Industry-Specific Programs
Breathing New Life Into Life Insurance

Do you have enough life insurance? Probably not, according to research showing that the percentage of individual Americans covered by life insurance has declined from 63 percent to 53 percent over the past 2 decades. The need for better marketing to get the word out about life insurance is one of the leading challenges facing executives in the industry.

"Life insurance companies have changed dramatically over the last 2 decades," said Robert A. Kerzner, CEO and president of LIMRA International, a global association that serves the industry. "Many of them generate more of their revenue not from life insurance but from other investment-oriented products such as annuities, 401k plans, mutual funds, and group insurance, separate from individual life." Companies also are moving into other areas, such as long-term care, and some are even beginning to look at returning to the disability business.

Cultivating a Broader View

Recently a number of banks have acquired life insurance companies. As companies have extended their offerings, managers have had to stretch their thinking. "The entire financial services industry is taking a broader view of what they do for the consumer," Kerzner said. "That requires much broader knowledge than it did a few decades ago."

To meet this need for knowledge, LIMRA created the LIMRA Leadership Institute Fellow (LLIF) Designation Program in partnership with the Wharton School. This graduate-level program focuses on marketing, finance, personal-effectiveness, and leadership strategies to provide a comprehensive development program for financial services executives. Some 500 executives have completed the program. By encouraging participants to think more rigorously and broadly about marketing, leadership, and other challenges, the program had helped participants better manage and grow their businesses.

Although the industry is more complex, some of the qualities that are needed to be successful are fairly simple. "Discipline, drive, and financial discipline," said Kerzner, who helped lead The Hartford to become the top seller of variable universal life insurance, with more than $130 billion in life insurance, before joining LIMRA. "I think for any organization to thrive, you have to have the discipline to make tough decisions. You have to have the drive to succeed — that nothing but success is an option. Finally, you need the right financial rigor behind all your decisions so you are running a tight financial ship."

"Management education is more important ever," he said, as consolidations and rapid change have led to the loss of seasoned executives. "Many of the key people in companies today have 20 to 30 years of experience, but many of them will probably be retiring in the next 5 years," he said. With tough industry conditions and consolidation, some of these executives are retiring earlier. "Companies haven't done enough thinking about perpetuation," he said. "It is an issue that can't wait. Companies are asking how they can accelerate that process. This program is a way to do that, and it also sends a message to executives that they are important to the organization, which helps reduce turnover."

The Marketing Challenge: Why We Are Underinsured

The executive program also focuses on marketing, which is a key challenge for the industry. Although the number of U.S. families with young children has increased by 19 percent over the past decade, the number of policies has dropped by 30 percent. "We need to do something different to make it a growth industry again," he said.

Part of the problem is that life insurance is not very well understood by consumers. "Consumers tell us it is complicated and they think it's expensive," he said. "As medical costs have risen, many companies have reduced the amount of noncontributory life insurance they offer. With employee medical costs going up and no one explaining to them clearly why they need more life insurance, they don't purchase it."

Consumer education can help. In September, LIMRA helped to spearhead the first annual Life Insurance Awareness Month. "People clearly recognize there is a need, but they need some help in deciding how much they need and what type of policy to consider," he said. The industry also needs more agents. "Do we have enough feet on the street, enough people talking about life insurance to make people understand that it is an essential part of any financial plan?"

Insurers also have to develop new channels, such as stock brokers and financial advisors that serve the middle market. Only about 5 to 10 percent of them routinely discuss life insurance with clients. "You have someone spending a lot of time talking to a client about how they are going to fulfill their financial plan for retirement," Kerzner said. "Yet if they walk out the door tomorrow and are hit by the proverbial bus, they will leave behind a 38-year-old spouse with two minor children. It may be wonderful to have this great retirement plan, but do they have enough life insurance to sustain their lifestyle?"

    

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