In the first quarter of 2016, three major life insurance carriers made announcements that could affect each and every person that sells or buys life insurance.
After learning about the first two changes, I was somewhat surprised, but then considered that “business is business” and from time to time hard decisions need to be made.
By the time the third announcement was released, it occurred to me that there very well may be a trend in the life insurance industry that we should all be paying attention to.
The interesting thing is that each of these announcements addresses shifts in the way the three carriers are going to business going forward. However, no two changes for the future are the same.
I view this as good news and bad news.
The Good News
The good news is that not one particular item within the industry is forcing carriers to react in one given way.
The Bad News
The bad news is that carriers are apparently becoming less and less enamored with their bottom line and it’s not clear if these announced changes are just the tip of the iceberg in trying to correct this.
The News
I suspect that at this point you are anxious to learn what the actual announcements are that I have been referring to. Here’s a summary of each:
- The Aegon (parent company of Transamerica) CEO announced a “strategic shift to asset management and fee based income businesses.” Along with this, he indicated that the life insurance business in the U.S. had lower earnings than expected and this needed to be addressed. The plan to do so includes cutting $150 million in the U.S. by taking out management layers, increasing customer self-service, simplifying products and outsourcing.
- Genworth announced that it will cease doing business in the life insurance brokerage market place (effective March 2016). They also indicated that it’s their intention to isolate their LTCI business from their other businesses and that they will continue to sell individual and group LTCI products.
- MetLife announced that it plans to separate a substantial portion of its U.S. retail business. This might take place by way of a public offering, a spin-off or a sale. This change is designed increase sustainable cash generation and direct capital to their other businesses where they can achieve a more clear competitive advantage (such as with their life brokerage business).
What It Means for You
If your practice includes selling life insurance with multiple carriers, then two of the three announcements should be concerning.
The Aegon and Genworth announcements suggest that selling life insurance in the U.S. is simply not as lucrative as it once was.
And Genworth’s complete withdrawal from the marketplace caught the industry by surprise. Perhaps what is most shocking about what these two carriers had to say is that just 20 years ago these two carriers were the #1 and #2 life insurance brokerage companies in the country!
On the other hand, what MetLife announced should be construed as a positive move for those selling life insurance. MetLife is, in effect, committing themselves to the life brokerage marketplace, as opposed to the more expensive retail marketplace.
On the surface this seems like a reasonable thing to do, and if they are successful, this will be a carrier that life producers will want to align themselves with.
So as I see it, the beginning of 2016 brought our industry good and bad news. And we all know that changes will continue to occur at increased speed relative to the speed of the past.
The important thing is to stay current on these changes and to determine what, if any, effect they might have on you and your clients.
The day of aligning yourself and your client with a carrier based on their financial soundness or the current price of their products is behind us.
Today you still need to continue to evaluate both of these items, but also what the apparent trend and attitude of the carrier is to see if they will even be in this business 6 months from now.
