Life Insurance as an Industry vs. Life Insurance as a Product

1. Life Insurance in a World of Declining Marriages and Children(Needs, Markets, and Distribution)Walter H. Zultowski, Ph.D. WZ Research + Consulting, LLCLIMRA’s Marketing & Research ConferenceJune 1, 2011

2. Life Insurance as an Industry vs. Life Insurance as a Product 2

3. Needs Markets Distribution

4. Consumer Needs 4

5. Life Insurance as Supplemental Retirement Income • Popular prior to social security • Future of social security, consumer desire for guarantees, volatility of investment products • Concern regarding threats to the inside build-up • Key is positioning it as protection, not accumulation • First-to-die as a source of retirement income for the surviving spouse 5

6. Life Insurance as “Wealth Replacement” To replenish assets depleted during economic downturns 46% of HNW “not likely to leave as much to their heirs as originally planned” Only 17% have considered this strategy -- of those, only 53% spoke with an advisor But, of those speaking with an advisor, 72% bought life insurance Speaks to the need to educate the field regarding such concepts Source: 2010 Phoenix Wealth Survey 6

7. Markets 7

8. Markets with Different Demographic Profiles Implies an international strategy – requires scale; not easy; not for everybody Domestic niches (e.g., Hispanics) – the problem is that scale players pursue niches also Future niche strategies will not be based on traditional demographics, but rather affinities and relationships (e.g., new bases for “fraternals” (social networking?), military, sexual orientation) 8

9. Household Protection for Young Families Conservative, traditional values, positive toward life insurance A saving grace for life insurance? Three challenges: Competition from consumption How they want to do business Life insurance = term 9

10. The Affluent Market Affluent market being abandoned because it became synonymous with estate planning and “gimmicks” (e.g., STOLI) 2010 Tax Law expires in 2012; estate tax exemption would return to $1m with a rate of 55% Only 37% of HNW households own term life; only 35% own permanent life Other niches (e.g., female decision makers in young households, widows for charitable giving) Source: 2010 Phoenix Wealth Survey 10

11. Distribution Approaches 11

12. Technology and Social Networking No question that these will play a greater role There still exists the ease of purchase vs. advice dilemma “Technology will not replace the agent (but is the agent of the future human)?” (Zultowski) “Comp-phone-avision” (Baranoff) Jury still out as to how personal contact and advice will be delivered 12

13. Simplified Issue Products The world of underwriting is undergoing a revolution Not just for low face amounts any longer Is this for the benefit of the agent or the consumer? Younger, healthier buyers would do better with full underwriting If they understood this, would they be willing to pay a premium for this ease of purchase? Not going away 13

14. Rebirth of the “Agency System” Nature abhors a vacuum; so too in business Consumers desire personal contact/advice; agents need marketing support Companies exited agency distribution not because of a declining consumer need (this trend started way before technology for direct purchasing came on the scene); but because of the financials of the system Is the system being “reborn” in the field in the form of IMO’s selling SI products to the mass market? -- responds to the issues of productivity, exclusivity, and multiple company representation Comes full circle as companies buy IMO’s Will it expand beyond senior products? 14

15. Thoughts in Closing Life Insurance – “Not Dead Yet” While the heydays may be gone, still many roles it can play The opportunity depends on the individual company strategy – no “one size fits all” The answer lies not in new product, but in marketing and delivery Keep in mind new uses for old products, long-term cycles, and that sometimes “past is prologue” 15

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