thresholds that result in stupid behavior," Bhojwani said.
Other challenges include companies' lack of understanding of the complex financial instruments they are using and the fact that there is "way too much comfort with debt at the citizen level, the government level and corporate level," Bhojwani said.
