Lincoln Financial Group's Insurance and Retirement Solutions division on Thursday made predictions in industry product development for 2011. Guarantees, hybrid/combination LTC products, voluntary coverage, product riders and flexible income options were all mentioned by Mark Konen, the company's president, as continuing to shape the industry in the coming year.
"In today's environment, we see a shift towards protection products that offset volatility and solutions that offer flexibility," Konen said in a statement. "The need for guarantees has become a compelling driver, along with an increased awareness of risk. As people near retirement, understanding the risks that may lie ahead and planning for the unknown becomes more critical. There is also a movement towards worksite products; as employers search for cost-effective solutions, voluntary coverage continues to grow in importance,"
Regardless of the market, Lincoln expects 2011 to be a strong one for:
1). Guarantees−Guarantees provide a compelling reason for consumers' to consider the financial protection and growth potential offered in insurance and retirement products. In response to consumers' needs for greater protection during uncertain markets, expect to see continued interest in products offering guarantees, including universal life, survivorship life, variable universal life and variable annuities. As consumer risk awareness continues to rise, companies will likely look to offer additional solutions to protect consumers during market fluctuations.
2). Hybrid/Combination LTC Products−Traditional long-term care sales continue to decline while interest in combination/hybrid LTC products continues to rise. One explanation is simple: traditional LTC insurance is often viewed as a "sunk" cost; i.e. if the insurance is never needed, the assets used to fund the premiums are lost. A hybrid policy with a long-term care rider offers an alternative by allowing the customer to reallocate cash reserves to a product that offers multiple benefits, including an optimized long-term care benefit, a leveraged death benefit (when combined with a life insurance policy) and access to cash if needed.
For example, by just taking a portion of cash reserves, an advisor can reallocate it to a single-premium purchase of a "hybrid" policy that links the benefits of universal life insurance with a long-term care rider, or to an annuity with a long-term care rider, depending on the individual's specific goals and needs. Additionally, these hybrid products help address multiple needs by packaging protection for risks clients are concerned about as they retire, including longevity and potential long-term care costs. The 2006 Pension Protection Act's tax treatment of hybrid/combination annuity/LTC products became effective Jan. 1, 2010 and many companies had products in development during 2010. Expect to see more companies start launching hybrid annuity/LTC products.
