Crafting Successful Product Portfolios for 2010 and Beyond
March 2, 2010Timothy C. Pfeifer, FSA, MAAAPfeifer Advisory LLC
Our Panel Offers Two Distinct Perspectives on Future Products
Consultant’s Perspective: Tim Pfeifer
Direct Insurer Perspective: Phil Polkinghorn
Our focus will be the future of life insurance andannuity products, over the next five to ten years.
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Primary Drivers of Product Portfolios of Future
1. Aversion to risk2. Doubts about value of
active management3. Increasing role of
technology in commerce4. Accommodating product
and tax regulatory environments for income, LTC
5. Tougher financial regulation and sales practice regulation
6. Concerns about inflation
7. Willingness to flatten sales compensation
8. 50-70 year old core clientele
Profitability Dynamics of the Future
Depends on risk-free rates, but most lines sold through independent channels will
be 10% businesses
Greater profitability potential in low-to-mid
market for customers/agents
Successful efforts to de-heap upfront commissions key to unlock more profit
Capital expectations have continually increased, and
not likely to decline
Selling Dynamics of the Future
Growth in sales requires re-oriented sales force
Greater comfort with Internet, Online sales
Adoption of external marketing principles
Middle Market versus Affluent
• more women, African American, Hispanic, Asian presence
• greater pool of intelligent new hires
• only straightforward products, but model still needs improvement
• smooth purchase decision, promote “free”, relationship building and branding
• target both, but distinctly different challenges
Regulation of the Future
+ -• Favorable tax elements, particularly surrounding income, LTC
• Disclosure and suitability
• Interstate Compact-speed, not creativity
• Increased focus on securities treatment
• Principles-based elements (Term) • Principles-based elements (VUL, VA)
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Biggest unknown is Federal vs. State (primarily financial regulation)
How Will Products Get Done in the Future?
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Fewer Products
More Modularity
Greater Upfront
Evaluation
Increased Focus on
Efficiency-to-Market
versus Speed-to-
Market
Execution vs.
Creativity
Aim for True
Distribution
Partnerships
What Products/Concepts will Drive the Headlines Between Now and 2020?
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Single most important factor is level of mid-term interest rates
Need for Portfolio Balance
Providing income guarantees inside and outside of traditional insurance products
Many patents, but less protection
Thumbs Up:• Term• Indexed Life• Inflation-linked• Rebound of VA guarantees
Thumbs Down:• Fewer VA Subaccounts• Variable UL• Steeply heaped comp• Longevity Insurance in present form
Mixed Results• Combo products• Competitive simplified issue• NLG UL