Make The Challenging Economy A Springboard For Opportunity

Demographics continue to increase the demand for insurance among seniors, who are looking for security and have assets available for repositioning. Single-premium whole life and universal life are excellent products for addressing this need, since they guarantee a specific cash value and death benefit.

Simplified issue programs continue to grow, as tele-underwriting techniques and non-invasive screening tools such as prescription drug databases and telephonically administered cognitive impairment testing are proving to be low-cost and effective. More insurers are offering these products to the large middle market.

Combination plans featuring life and long term care coverage are expanding. This opportunity is growing as stand-alone LTC insurance has become very expensive.

The possibility of federal regulation of insurance has led to the development of the Interstate Compact, an initiative of the National Association of Insurance Commissioners. The compact is expected to streamline the filing and approval process for the industry. In fact, carriers are already finding that the compact allows them to reduce the amount of time it takes to get a product to market.

One of the areas of activity affecting life insurance in the last several years has been the life settlement business. Some view this as a major threat to industry profitability, particularly in event of fraudulent presentations of an insured's health at time of application. But in today's challenging economic environment, capital available to support that market has dried up. More importantly, the general outlook on mortality for life settlement business has been modified downward by life settlement underwriters, making these transactions much less attractive to investors.

Another opportunity stems from the fact that the pool of qualified, unemployed personnel has grown as many industries have shed workers in response to the economic downturn. This should provide the industry with a prime opportunity to rebuild distribution systems, as many talented sales representatives are out looking for the next challenging opportunity for a successful career. Insurers need to be proactive in hiring and training the next generation of sales representatives.

Consumer confidence in the financial services sectors has dropped, including for insurance companies. But this is a time to deliver the message that the insurance industry is not just about investment returns; it is also about insurance protection from adverse events.

Carl A. Friedrich, FSA, MAAA, and Keith Dall, FSA, MAAA, are consulting actuaries with Milliman Inc. in the Chicago and Indianapolis offices, respectively. Their e-mail addresses are [email protected] and [email protected]