butch britton
TRANSCRIPT
Presenting Sponsor: Produced By:
Presenting Sponsor: Produced By:
It’s All About Life
Donald (Butch) Britton, CEO, ING U.S. Insurance
CN1114-5988-0113
CN1114-5988-0113
Presenting Sponsor: Produced By:
DISCLOSURE
Life insurance products are issued by ReliaStar Life Insurance Company (Minneapolis, MN), ReliaStar Life Insurance Company of New York (Woodbury, NY) and Security Life of Denver Insurance Company (Denver, CO). Within the state of New York, only ReliaStar Life Insurance Company of New York is admitted, and its products issued. All are members of the ING family of companies. All guarantees are based on the financial strength and claims paying ability of the issuing insurance company, who is solely responsible for all obligations under its policies. Other than the ING companies identified, no other entities, whether distributing or listed on the material, are affiliated with the ING family of companies.
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Key Topics
State of the Industry Economic Impact of Insurance
Key Industry Trends
Industry Headwinds
What’s Happening in Products
Future of Distribution
Save the Goose that Lays the Golden Egg
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Life Insurance Industry Key in U.S. Economy
Just how big and important is it
Where would we be without Life industry
Weathering a storm
How is fiscal policy affecting us
Is history repeating itself
Strong, important industry with big challenges
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Life insurance
beneficiaries received
approximately $60 billion
in 2011.
Source: The Heart of the Matter, LIMRA 2012
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Life insurers infused $59 billion
into the U.S. economy in
2009 through death benefits
paid to beneficiaries.
Source: The Heart of the Matter, LIMRA 2012
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At the end of 2009, life insurers
held $325 billion in
commercial and residential properties.
Source: The Heart of the Matter, LIMRA 2012
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Life insurers have $4.5 trillion
invested in the U.S. economy,
making them one of the largest sources
of capital in the nation.
Source: The Heart of the Matter, LIMRA 2012
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The life insurance industry has
$1.3 trillion
in investable assets.
Source: The Heart of the Matter, LIMRA 2012
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The life insurance industry pays
$14.7 billion
in premium taxes annually.
Source: The Heart of the Matter, LIMRA 2012
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The life insurance industry is the
NUMBER ONE
U.S. investor in corporate bonds.
Source: The Heart of the Matter, LIMRA 2012
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Social Security pays out about
$1.9 billion every day.
The life insurance industry
pays out $1.5 billion every day.
Source: The Heart of the Matter, LIMRA 2012
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The life insurance industry employs
5.7 million people.
Source: The Heart of the Matter, LIMRA 2012
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Life Insurance Industry: Emerging from a Dark Decade
What happened – the five fatal factors
Where are we now
Don’t want a replay
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The Credit Crisis
Image from: http://www.dallasloanofficer.com/files/tag-sub-prime002c-alt-a002c-credit-crunch.html
Fatal Factor #1: Subprime
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Timeline: Crisis Unfolding
Key Events 2002-2006
Interest rates held at all time lows, housing prices soar Banks fundamentally shift mortgage activities to an “originate and distribute” model (Source: OECD)
02/07 Freddie Mac announces will no longer buy subprime mortgages
07/07 Countrywide Financial warns of “difficult conditions”
11/07 Interbank lending rates start trend upward
12/07 Federal Reserve creates Term Auction Facility (TAF) to inject $24B of liquidity into the financial system
01/08 Bank of America buys Countrywide Financial for $4B in all stock deal
03/08 Fed provides financing deal for JPM to “purchase” Bear Stearns
Source: Timeline.org, Organization for Economic Cooperation & Development (OECD)
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Timeline: Crisis in Full Swing
Key Events 09/08
Bank of America announces purchase of troubled broker Merrill Lynch for $50B
Freddie and Fannie placed under government control
Lehman Brothers files CH 11 Bankruptcy
JPM purchases troubled bank Washington Mutual
Government drastically expands various programs aimed at injecting capital into the financial system
Wells Fargo announces intention to purchase troubled bank Wachovia
US Government lends AIG $85B
10/08 FDIC Insurance limits raised to $250k
11/08 Three large Insurance companies seek TARP money (Lincoln, Genworth and Hartford). [Genworth
did not qualify / receive TARP money]
12/08 Automakers receive government aid
Source: Timeline.org
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A Remarkable Statistic
1/1/1970 to 04/30/2009
DJIA – 10,000 trading days – nearly 40 years
39 days with a 4%+ rise
34 days with a 4%+ fall
0.7% of the time
Sept. 2008 to April 2009
17 days with 4%+ rise
20 days with 4%+ fall
(Source: Morgan Stanley research)
HALF of the big swings over 40 years have occurred from Sept. 2008 to April 2009
Fatal Factor #2: Market Volatility
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The Federal Funds Rate
Fatal Factor #3: Rate increase
• Fed Funds – interest rate banks borrow from each other remains close to 0%. Rate is determined by the Federal Reserve.
• Rates expected to be kept low for extended period.
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(Perc
en
t)
Shaded areas indicate U.S. recessions.
2010 research.stlouisfed.org
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Accounting Issues
The crisis highlighted issues around securities valuations in stressed market liquidity
Mark to Market (FAS 115)
Accounting policy implies markets are operating in a way that will price securities correctly (efficient market theory)
Example: Alt-A Mortgages
Valuation A: Valued at 90 cents on the dollar based on coupon payments
Valuation B: Trading at 60 cents on the dollar in the open market
Which valuation would be more meaningful to a long term investor planning on holding the Alt-A Mortgages to maturity
The question of how accounting policy can be adapted to different types of financial institutions and ensure transparency remains an important policy issue
Fatal Factor #4: Mark to Market
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Ratings Agencies
Recent book “The Big Short” by Michael Lewis has portrayed rating agencies in a negative light
Banks learned how to game the ratings agencies’ models
Ratings models wrongly assumed house prices would always rise
Mortgage securities with a high risk of default were bundled with other high risk securities and wrongly given AAA ratings based on “geographical diversification”
Ratings agencies gave many mortgage-backed securities AAA ratings that failed and are now being accused of “shooting the wounded” with credit downgrades of companies that invested in these securities
Lower rating impact on cost of capital
Fatal Factor #5: Rating Agencies
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How Have Rating Agencies Responded?
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Downgrades
U.S. Life / Annuity Rating A.M. Best Downgrades
Source: A.M. Best Research, 2009 Special Report, A.M. Best Monthly Ratings Reports (Jan. – Dec. ‘09)
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Headwinds for the Future
Ratings and consumer confidence
Low interest rates problem
Regulation and disclosure
Loss of tax advantages
High capital use products
Not out of the woods yet
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Ratings Hurting Consumer Confidence
Look back 20 years at performance vs. ratings
Does not tell the story
Comdex in a vacuum not worth it
Average rating of big US bank
Are we using ratings against ourselves?
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Financial Strength Ratings Comdex vs. Credit Ratings
Company A Company B
A.M. Best A+ Negative A+ Negative
Standard & Poor’s AA- Stable A+ Negative
Fitch A+ Negative Not Rated
Moody’s A2 Stable Not Rated
Company Information Admitted Assets: $237Bn
Net Earnings from Ops: $497M
Admitted Assets: $1.3Bn
Net Earnings from Ops: $173k
COMDEX 89 93
A.M. Best Company assigns ratings from A++ to F based on a company's financial strength and ability to meet obligations to contract holders. A+ is the 2nd highest of 15 ratings. Fitch assigns ratings from AAA to C based on a company's financial strength. A+ is the fifth highest of 19 ratings. Moody's Investor Service (Moody's) assigns ratings from Aaa to C based on a company's financial security. A2 is the sixth highest of 21 ratings. Standard & Poor's assigns ratings from AAA to CC based on a company's financial security. AA- is the 4th highest and A+ is the 5th highest of 20 ratings. The ratings relate to an insurance company's ability to meet its claims and guarantees. The Comdex is a composite index based on the ratings received by a company from the ratings services. It is the average percentile ranking for all of the ratings received by a company. As such, it is not another rating, but rather an objective scale that can be used to easily compare the ratings of different companies. The ratings are as of 09/16/2010 and are subject to change. Source of ratings and financial data: VitalSigns Carrier Analysis Report Financial data as of 2008 Year End
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What About the Major Banks?
Senior Unsecured Debt Baa2 A-
Subordinated Debt Baa3 BBB+
Outlook NEG NEG
Senior Unsecured Debt A2 A
Subordinated Dept A3 A-
Outlook NEG NEG
Senior Unsecured Debt Baa2 A-
Subordinated Debt Baa3 BBB+
Outlook NEG NEG
Senior Unsecured Debt A2 A+
Subordinated Debt A3 A
Outlook NEG NEG
Senior Unsecured Debt A3 A-
Subordinated Debt Baa1 BBB+
Outlook NEG NEG
Senior Unsecured Debt Baa1 A-
Subordinated Debt Baa2 BBB+
Outlook NEG NEG
Bank 1
Bank 2
Bank 3
Bank 4
Bank 5
Bank 6
Moody’s S&P
Moody's Investor Service (Moody's) assigns ratings from Aaa to C based on a company's financial security. Standard & Poor's assigns ratings from AAA to CC based on a company's financial security. The ratings are as of 09/2012 and are subject to change.
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S&P Historical Ratings
The ratings relate to an insurance company's ability to meet its claims and guarantees. The ratings are as of 11/2012 and are subject to change.
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ING US Life Insurance Company Ratings and Competitor Benchmark
Financial Strength Ratings
Rating Outlook
Financial
Strength
Rating Action/
Credit Opinion
Rating
Outlook
Financial
Strength
Rating Action/
Credit Opinion
Stable A+ 02/28/2011 New Rating AA+ 03/06/1990
Stable A+ 02/28/2011 Watch, Neg AA+ 03/30/2005
Negative AA- 1/27/2012 DG, Neg A 12/11/1990
Stable B+ 08/03/2012 UG, Stable A+ 11/06/1997
Executive Life DG BBB 03/28/1990 Stable A 01/23/1990
Stable A- 3/21/2012 Stable AAA 07/02/1985
Stable A- 03/07/2012 Stable AA 04/17/1991
Stable A- 03/07/2012 New Rating A+ 09/26/1990
Stable A- 03/07/2012 Stable AAA 02/12/1987
Stable AA- 12/13/2010 New Rating AAA 07/03/1991
Stable AAA 02/21/1986
Stable AA- 6/15/2009 New Rating AA- 10/03/1991
Stable AA- 5/1/2012 New Rating AA+ 07/15/1994
Mutual Benefit R 08/24/1992 Stable AA+ 05/10/1990
Stable AA- 8/19/2011 New Rating AAA 06/25/1997
Stable A+ 7/8/2011 Stable AAA 12/14/1988
Stable A+ 6/20/2012 New Rating AA+ 10/03/1991
Negative A+ 10/9/2012 New Rating AA+ 09/24/1991
Stable AA- 2/26/2009 Stable AAA 01/03/1985
Stable BBB+ 2/24/2012 New Rating AAA 01/16/1990
DG BBBpi 12/22/1999 UG Aaq 06/25/1996
Standard & Poors 2012 Standard & Poors 1990
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2008 – 2011 Timeline
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Consumer Confidence in Insurance Companies
Consumer Favorable View of the Economy
New Annualized Premiums ($ Billions)
4%
4%
2%
3%
10% 8%
7%
11%
9%
8%
14%
9%
8%
5%
77%
62%
72%
69%
71%
69% 69% 70%
72% 72%
74%
A global financial crisis is
triggered by the bursting U.S.
housing bubble.
• Lehman Brothers files for
bankruptcy
• AIG receives an $8.5 billion
federal bailout
• Bear Stearns collapses and
is sold to JP Morgan Chase
• Individual life insurance sales
(based on annualized new
premiums) fall 7% to $10.9
billion.
March 9, 2009: the S&P 500 closes
at 676.53, a 57% drop from the Oct.
9, 2007 high of 1,565.15.
The recession officially ends in June
according to the National Bureau of
Economic Research.
The unemployment rate plateaus at
10% in October.
Individual life insurance sales decline
16% to $9.2 billion, the worst annual
percentage decrease since 1942.
The Dodd-Frank Wall Street Reform
and Consumer Protection Act is
signed into law. The legislation
requires about 400 rulemakings and
nearly 100 studies.
The Moment of Truth: Report of the
National Commission on Fiscal
Responsibility and Reform (the
Bowles-Simpson report) is released.
The report states that, “everything
must be on the table,” and
recommends an end to many tax
expenditures, including the current tax
treatment of individual life Insurance.
Individual life insurance sales rise 4%
to $9.5 billion.
The U.S. federal debt ceiling is raised
and within days Standard & Poor’s
downgrades the credit rating of U.S.
debt. The U.S. federal debt stands at
about $1.5 trillion by year-end.
The Federal Reserve announces
it will keep interest rates at
historic lows through mid-2013.
Individual life insurance sales gain
4%, totaling $9.9 billion.
Source: 2012 LL Global
Presenting Sponsor: Produced By:
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The Federal Funds Rate and 10 Year Treasury Rate
Who is thinking about Insurance Industry with 4% cash value?
• Fed Funds – interest rate banks borrow from each other remains close to 0%. Rate is determined by the Federal Reserve.
• Fed expected to keep rates low for extended period.
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(Perc
en
t)
Shaded areas indicate U.S. recessions.
2010 research.stlouisfed.org
Presenting Sponsor: Produced By:
Potential Headwinds – Low Interest Rates
Key Findings
45% of respondents see a prolonged low interest rate environment as the greatest threat to their business.
87% believe there is a 50% greater likelihood of a major disruption to the economy in the next 12 to 18 months.
97% consider interest rate risk a significant exposure for their company.
When considering interest rate exposure, respondents cited the level of statutory capital and statutory earnings as the primary metrics for concern.
57% of respondents have established risk tolerance limits for interest rate risk. Some of these companies have had serious challenges trying to keep within their established limits.
43% of respondents say the language in their policy forms allows them to change COI rates based on investment earnings.
Most CFOs are considering implementing multiple new strategies as a result of the low interest rate environment, including dramatic changes such as ceasing or exiting a product line.
Source: Towers Watson’s Life Insurance CFO Survey #30 (web-based survey conducted March & April 2012)
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What’s Happening to Products
Low interest rate environment
Potential impact on crediting rates
Pulling of long term guaranteed term product
Are GDBUL next to go?
Is Indexed our future?
Low interest rates drive up prices in big way
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Potential Headwinds, Regulators and
Disclosure
Actuarial Guidance 38 and long term guarantees
Commission disclosure
Other challenges
Loss of tax advantages
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Moving on to Current Trends
Are we fulfilling our social mission
Is the market mature
Is there still an opportunity in affluent market
Can we solve the middle market puzzle
Are we a pass or fail?
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Key Findings – Sales Trends
U.S. Individual Life Sales Trends
Industry sales flat for two decades. Down 29% on constant dollars. First Quarter 2006 up 15% driven by UL and NRPF.
2011 +4%
Source: LIMRA’s U.S. Individual Life Insurance Sales Survey and LIMRA estimates
0
2
4
6
8
10
12
14
16
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2005 2007 2008 2009 2010 2011
Premiums $bbl Constant (1985) $
-29%
9.7
6.0
13.5
11.6
12.5 12.0
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0
2
4
6
8
10
12
14
16
18
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Policies $mm
Key Findings – Sales Trends
Policies Sold
Bad direction for policies sold. Selling bigger policies.
Source: LIMRA’s Individual Life Sales Survey and LIMRA estimates (U.S. Individual Life Insurance Sales Trends, 1975 – 2011)
-41%
17.1
12.3
10.0 9.5 Policies 2011 +2%
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Opportunity – Needs Up
42%39%
44%
50%
23%
32%
27%25%
19921998
20042010
19921998
20042010
Trends in Need for Life Insurance and Future Purchase Intentions
Needs more life insurance Likely to buy in next 12 months*
*Includes “Very” and “Fairly” likely to buy in the next 12 months
Source: LIMRA’s Individual Life Sales Survey and LIMRA estimates
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Presenting Sponsor: Produced By:
Policies Sold vs. Households with Children
Industry failing in a growing market. Opportunity is huge.
Source: LIMRA’s Individual Life Sales Survey and LIMRA Estimates (2010)
0
2
4
6
8
10
12
14
16
18
0
10
20
30
40
50
60
70
80Policies Households w/children74.3 mn HH
62.7 mn HH
+19%
1980s 1990s 2000s
37
10 mn Policies
Key Findings – Sales Trends
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Presenting Sponsor: Produced By:
1Source: 2008 CEO Life Insurance Task Force for the Future 2Source: LIMRA’s Individual Life Sales Survey and LIMRA Estimates (2010)
Trends in U.S. Life Insurance Ownership
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“We’re Failing”1
38
83% 83%81%
78%76%
78%
70%
46%
72%
65%
34%
54% 53%52%
52%
49%
55%
50%
50%
44%
62%
56%
47%
42% 41%
30%
40%
50%
60%
70%
80%
90%
1960 1976 1984 1992 1998 2004 2010
Total Group Individual Face-to-Face
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Opportunity - Answers
43%
40%
29%
20%
74%
52%
50%
Can’t afford life insurance
Difficult to decide how much I need
Have not gotten around to it
Worry about making the wrong decision
Prefer to put money in other financial products
No one has approached me
Unpleasant to think about dying
Source: LIMRA 2004 Ownership Study
Why Households Needing More Insurance Haven’t Bought
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40
25000
75000
125000
175000
225000
275000
19
75
19
83
19
89
19
93
19
98
20
02
20
04
20
06
20
08
20
10
Opportunity – Fewer Agents
Number of Agents and Recruits
100,000
80,000
60,000
40,000
20,000
0
Source: LIMRA’s Census of U.S. Sales Personnel
Total Agents
Recruits (Right Axis)
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Future of Distribution
LIMRA numbers show the problem
New generation of talent in the industry
Growth in intermediaries
Is career on the comeback?
Alternative distribution for middle class has its opportunity and problems
The quote shop
Technology as a distribution tool, like ING for Life
Mentoring new people
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Sales Capacity Remains an Issue Across most channels, the majority of experienced1 advisors are
over 50 and have significant industry experience
Advisors age 50 and older
Percent by channel
Advisors with 25+ years industry experience
Percent by channel
42
1 Advisors in survey have at least 3+ years of experience in industry
Source: LIMRA-McKinsey Financial Advisor Survey 2012
Presenting Sponsor: Produced By:
Shrinking Pool of Agents
Median Age of Producers by Distribution System
Distribution force is aging. Going independent and up market. *Source: LIMRA’s Survey of Producer Opinion
Source: Financial Advisor Survey
1978 1996 1999 2004
All 38 47 50
Affiliated 48
Career 47 50
MLEA 46 48
Independent 56
Broker 48 50
PPGA 50 53
Securities Rep 39
Bank Rep 31
IFP 43
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Sales Capacity Remains an Issue About 20% to 40% of advisors are within 10 years of retiring or selling their
practices, but more than half have no succession plans
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1 to 3 years
4 to 6 years
7 to 10 years
Years to retirement/sale of practice by channel
Percent channel total
28
21 18
Percent with
succession plans
39
23
32
22
41% 65%
*Insufficient data
**Based on a small sample
SOURCE: LIMRA-Mckinsey Financial Advisor Survey 2012
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Company Success Focus on Multiple Channels
Growth may come from channel diversification.
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Individual Life Market by Channel
Annualized New Premium
Source: 2010 LIMRA Life Facts
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Technology Future in Distribution
Bought vs. sold
Internet sales
Internet and technology as a tool
Social media
Who will crack the safe?
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Can’t let all the events blind us
This says it all
“No! – I can’t be bothered to see a salesman – we’ve got a battle to fight!”
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The Insurance Purchase Process
The Role of the Internet in the United States
In the United States, 245 million people (78 percent of the population)
are online.1
Transact online: 61% bank online and 71% purchase products there.
Both figures increase as household incomes and educational
attainment rise.2
61% of U.S. consumers who recently sought information on individual
products made the Internet one of their information sources, up 38%
from 2006.3
1 Internet Usage and Population Statistics for North America, Internet World Statistics, December 31, 2011. 2 Zickuhr, Kathryn, and Aaron Smith, Digital Differences, Pew Internet & American Life Project, April 13, 2012. 3 Need Identification and Information Seeking; The Role of the Internet in the United States, LIMRA, 2012.
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The Insurance Purchase Process
The Role of the Internet in the United States (cont’d.)
Online consumers continue to purchase offline, most often in person through insurance
professionals or at work.
Only about 1 in 10 recent buyers purchased insurance or annuities online, fewer than
in 2009.
Only 59% of online life buyers were able to complete the purchase process without
contacting someone.
Consumer who buy online most often look for convenience (61%).
Offline buyers most often want to meet with someone in person, meet with a personal
agent, or be able to ask questions.
Self-directed consumers want to buy online. Men, Gen Yers, and middle-income
consumers were more likely to purchase online.
Source: 2012, LL Global, Inc.
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Recent Purchase Behavior
Source: The Insurance Purchase Process: The Role of the Internet in the United States, 2012, LL Global, Inc.
Roughly 9 in 10 recent individual insurance or annuity purchasers completed the process offline, most often in person or at work. Online purchasing has not increased.
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How Did They Buy Individual Insurance and Annuities? Percent of consumers who purchase from any source, by product purchased
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Technology and Innovation to Reach the Middle Market
Determine if Agency or Lead Generator?
Phone # for consumers to
call
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Life Insurance Still a Big Advisor Base Sale
Shop online, buy online
The professional agent
Buyers want education
Where are professionals focused?
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Life Insurance Ownership in High Net Worth
Market has an Impact on the Middle Market
Is declining ownership of life insurance in middle market driven by agent
pursuing wealthier households?
Is the high net worth market saturated?
Who will serve the middle market?
Will alternative channels fill the void?
Disappearing life companies
1985 – 2,261
2003 – 1, 123
We fail as an industry if we don’t serve both
Multiple distribution channels and broad product offerings are key to solutions for industry.
Source: Count from AM Best
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9.6
10.9
13.213.7
13.3
9.69.1
10.5
13.1
14
4.95.3
6.77.1
6.3 6 6.2 6.2
7.58.3
2.7 2.52.9
3.33.7 3.7
3.33.8
4.95.4
0.25 0.23 0.41 0.59 0.53 0.48 0.48 0.54 0.74 0.93
0
2
4
6
8
10
12
14
16
$500k+* $1mn+* $1mn+ Investable Assets $5mn+*
The Affluent Household
All time high at 14 million NIPR – Not including Primary Residence
Source: Spectrem Group
Number of Affluent Households Total Households (millions)
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The Belief that High Net Worth Market is Saturated is a Myth
More than half of high net worth households do not own permanent or term
Less than 10% own second to die
While future purchase intentions seem low, each percentage point translates into some
89,000 high net worth
Debate around estate taxes causes hesitancy to purchase
12% admit they do not have enough
Probably an underestimate given 26% of high net worth have less than $100,000 of life
insurance.
There is a big market, but current sales practices could hurt
the traditional sale.
Individual Life Insurance and Ownership
and Future Purchase Intentions
Ownership Future Purchase
Intentions
Cash Value 44% 4%
Term 41% 5% Second-To-Die 7% 2%
Source: 2006 Phoenix Wealth Survey and July National Underwriting article by Walter Zultowski
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The Life Insurance Company Dilemma
in the Middle Market
Need to be competitive, price sells
Mortality results drive price and profit
Underwriting and risk selection strict
Compensation supporting distribution vs. price
Economics of the sale vs. market opportunity
You can tie underwriting and loss to price
They want to buy. We need to be competitive. Can
you afford to sell it?
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The Competitive Landscape in the Middle Market
Spread sheet selling
Price
Underwriting guidelines
Risk of an outlier
For $500,000 of Term Life Insurance at most ages the
difference in #1 and #5 may be $10
Easy does not sell like price
Easy is important to company/distributor economics
Price is king, easy is necessary, process is expensive.
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Underwriting and Mortality
Very strict underwriting to get mortality results
Just think in super-preferred class on average in the
industry. You are looking at around:
Under 2 deaths per 10,000 insured at 35 year 1
Under 3 deaths per 10,000 insured at 45 year 1
Under 5 deaths per 10,000 insured at 55 year 1
Population mortality is substandard. This is the
challenge to Simple and Instant Issue Product.
Source: Rounded ING pricing mortality
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The Economics of the Sales ING TermSmart 10 Year Level Term – Super Preferred 80% Base Commission $68 Policy Fee
Delivery is economics of the sale.
Male
Age
Face
Amount
Premium
Commission
on the Fee
Commission
not on Fee
35 100,000 102 81.60 27.20
300,000 143 114.40 60.00
500,000 193 154.40 100.00
55 100,000 279 223.20 168.80
300,000 560 448.00 393.60
500,000 873 698.40 644.00
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Cost of Distribution
Nobel assertion is “distribution cost too high”
Average agent under $50,000 income
Alternative channels have not found way to reduce distribution
cost. Direct mass prospecting is middle market key.
Agent’s Role
Prospect
Sell
Case manage
Place policy
Service
Direct Role
Prospect
Sell
Case manage
Place policy
Service
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Presenting Sponsor: Produced By:
Future of the Middle Market
Alternative channels will play a bigger role
Mass marketing to call centers selling term
Ordinary agent economic dilemma
Company scale to deliver
Five years from now new models will find a way to capture share in the
segment
Banks may be a bigger player
Distribution economics a challenge in middle market
New industry models needed or a back to basics is
needed to fill the need in this large market segment.
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Presenting Sponsor: Produced By:
Protecting the
Goose that Lays
the Golden Egg
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Presenting Sponsor: Produced By:
The Goose’s Golden Egg
Protecting your home, your car – why not your family?
Income tax-free death benefits – Proceeds from an insurance policy are generally income tax free and if properly structured, may also be free from estate tax.
Potential for income tax-deferred growth – No income taxes are generally due on cash values that accumulate in the life insurance policy.
Potential source of retirement income - Income tax free distributions are achieved by withdrawing to the cost basis (premiums paid) then using policy loans. Loans and withdrawals may generate an income tax liability, reduce available cash value and reduce the death benefit or cause the policy to lapse. This assumes the policy qualifies as life insurance and is not a modified endowment contract.
Lifetime return on death benefit
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Presenting Sponsor: Produced By:
Enter the Life Settlement
Market is growing but still small when compared
to more than 9 trillion of life insurance in force. (1) Source: Sanford Bernstein Co. (2) Source: Scope Group, Berlin
Deal Volume
Year
Total Policy
Face Value
2003 6 Billion
2005 (1) 13 Billion
2010 (2) 15 Billion
2030 (1) 160 Billion
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Presenting Sponsor: Produced By:
Life Settlements
Do Life Settlements have a role?
Model regulations coming along – State regulation is increasing
States passing provision to protect consumer’s right to know
Industry Impact
Old age prices – not significant yet
Price into new products
Raise rates on older ages
Impact of abuses
First right of purchase policy language
Establish a new role in underwriting. The risk is
longevity. They live too long.
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Presenting Sponsor: Produced By:
The Perfect Storm
Adverse Conditions Life Settlement
Premium Finance
Non Recourse Premium Finance
Investor Owned Life Insurance (IOLI)
Wet Paper Transactions/Free Insurance
Future impact on the industry
Nothing in this world is free
The table shave program
Death of the underwriting exception
Two tables turn a 5% asset into 12% asset
Does anybody buy real life insurance anymore?
Need back to basics.
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Presenting Sponsor: Produced By:
Term-to-Perm, To Settlement
Destroying the term conversion
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Presenting Sponsor: Produced By:
My greatest learning experiences were from my mistakes. Learn from the past 10 years.
Our industry is a big part of the U.S. recovery
The opportunities have never been greater
The challenges have also never been greater
Low interest rates, shrinking new agents, disappearing products
Ethics in the business
Back to basics in selling
Distribution online or offline still king
The future is up to us
We all should care
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We Are a Very Important Industry