Planning for 2020 and beyond is clearly presenting life carriers with an array of challenges to address. LIMRA’s CEO, Dave Levenson, highlighted some of the key issues facing carriers in a recent presentation. He noted that in the United States, the number of carriers has declined by 67% between 1985 and 2016. In a related set of statistics from LIMRA, the number of affiliated agents declined by 43% between 1973 and 2016, while the US population grew by 52%. He did not address the notable aging of those in the distribution labor force, with the average age of an agent now approaching 60.
Millennials are poised to represent 50% of the US labor market in 2020 and are projected to hit 75% of the market in five years. Bloomberg recently reported that in 1965, there were 27 million life policies sold in the US; the number was exactly the same in 2016, with a dramatically larger overall population. The result is simple math: Today, less than 60% of Americans own life insurance, down from 77% in 1989.
Carriers are also facing challenges from persistently low interest rates, meaning that investment income is not making up for challenges in other parts of the life product economic value chain. Concurrently, mortality and morbidity are no longer improving, creating a perfect storm of renewed focus on the remaining value lever, expenses. There is a notable urgency for many life carriers now around addressing cost concerns in the near term.
There are opportunities, however, that carriers should be mindful of. As Millennials mature, they are following pathways that are different from their parents and older siblings—but key milestones create chances for engagement if carriers are aware of them and how this generation wants to be served. The birthrate from Millennials is at a 30-year low, for example, but they are having children. And buying homes. And saving for college. They are also not “kids” anymore, with the upper edge of the generation now fully 38 years old.
To address these opportunities and challenges, carriers need to start focusing on what the next generation of customers want in a financial relationship. Too many carriers think about their world from the inside looking out, rather than (as banks do) focusing on an outside-looking-in perspective. Secret shopper data, focus groups, and other tools can create new insights, which can lead to new products and heightened levels of engagement. Doing this requires some fundamental rethinking of how carriers plan to go to market in the future, too. LIMRA’s CEO asked a great question, “Are we building products and designing marketing programs based on where are customers are—or where they will be?” For too many companies, the answer appears to be “no.”
This is, however, a fixable problem with the right focus and prioritization. It also has significant implications for the technology investments that companies make. Novarica has said repeatedly that legacy systems may be fine for legacy customers, but they aren’t effective at addressing future-state needs. Now is a terrific time to get ready for a new normal. Time waits for no one—and certainly no insurance company. “Interesting” doesn’t begin to describe the current planning horizon for life carriers.
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