Life insurance: 5 things to expect in 2013

By National Underwriter

National Underwriter

By Mike Stanley

The life insurance industry in 2013 will be in a state of transition, to say the very least. For an industry not commonly pressured to make substantial and fundamental changes to how it operates, life insurance is finding itself in unfamiliar and uncomfortable territory, indeed. Five topics are likely to show most brightly on the industry’s radar over the next twelve months.

1. The tax-favored status of life insurance products.

Many industry watchers believe that life insurance products will not lose their tax-favored status as a result of fiscal cliff and debt ceiling negotiations. However, as the government looks for new revenues, everything is on the table and there very well may be a change to the tax-favored status of COLI and BOLI products.

2. Evolving to respond to the changing consumer.

Many life insurers pride themselves on their social media presence, as if having a Facebook page keeps them on the cutting edge. The evolving consumer may shop for life insurance products while standing in line at the supermarket, and insurers must remain nimble and able to adapt to digital marketing and mobile distribution strategies.

3. Remaining relevant.

Life insurers may have to rebrand themselves as many young people are not aware that the product can be used an investment vehicle. An Ernst & Young report found that the average household expenditure on life insurance has declined by 50 percent over the last decade. Insurers need to step-up their marketing campaigns to reach young people whose view of life insurance may be incomplete.

4. Entering into developing markets.

Many large carriers are looking to international developing markets as the “next big thing.” Although these countries look appealing because of a growing middle class and low market saturation, there are huge geographic, political, bureaucratic and cultural hurdles to be overcome. It also overlooks a serious and untapped opportunity right here at home: the grossly underserved middle market.

5. Keep themselves up-to-date on international and domestic regulatory issues.

Insurers will need to watch what is going on in the international regulatory arena as well as what is happening here at home. Some of the largest carriers, such as AIG, Prudential and MetLife may soon be designated as systemically significant (SIFI) and they will have to get used to federal regulation and higher capital standards. Of course, SIFI designation has been on the horizon for these firms for the better part of a year, so they should be prepared for it already. The question is what happens if SIFI designation drops on a company not expecting it.

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