As the U.S. economy recovers ever so slowly from a near-catastrophic contraction, 2010 is not likely to be a banner year for life insurance professionals. But those in the know foresee business opportunities in the return to financial stability–however tenuous.
"The shock of the economic crisis has worn off to a large extent," says Mark Rosen, CLU, principal, Underwriters Brokerage Service, Pittsburgh, Pa. "Now is a good time for advisors to talk with clients about their plans, to make sure that financial objectives are still on track."
Vernon Holleman, president of The Holleman Companies, Chevy Chase, Md., agrees. "We're seeing a healthy appetite among folks to reexamine their portfolios with a view to improving their product or plan design," he says. "There are tremendous opportunities that can translate into 1035 exchanges and new sales."
Sources tell National Underwriter that much of the new business will be driven by the need to revamp plans pummeled by the markets in 2009.
The greater flexibility of new products is also expected to spur advanced markets sales. In a recent case, says Holleman, he was able to exchange an ILIT-owned whole life policy carrying a $5 million face amount for a $5.5 million contract and eliminate the premium for gifting purposes. Because the client's health (and rating) had improved, the cost of the new policy was also lower than under the old contract.
Still competitive prices for insurance products could also fuel advanced sales, at least near-term. Says Holleman: "Right now, there should be a fire sale going on because the products are currently underpriced. People should be gobbling them up."
David Archambault, a chartered life underwriter and principal of Showley, Archambault, Alexander Insurance Associates, San Diego, Calif., agrees, but suggests that premiums could soon rise, as insurers shore up reserves to make good on product guarantees. Alternatively, carriers may drop certain products, as the needed premium increases could render the offerings uncompetitive. He notes this is already happening with secondary guarantee universal life products.
"Several carriers have left the marketplace for secondary guarantee products because the reserve requirements are so great," he says. "They're offering instead current assumption UL policies, which are more attractive to the insurer because of the lower reserve requirements. But the products also carry greater risk for consumers."
Rosen also anticipates a rise in premiums, noting that a "wave" of price increases for term insurance is already underway. But continuing innovation in product design and features could also compensate for the higher costs. Among the new solutions expected to hit the market in 2010: combination products, including life insurance and annuities featuring long term care riders.
Advisors say they also anticipate increased sales of traditional products that better align with the more conservative asset allocations clients have adopted in the wake of the downturn. Hence the renewed focus on whole life insurance, which Rosen notes is enjoying a resurgence.
Verena Lewandowski, a chartered life underwriter and a Portland, Ore.-based financial representative for Northwestern Mutual Financial Network, concurs.
"I'm seeing a huge amount of interest in whole life insurance, much more so than in prior years," she says. "Many clients favor the product because of its solid performance."
Experts say they also foresee an uptick in certain advanced planning techniques. Gregory Amundson, a financial consultant and principal of Avastia Business Transition Team, Federal Way, Wash., points to charitable remainder trusts, which constitute a big portion of the planning he does for clients.
