Insurance

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November 9, 2007Some have accused our industry of picking only low risk customers to keep profit margins up. Or that we put more emphasis on profits than on consumers. Others criticize the industry fo

November 9, 2007

Some have accused our industry of picking only low risk customers to keep profit margins up. Or that we put more emphasis on profits than on consumers. Others criticize the industry for its internal shortcomings such as its propensity for getting product pricing wrong.

On the flipside, some observers say things are only looking up for the beleaguered insurance industry and predict only good things to come within the next decade.

One of the most promising business opportunities for the industry is the retirement market. This market will be fuelled by millions of baby boomers who are looking for sources of income to fund retirement and elder care.

Already annuities are gaining momentum as traditional pension plans start to disappear and Social Security continues to wobble. But these are not the same annuities that were the object of derision a few decades ago.

These next-generation variable annuities provide living benefits linked to an income stream that receives increases in underlying principle value. Simultaneously, annuities provide payout guarantees that never decline below the initial amount.

Other contracts offer guaranteed payments for a fixed number of years if the original buyer dies within that period. Still expected to arrive are annuities designed to pay for the large health care bills that many baby boomers will face as they grow older.

It¡¯s not only the annuity products that will evolve. Having been embroiled in suitability and compliance issues, the industry¡¯s marketing approach to the elderly will undergo fine-tuning and improvements making them much easier to understand.

Other positive developments within the next eight to ten years as seen through the crystal ball of industry soothsayers include:

Top companies will expand market ownerships and shares in order to increase business and ensure that costs remain low.
Major insurance companies will create new markets around the world, spreading risk over a wider audience and increasing earnings from non-domestic sources.
The insurance industry will focus on untapped markets for future opportunities for life insurance products.
The insurance industry will develop advanced risk management techniques in response to the rising demand for non-reinsurance balance sheet management solutions.
The insurance industry will design more complex risk management methodologies and more focused reporting requirements as providers attempt to combine cost reduction and continued business expansion.
The aging agent-based distribution system will give way to new compensation programs that is expected to attract younger advisers, who in turn will revitalize the industry.
U.S. regulations will adopt the prevailing global standards. Large companies will have to opt for federal regulation while smaller providers will work within state-based regulations.
It is easy to become discouraged when your industry is under attack, but these new developments will help discredit the negative reputation gained over the years.  These improvements are the first steps towards gaining the positive reputation that the insurance industry rightfully deserves.