Insurance Industry Insiders See Glass Half Full for 2013

Insurance industry professionals are optimistic about the market in 2013. A recent survey conducted by financial services firm LOMA, revealed that industry executives are decidedly upbeat about 2013.

 

LIMRA president and CEO Robert Kerzner recently painted a brighter picture of the life insurance industry in 2013 and beyond. While not dismissing upcoming challenges, he expressed optimism in the months ahead. "There is hope," said Kerzner at LIMRA's 96th Annual Conference in Chicago. "Demographics are in our favor and the need for our products has never been greater as more consumers recognize the financial risks they face and the value our products provide."

 

While obstacles remain, one industry executive who chose to remain anonymous said they anticipate a growth of 3 percent over last year. "In terms of profitability, the industry will continue to be challenged by the low interest rate environment, as compressed margins will continue to present challenges and put pressure on earnings," said a senior executive. This is in line with Fitch Ratings Service forecasts, which expects the net written premium for the P&C industry to grow by 3.2 percent in 2013.

 

Stubborn low interest rates may limit earnings growth, but Fitch notes this will not have a major negative impact on industry capital in 2013. The ratings service says that that if interest rates remain low beyond 2014, the outlook would probably be revised downward based on sluggish earnings profiles and expected negative capital impacts. 

 

There are a number of factors that will affect the industry in 2013. Chief among these is that life insurance products may not lose their tax-favored status precipitated by the fiscal cliff and debt ceiling negotiations. There may also be a change to the tax-favored status of COLI and BOLI products.

 

So what will re-energize the life insurance industry? Professionals at LOMA note that social media will certainly play a role, enabling agents to communicate with customers and promote consumer-to-consumer interaction. Responsive customer service will also improve sales, bridging the gap between what customers initially learn about specific products and what’s needed to close. Insurers must remain nimble and adapt to digital marketing and mobile distribution strategies. They will have to reach customers across a variety of interactive channels—online, smartphone apps, video conferencing, and live support call centers. Finally, life insurers may have to make themselves more relevant to young consumers who may not see insurance as an investment vehicle. An Ernst & Young report revealed that the average household expenditure on life insurance has dropped by 50 percent over the last 10 years. Insurers must shift their marketing campaigns to reach these young consumers to bring them up to speed.

 

To survive and profit in 2013 and beyond, life insurers will have to improvise, adapt and overcome. Agents will have to face a recovering economy and young shell-shocked consumers who must be convinced that life insurance is relevant for them. Agents will also have to be early adopters of the latest social media channels and mobile technology—to remain connected with their customers. 

 

Image courtesy of Stuart Miles/FreeDigitalPhotos.net