The Great Recession continued in 2009 and so did its impact on insurance products.
Once again, guarantees were a major part of the product story–in terms of sales and product features. But another trend reared its head too–de-risking. That is, carriers sought to better manage risk exposure as part of their efforts to strengthen capital reserves. In the process, many insurers increased prices, reduced feature selection, placed occasional moratoriums on sales of certain products, and/or exited certain markets or lines.
This occurred as industry-wide sale
s of life, annuities, long term care and many other products slid, with only a few firms reporting sales growth.
Here is how various professionals around the country saw it all play out.
Guarantees
"It was a banner first quarter for sales of fixed annuities," says Steve Clemens, vice president-life marketing at URL Financial Group, a Harrisburg, Pa. brokerage. He attributes this to the annuity guarantees. (When interest rates fell and some carriers had rating downgrades later in the year, sales did slow down, he adds, but the guarantees were still important.)
At his firm, the fixed sales were strongest among health agents and financial planners whose clients lost health care coverage or were concerned about what would happen to their coverage due to possible health reform, he adds. "Those clients wanted guarantees or fixed interest products, to protect their money."
The story was similar at carriers. Advisor inquiries about guarantees were up during the year, reports Chris Littlefield, CEO of Aviva USA, Des Moines, Iowa.
In addition, consumers became more accepting of products that guarantee safety, he points out, citing Aviva research on waning consumer confidence in the wake of the decline in equities. That spurred interest in "pre-packaged solutions," such as indexed, fixed and income annuities, he says. Nearly 50% of Aviva's indexed annuity business includes guaranteed withdrawal income benefits, he notes.
Guarantees were a big story for variable annuities, too. For instance, "about 90% of our third quarter VA sales had some form of guaranteed living benefit attached," says Steve Deschenes, senior vice president and general manager-annuities at Sun Life Financial U.S., Wellesley Hills, Mass. The turmoil of 2009 impacted retirement confidence, he says, so consumers not only wanted to retire later but also to have guarantees in their insurance products.
Life insurance sales were also influenced by guarantees. "There was a flight to safety and security in life insurance" due to all the economic instability, says Melissa A. McConville, vice president-brokerage of Kiselis Brokerage Services, Inc., San Antonio, Tex.
That drove life sales, she says, pointing to an uptick in sales of no-lapse universal life as one example. Kiselis saw a 50% increase in requests for applications and illustrations for these products, despite the price increases many carriers had instituted, she says. The products were selling well mostly in the older age market, age 55 and up, McConville notes.
So, too, at many life insurers. Before the economic meltdown, no-lapse UL was the most popular product, recalls Dan Mulheran, president–retail life distribution at ING, Minneapolis. "Now, for us, it is even more so," he says, surmising that "people are still looking for certainty." The same is true with whole life, he says, noting WL sales rose.
In fact, WL was a "bright spot" in 2009, says Mike Fanning, executive vice president, MassMutual, Springfield, Mass., with his firm's WL policy count up 21% in the first 9 months, and WL premium up 9%.
New York Life attributes its 8% increase in life sales during the first 9 months to its "safe secure products," as well as its financials and other factors.
At Aviva USA, traditional and indexed UL sales typically included a no-lapse guarantee, notes Littlefield.
De-risking
De-risking was "important work" that life carriers did in 2009, according to Sun Life's Deschenes.
The year was "all about navigating the financial crisis and de-risking and making product refinements to balance risk to benefit customers, shareholders and advisors," he explains.
On the annuity side, some carriers left the market, either by product or product changes, Deschenes points out. Others were effectively removed from the market due to rating downgrades and the subsequent loss of distributors. Others, however, figured out how to sell their products but to be prudent about it in a long-term way, he says.
The refinements were designed to fund profitably at the right level of risk and return, Deschenes says.
