SOA 2012 Life & Annuity Symposium May 21-22, Session 52 PD, Products and Marketing Techniques for the Developing Senior Market

Transcription

1 SOA 2012 Life & Annuity Symposium May 21-22, 2012 Session 52 PD, Products and Marketing Techniques for the Developing Senior Market Moderator: Jeffrey E. Johnson, ASA, MAAA Presenters: Jeffrey E. Johnson, ASA, MAAA Jeffrey Shaw, CLU, ChFC Walter H. Zultowski, Ph.D. Primary Competency External Forces & Industry Knowledge

2 LOS ANGELES, CA SESSION 52 PRODUCTS & MARKETING TECHNIQUES FOR THE DEVELOPING SENIOR MARKET Moderator: Presenters: Jeff Johnson Jeff Shaw Walt Zultowski Primary Competency: External Forces & Industry Knowledge 1

3 Session Agenda Senior Market Overview Jeff Johnson, ASA, MAAA Forethought Financial Group, Inc Marketing to Seniors Jeff Shaw, CLU, ChFC Executive Director, Life Insurers Council Income Protection for Seniors: Case Study Walt Zultowski, PhD Principal, WZ Research & Consulting, LLC Senior Market Overview Survey Question #1 When you think about the senior market, at what age do you consider it starting? Age 70 6% Age 65 27% Age 60 33% Age 55 19% Age 50 15% 0% 10% 20% 30% 40% N=48 2

4 Senior Market Overview Description Ages 65 and older Silent Generation Fastest growing population segment (MMs) Age U.S % of US 13% 16% 19% 20% 20% 9.1M armed forces veterans 2010 Source: US Census Bureau Senior Market Overview Description Workforce: M (16% of 65+) M 1M (21% of 65+) $31,408 median HH income % are married 81% are homeowners Source: US Census Bureau 3

5 Senior Life Insurance Ownership Only 58% own any life insurance 81% of owners have permanent 26% of owners have term Mean total coverage amount: $92,300 32% believe more insurance needed 8 out of 10 not interested in talking to a financial professional Source: LIMRA 2010 Life Insurance Ownership Study Senior Market Products Life Insurance Final Expense Preneed SPWL Term, UL Grandchildren Annuities Fixed, Variable Accumulation, Payout Health Insurance Long Term Care Medicare Medigap & Med Adv Critical Illness Indemnity Other Prescription, Vision Longevity 4

6 Senior Market Overview Survey Questions #2 & #3 Which products do you believe are most [2] needed for / [3] offered to the senior market? LTC & Combo Payout Annuities Critical Illness Final Expense SPWL Med Supp Term Life Preneed Accumulation Annuities Needed Offered N=48 Senior Market Overview Survey Question #4 Which of the following statements most accurately reflects your employer s senior market efforts? Senior market is the primary strategic market Serves the senior market, but it is secondary Intends to enter senior mkt in next few years Has no senior market intentions N=43 5

7 Senior Market Overview Survey Question #5 On which of the following senior market needs is your employer primarily focused? Estate Planning Final Expense Coverage Not applicable Income Protection N=44 Senior Market Overview Survey Question #6 Which life insurance product types does your employer offer to the senior market? Whole Life Universal Life Not applicable Term Other (VUL, IUL) N=44 6

8 Senior Market Overview Survey Question #7 Which underwriting levels does your employer use in the the senior market? Rank 3rd Rank 2nd Rank 1st Full Simplified Gtd Iss / Preneed Senior Market Overview Survey Question #8 What is the maximum non-facultative face amount your employer will issue to the senior market? Underwriting Level # resp Least Most Full 15 $25,000 $50,000,000 Simplified 16 $15,000 $5,000,000 Gtd Iss / Preneed 13 $10,000 $500,000 N=30 7

9 Senior Market Overview Survey Question #9 Which distribution channels does your employer use for each of the following products? Product # resp Most Used 2 nd Most Used Annuities 61 Indep B/D Long Term Care 27 Indep B/D Final Expense 25 Indep Captive SPWL 23 Indep Bank Med Supp 13 Indep Captive & B/D Preneed 12 Captive Indep & Direct Other Life Ins 58 Indep B/D Other Non-Life 20 Indep Captive 8

10 SOA Life and Annuity Symposium Products and Marketing Techniques for the Senior Markets May 22, 2012 Which Seniors are Your Seniors? 1

11 Most Insurance Companies Focus on the Middle But It s a Very Big Middle 2

12 Broad Market = Many Options This Still Exists Home Service Business 3

13 Home Service/Debit Insurance Mostly fully underwritten whole life Less than $10,000 average face Captive and Independent Field Force Most premiums mailed but some still collected Low to middle income Younger insured/older payor Home Service Opportunity Ignored market Expensive but not overly price sensitive Not ratings sensitive Collections improve persistency and prospecting Predictable results 4

14 But More Companies Do This Final Expense Insurance Final Expense Insurance Highly specialized independent IMO distribution Agents captive to IMO Direct mail leads Monthly check authorization/commission advances Simplified issue whole life $14,000 average face/62 average age Single interview/single product sale 5

15 Underserved market FE Opportunity High premium potential Not ratings sensitive Requires active management but can be managed Strong recruiting proposition Few obstacles to entry Who needs Agents? 6

16 Guaranteed Issue Senior focus TV and internet ads Direct Sales Highly sophisticated, well researched methodology Dramatically different experience than traditional final expense Direct Sales Opportunity High premium potential Well established business model Not a lot of competition Companies can exercise more control 7

17 Why not do Both? Telephone Sales Direct mail to drive prospects to call center rather than agent Simplified issue rather than guaranteed issue product Technology now allows for underwriting and application to be completed during a single phone call Experience is as good or better than with agent directed sales 8

18 Telephone Sales Opportunity Good complement to agent sales Good alternative to agent sales Doesn t require new technology or processes Potential for better results at a lower cost Would you buy a life insurance policy from this man? Preneed is NOT Final Expense 9

19 Preneed Insurance Provides funding for a specific pre-arranged funeral contract Sold by funeral directors or specialized distribution working with funeral homes Contracts are typically assigned to a trust with funeral home as beneficiary Face amounts increase at specified interest rates Preneed Insurance Unique single premium or multi-pay products (1, 3, 5, 7, or 10 years) Minimal to no underwriting Sales reported by face amount rather than premium $5,120 average face amount (single premium) Average issue age 75 (single premium)/63 (multi-pay) 10

20 Preneed Opportunity Funeral industry is in drastic need of innovation but holds current carriers hostage to change Mix of single premium and multi-pay products can help balance surplus strain What More Could a Senior Need? 11

21 Senior Health Products Hospital Indemnity Critical Illness Medicare Supplement Prescription drug cards Long Term Care/nursing home riders Life and Health Agents Don t Mix 12

22 Senior Health Opportunity Clearly defined need Uncertainty is an opportunity as well as a challenge Direct sale of peripheral health products can dramatically improve persistency of life block Upscale Seniors Go Where the Money Is 13

23 Annuities Investments Estate Planning Wealth Transfer Medicaid trusts Upscale Seniors Ably served by traditional career agency system, independent brokers and financial planners All Companies Serving the Senior Market 14

24 SOALife and Annuity Symposium Products and Marketing Techniques for the Senior Markets May 22,

25 A New Need for Life Insurance in the Senior Market: Income Protection Walter H. Zultowski, Ph.D. WZ Research + Consulting, LLC SOA Life and Annuity Symposium May 22, 2012 The Life Insurance Purchasing Lifecycle Higher Socio-Economic Status Income Protection Income Protection Lower Age 2 1

26 Current Environment: Academic Coverage working longer is the key to a secure retirement for the vast majority of older Americans What is the Average Retirement Age? Center for Retirement Research at Boston College for many Americans, the foundation of their retirement strategy is simply to not retire or to work considerably longer than the traditional retirement age of 65. The New Retirement: Working 12th Annual Transamerica Retirement Survey 3 Current Environment: General Media Coverage Many older people are finding themselves in a position they never expected to be in at retirement age: still working or in need of a job. For Many Seniors, There May Be No Retirement The Wall Street Journal Many older workers are responding to the economic downturn by postponing retirement, but even so it will be a struggle to make up for market losses in their retirement plans. Scary Economy Delays Retirements The Hartford Courant 4 2

27 A Perfect Storm of Demographic and Economic Events Demographic Delayed household formation Divorce and household reformation at later ages Increased longevity Increasing likelihood of health care needs Longer number of years supporting adult children Increasing need to support old old parents 6 3

28 A Perfect Storm of Demographic and Economic Events (cont d) Economic Increasing costs of health care and long-term care Disappearance of defined benefit pension plans Fragility of existing public and private pensions Decimation of retirement nest eggs during the Great Recession Housing no longer a Bond Fund Fear of a Double-dip Recession and/or stagnant economic growth Widespread job layoffs affecting people in their 50 s and 60 s 7 Exacerbated by 20- or 30-year term life insurance expiring before the need for coverage has expired Disappearing employer-sponsored group term life insurance, resulting from job change or layoffs 8 4

29 Case Study How one company is acting to penetrate the senior market for life insurance 9 Amica Life Lincoln, Rhode Island Wholly-owned subsidiary of Amica Mutual Legendary for customer service and satisfaction Primarily provides term life insurance Marketed through direct response/call center Primary market is the Amica Mutual P&C policyowner base 10 5

30 Potential Within the Amica Mutual Market # of Auto Customers # of Life Policies Issued < Age Ranges 11 A Two-Pronged Strategy for the Senior Market Higher Socio-Economic Status Income Protection (20-year level term)<->(10-year level term) Final Expense (Simplified issue whole life) Lower Age 12 6

31 Step 1: Market Research Validating the Need I don t think I ll be as comfortable [in retirement] as I d hoped. It will be later than I thought, and won t be as luxurious. The stock market just whomped me. It s not what I envisioned it would be. I retired two years ago. We built a home, and have about 50% equity in the house. So if something were to happen to me, my wife would have to sell the house. She would have to downsize. I think I d like to protect against that. 13 Validating the Need (cont d) I m concerned. I m planning on retiring in about 12 years. I was planning on doing so sooner, but with costs, the economy, and health care [it s not going to happen]. I had to make a job change a while ago, so I m not making what I used to make. So it s one layer after another layer after another layer; it makes me cautious. 14 7

32 The Role of Expiring Term Coverage It s term life that my husband and I have. We worry because it s going to expire. A good question is [what happens] when our term insurance expires; will we need life insurance beyond this point? It s the term dilemma. It s hard to have that policy end, and then have nothing. 15 The Cost of Coverage When You re Older I could probably get life insurance today, but it would probably cost and arm and a leg because of my age. I should have bought a longer term. It s coming to an end now, and to buy what I have now would be very expensive. I have a 20-year term; I wish I d gotten a 30- or 40-year term. Now trying to get another term policy, but it s not affordable. 16 8

33 The Cost of Coverage When You re Older (cont d) I m turning 70 next month. Today I just took delivery of a brand new term life policy -- a 15-year policy. I was able to get a premium non-smoker rate. Otherwise, I could never afford something like that. I have life insurance that is expiring this August, and that was the trigger for this. 17 Some Summary Comments The concerns are different. When you re younger, it s all about your family. As you get older it switches to you -- your health, ability to pay bills, etc. Once you re older, the concerns just change. [Regarding the role of life insurance over time] the burden shifts from others to us. When you have a young family, it s all about the children. When they re on their own, it s all about us. [Buying life insurance] it s the last thing you have to do to complete your retirement plan. 18 9

34 Step 2: Developing Marketing Programs Direct Mail Use of targeted advertorials Training of the call center staff Future Marketing Activities On-line marketing Senior market microsite 19 Challenges to This Strategy The economy strengthens, retirement portfolios rebound significantly, and the need to continue working into one s retirement years disappears in the marketplace (Would anyone bet on this scenario?) Due to health reasons and/or the economy, seniors are unable to continue working, or are unable to find work even on a part-time basis 20 10

35 Challenges to This Strategy (cont d) Regardless of their personal health, many consumers believe that life insurance is either unavailable or unaffordable at older ages (THEY BELIEVED US!) Many agents, while recognizing this trend in the marketplace, have failed to translate it into a need for income protection life insurance 21 Other Considerations Product Keep it simple Messaging Don t make it sound like they failed to plan Selling Educate the sales force regarding this need in the marketplace 11

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