Insurance Insight Group

Chris Conklin's Insights are Popular on ProducersWeb.com

noreply@blogger.com (Insurance Insight Group) — Thu, 02 Jul 2009 14:49:00 +0000

Chris Conklin, Principal and Actuary at Insurance Insight Group, is a regularly featured columnist on ProducersWeb.com where his life and annuity insights receive a lot of attention. One of his recent articles "Where three types of annuities fit in a client's portfolio" spent several weeks on the top of the "Most Popular" articles list and still sits high on the "Editor's Top Picks" list.

When you click on one of the links above, you can also sign up as a fan of Chris Conklin. When you register as a fan you receive notifications when he has a new article posted. His articles are targeted at providing insights to enable agents, carriers and marketing organizations to succeed.

Perfect Annuity Prospecting: Seven Times with the Same Method

noreply@blogger.com (Insurance Insight Group) — Wed, 01 Jul 2009 16:33:00 +0000

Michael Poirot, marketing director at Game Plan Financial Marketing, talks with numerous annuity producers daily to help them determine what prospecting methods might work best for them. He indicates that he has seen financial advisors have success with newspaper advertising, direct mail, seminars and radio shows.

He says it is always important to advertise a hot topic. Right now, financial consumer concerns are related to the economy’s instability and the collapse of the stock and real estate markets. Any advertising that talks about safety, guaranteed returns and attractive places to put money in today’s tough environment will have appeal.

Poirot also says the seven-time rule is key. “If you can’t afford to repeat your message to your target audience seven times, you need to find another prospecting method.”

For more, read Hit the Jackpot with the Power of Seven or Why Seven Times?

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Perfect Annuity Prospecting: Why Seven Times?

noreply@blogger.com (Insurance Insight Group) — Wed, 22 Apr 2009 19:51:00 +0000

Many financial advisors try a prospecting method once or twice, determine that the results did not meet expectations and stop using it. That seems to make good business sense. After all, why would you want to spend good money after bad? But insurance marketing experts say repetition is key, even if the initial results seem disheartening.

Brian D. Mann is the Executive Vice President and Chief Marketing Oﬃcer at Partners Advantage Insurance Services and a multimillion-dollar producer. He finds that repeat mailings usually yield good results for his organization and for his personal practice.

“You have to stay in front of your annuity prospects in order to build credibility and to position yourself as having the expertise they need,” Mann says. “When a need arises or when something finally captures their attention, they will call you. You have to be committed and consistent in your marketing practices.”

If you think about it, driving just a few miles on a major commercial street presents you with hundreds of commercial messages from the businesses you pass. Plus, reading a magazine, listening to the radio, watching television and surfing the Web present you with hundreds more every day. The reality is that you are constantly bombarded with such commercial messages, so you are accustomed to mentally blocking out most of them.

That is why repetition is so important. Each time your message is repeated to the customer, whether it is in the same form or a slightly different form, it moves your target audience a little closer to responding to you, because they see a reason to become more familiar with you.

For more, read our first blog post: Hit the Jackpot with the Power of Seven. Our next post will discuss prospecting Seven Times with the Same Method.

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Perfect Annuity Prospecting: Hit the Jackpot with the Power of Seven

noreply@blogger.com (Insurance Insight Group) — Mon, 20 Apr 2009 14:54:00 +0000

Many a financial advisor has tried a wide variety of annuity prospecting methods without success. Open any industry publication and you will see advertisements touting the benefits of using direct mail, holding seminars, running newspaper advertisements or creating a Web site. Recently, more elaborate business strategies such as starting an income tax preparation service have become popular.

But many exasperated insurance professionals exclaim, “I’ve tried a bunch of those things, and none of them work!” And even many annuity marketing organizations seem to struggle to find an annuity lead generation system that works reliably for their agents.

So, what is the answer? Why do some agents have incredible success with annuity prospecting while others have none? Are all these vendors that claim to have effective annuity lead generation methods lying to us?

The answer, according to industry marketing experts, is that they all have the potential to work well.

For a prospecting method to work for you, it needs to fit your strengths and be properly executed. For example, there is no point holding annuity seminars if you are not a dynamic public speaker or you have difficulty befriending people quickly. It is fruitless running newspaper advertisements if you are often unavailable to answer the phone when clients respond. You will be frustrated by direct mail if your mailer is not compelling or your mailing list is not up-to-date and properly segmented.

But what if you feel you have been doing everything right yet still see poor results? Successful insurance marketing relies on several factors being aligned, including targeting the right market, having the right message and getting your audience’s attention. But if you ask industry marketing experts, many of them will tell you that a lack of repetition is a common reason why otherwise well-planned annuity prospecting campaigns fail.

Too many insurance professionals simply give up on a prospecting method too soon. They disobey one of the most basic rules of marketing: Your target audience needs to see your message three to seven times before they will take any action to respond. Our next four blog posts will explain this further.

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President Obama’s auto-enrollment retirement savings plan

noreply@blogger.com (Insurance Insight Group) — Thu, 26 Mar 2009 13:42:00 +0000

President Obama recently proposed that employers without retirement plans should be required to establish an automatic retirement savings account (similar to an IRA) for all of their workers. The accounts would be funded by payroll deduction from workers’ paychecks.

Insurance Insight Group thinks this proposal makes a lot of sense. Workers have traditionally had a number of incentives available to them to encourage saving for retirement, such as the tax-deferral available in IRA’s and the employer-match available in many 401(k) plans. But it seems that the best way to encourage workers to save for retirement is the simplicity and automatic savings associated with payroll deduction. If it weren’t for payroll deduction, can you imagine how hard it would be for the average American family to pay their Social Security, Medicare, and income taxes?

President Obama’s proposal will also create opportunities for insurance agents. Up to now, insurance professionals have approached employers without retirement plans, trying to get these employers to offer 401(k) plans, SEP-IRA plans, or a variety of other plans to their employees. The insurance agents have been at a disadvantage because no such retirement plans are mandated by government, and also each of these plans costs the employer money both in plan contributions and administrative expenses. Under Obama’s proposal, employers without retirement plans would be forced to take action, and there is the additional incentive that these retirement savings accounts would be funded solely with employee contributions. So, the employer’s expense is limited to administrative expenses. To the extent that insurance professionals can offer these employers efficient solutions to this new mandate, they have an opportunity to earn ongoing commissions as these accounts are funded by employee payroll deductions.

For more on this, Insurance Insight Group's Principal and Actuary, Chris Conklin, answers a series of questions on this in an Q&A format posted on the ProducersWeb.com Editor's Blog.

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Unusual industry conditions create challenges, avenues for growth

noreply@blogger.com (Insurance Insight Group) — Wed, 25 Mar 2009 13:55:00 +0000

2009 is shaping up to be one of the most unusual years in the fixed annuity industry, ever. In most years, insurance companies welcome increases in sales of their insurance products. In fact, insurance companies employ and incent sales personnel and independent insurance agencies in order to increase sales. But a combination of unprecedented financial constraints and soaring sales volume has forced many carriers to take unusual actions to limit incoming sales volume.

It is not unusual to see insurance companies cut compensation or interest rates. But so far this year, we have seen some of these carriers eliminate popular products, terminate productive agent forces, eliminate the contracting of new agents, or even stop all new sales altogether. Why is this?

One constraint is the soaring popularity of fixed annuity products, particularly multi-year guaranteed annuities. Some carriers have seen monthly sales volumes in excess of their typical yearly annuity sales volume. The desire of financial consumers and retirees to find a safe place to put their money while still realizing a respectable return has led them to beat a path to fixed annuities.

At the same time, declining interest rates, high bond defaults, high stock market volatility, and the lack of availability of new capital has severely constrained the ability of these insurance companies to profitably write new business.

To respond, insurance professionals are going to need to be more flexible than usual, moving their new business volume from carrier to carrier as the availability of products dries up. These insurance agents are also going to need to work harder to service their business. Some insurance carriers are so swamped with service business that they cannot effectively process rollover business. Thus, insurance agents would be wise to work with their clients to obtain rollover checks rather than relying on carriers to do the work.

Savvy financial advisors will be able to take advantage of these conditions to grow their businesses dramatically. There never has been a better time to advertise fixed annuities to potential clients and the general public as now.

151A Lurking Danger to Consumers

noreply@blogger.com (Insurance Insight Group) — Wed, 04 Mar 2009 21:26:00 +0000

Many concerns are circling the outcome of Rule 151A. But perhaps the most dangerous aspect of it all is that it will scare producers away from addressing retirement risks and offering index annuities to retirees and pre-retirees at a time when they are desperately needed.

The Key Role of Insurance Agents in Society
“Insurance is sold, not bought” is a well-known industry saying. Sometimes missed is the underlying meaning of this saying: that insurance agents play a key role in prodding American families to take the key steps necessary to secure their financial futures.

It is no different with retirement security. With the decreasing prevalence of company-provided defined benefit pension plans, individuals and families retiring in the future must rely more on their own savings. Unfortunately, study after study has shown that consumers are not saving enough for their retirement, nor are they making wise choices for how to save or invest their money.

As a result, it is crucially important to our society for insurance agents to be collectively pursuing families and reminding them to take the necessary steps to increase their financial security. One of the most powerful financial tools in an insurance agent’s arsenal is to help accomplish this mission is an index annuity. An index annuity provides a financially safe place for retirees to put their money, and it provides growth that is tax-deferred, that is linked to increases in a market index, and that is protected from decreases in the market index.

If insurance agents shy away from offering index annuities because of Rule 151A, our society will be left more vulnerable because consumers will not have insurance agents urging them as diligently to help make sure their financial futures are bright.

Still, various anti-annuity groups have perpetuated a false belief that insurance agents offering index annuities are predators, especially when their sales practices include free dinner seminars.

Rule 151A has created a toxic atmosphere for insurance agents who wish to offer free dinner seminars to reach out to potential consumers. Again, financial consumers who would otherwise have been helped by the services offered by insurance agents, are hurt by the Rule.

The Way Forward
“The only thing we have to fear is fear itself,” as said by President Roosevelt during his 1933 inaugural address, and he was referring to how the public should respond to the economic conditions of the Great Depression. The same is true for an insurance producer today regarding Rule 151A. Rule 151A has created uncertainty and financial fear even as the insurance industry is attacking Rule 151A in court leaving a possibility that Rule 151A will go away.

But, in the meantime, consumers still need insurance agents working diligently to help them realize their financial needs. Let’s not allow the fear and uncertainty created by rule 151A to distract us from our mission, because that would be a tragedy.

For more on this see the Chris Conklin’s article in Senior Market Advisor.

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The Unfortunate Demise of the Free Dinner Seminar

noreply@blogger.com (Insurance Insight Group) — Thu, 12 Feb 2009 17:25:00 +0000

Various groups have perpetuated a false belief that insurance agents offering index annuities are predators, especially when their sales practices include free dinner seminars.

On June 25, 2008, the SEC proposed Rule 151A, saying that the growth of index annuity sales “has, unfortunately, been accompanied by growth in complaints of abusive sales practices.” At the SEC meeting where the rule was proposed, the Commission played a segment of a Dateline NBC news segment alleging rampant abuses by annuity salespeople, such as in free dinner seminars. Now, even the AARP has launched a program against free dinner seminars, starting a program where people are encouraged to become volunteer “Free Lunch Monitors” and share stories of abusive sales practices with regulators and each other.

The fact, however, is that relative to the number of retirees helped by index annuities (and reached through free dinner seminars) there are not a lot of complaints. The SEC admitted as much in its final release of Rule 151A on January 8, 2009. It responded to assertions by the annuity industry that there is no evidence of widespread annuity sales abuse by answering that “the presence or absence of sales practice abuses is irrelevant in determining whether an annuity contract is entitled to the exemption from federal securities regulation.”

So, one of the most dangerous aspects of Rule 151A is that it has created a toxic atmosphere for insurance agents who wish to offer free dinner seminars to reach out to potential consumers. The demise of the free dinner seminar, a demise which is based on false rumors and false beliefs, will hurt consumers who would otherwise have been helped by the services offered by insurance agents.

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Having Customers versus Clients for Life

noreply@blogger.com (Insurance Insight Group) — Tue, 10 Feb 2009 15:15:00 +0000

We all know that selling an annuity or life insurance product should be based entirely on a client’s needs, not the insurance agent’s available product portfolio or desire for commission. Yet, so many insurance agents paint themselves into a corner by focusing on a limited product portfolio or insurance product type.

How many more clients could they help by broadening what they have to offer?

There is an array of insurance products that meet many needs for many people and many situations. Still, we encounter many agents that focus on one product type. The product they offer could be fixed index annuities, fixed annuities, or indexed universal life insurance to name a few. Why does this happen?

Most of the time we can say this narrow focus is due to a lack of product training made available to the agent, or even a dismal understanding of the benefits of cross-selling. As insurance marketers we should take the time to develop programs for our agent base to help them grow their business by expanding their horizons. Why? Because if their business grows so will yours.

As an example, in the presentation “Surviving a 151A World” Insurance Insight Group created with Insurance News Net we highlight how index universal life insurance can create a tax-free cash flow in retirement. The death benefit is key to providing that benefit. Now, if neither the death benefit nor the tax-free cash flow in retirement is desired, the indexed universal life product is probably unsuitable.

Keep in mind that the use of life insurance as a cash accumulation vehicle is not new. Even prior to the somewhat recent introduction of index universal life insurance, traditional fixed universal life insurance has always been used in sales where tax-advantaged growth and use of the cash value is an important objective. In fact, to limit sales of universal life insurance where there seemed to be little regard for the death benefit at all, Congress added section 7702 to the Internal Revenue Code back in 1984.

Here’s the point. A client always has more than one need. Help them meet one need and they are a customer but if you help them meet more than one, then they could be a client for life. What about you? Do you have customers or clients for life?

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Failed Financial Beliefs and Time Tested Truths: Post 4

noreply@blogger.com (Insurance Insight Group) — Thu, 05 Feb 2009 18:08:00 +0000

This is the fourth and last post in a series that reviews retirement planning beliefs that have been shattered by a failing economy. Check out Post 1, Post 2 or Post 3 in the series, What to Do When the Financial Experts Don’t Know Anything, which discusses financial risk and guarantees.

Failed Belief No. 4: Buying a home is always a good idea.
The belief that it is always a good idea to buy a home led millions of American families to buy homes using whatever mortgage they could afford. Now, in the face of a recession and dropping real estate values, these families are at best, stuck in their homes due to having less equity than the market value, and at worst facing foreclosure. No matter how you look at it, their decision to buy a more expensive home than they could really afford was a big financial mistake.

Time-Tested Truth No. 4: Control the risks that you can control.
Financial advisors can really help a client by performing a risk audit. Take a look at the risks your client faces, help him to examine those risks, and help him to purchase affordable insurance to mitigate those risks. Every family should have homeowners, automobile, health, and life insurance. Many families should also have disability, personal umbrella liability, and long term care insurance. Too many families are inadequately protected.

This ends our four post series on failed beliefs of the experts and time tested truths are coming back in fashion. It’s a risky world. Financial professionals who value guarantees and insurance products can help their clients live comfortably. That puts everyone on solid ground.

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Failed Financial Beliefs and Time Tested Truths: Post 3

noreply@blogger.com (Insurance Insight Group) — Thu, 29 Jan 2009 17:55:00 +0000

This is the third of a four post series that reviews retirement planning beliefs that have been shattered by a failing economy and then revisits a time-tested financial planning truth we can expect to be championed again.

Failed Belief No. 3: Invest regularly in your 401(k), and it will take care of your retirement.
This is another unquestioned idea. Over the couple decades financial advisors have come to believe that if we invest regularly in our 401(k) and maintain a well-balanced retirement portfolio with choices of mostly stock mutual funds, we will certainly achieve a financially comfortable retirement. But the stock market losses of the past year have scuttled a lot of retirement plans.

Even worse, a report from Boston College’s retirement research center examined scenarios where workers had done everything right: Contributed 6 percent of pay to a retirement plan for 40 years, invested in a target date fund, and never touched their retirement savings until it was time to retire, the portion of their pre-retirement income that these savers could replace in retirement still varied dramatically depending on when they retired. Those retiring in 1948 could replace 19 percent, 1999 retirees could replace 51 percent, and 2008 retirees could replace 28 percent. Notice that none of these percentages is anywhere near replacing 100 percent of their pre-retirement income.

Time-Tested Truth No. 3: Make paying off debt and building your savings a priority.
Make eliminating your debt and building your savings a central goal of your monetary life. For example, encourage any client who has a debt other than a mortgage to set a goal to have it all paid off within a year. If your client makes that a priority, chances are he can do it. If your client has a mortgage, he should set a goal to have it paid off within 10 years.

Once your client is totally debt free, he should set a goal to add a particular dollar amount to his retirement savings every year. Whatever the financial goal is, if it is a high enough priority for him, he is very likely to achieve it. After he meets the first financial goal, you will have instilled in him a very good habit, so it will get easier.

Check out Post 1 and Post 2 in the series, What to Do When the Financial Experts Don’t Know Anything, which discusses financial risk and guarantees.

Our next post will put buying a home and controlling risk in perspective when considering financial security.

Share your thoughts by clicking on the “Add Comment” link below.

Failed Financial Beliefs and Time Tested Truths: Post 2

noreply@blogger.com (Insurance Insight Group) — Thu, 22 Jan 2009 14:23:00 +0000

This is the second of a four post series that reviews retirement planning beliefs that have been shattered by a failing economy. Each point will also revisit a time-tested financial planning truth we can expect to be championed again.

Failed Belief No. 2: Smart money management can achieve consistently excellent returns.
The grand financial institution, Bernard L. Madoff Investment Securities LLC, rose to prominence because it was able to consistently deliver above-average returns to its customers, no matter what the economic environment. Its founder and CEO was a very respected figure on Wall Street. Over the last several months we’ve learned that it was all a Ponzi scheme that lost perhaps $50 billion of investor funds.

And note this: The Madoff firm had 147 employees and 54 registered representatives. Didn’t any of them know that the firm’s financial statements were a complete fraud?

Time-Tested Truth No. 2: Always spend less than you make.
Investing regularly in your 401(k) is good retirement planning, but it is even better to consistently put money away year after year not only in your 401(k), but also in your general savings or retirement products. No matter how big an income you produce, if you outspend it, you will retire a pauper. How many times have we seen a once-famous athlete or entertainer filing bankruptcy?

Following this financial truth may mean you drive an older, less impressive car than your neighbor. It may mean that you eat out less. It may mean you live in a more modest home than your co-workers. But it will certainly increase your financial security and ability to retire comfortably.

Check out Post 1 in the series, What to Do When the Financial Experts Don’t Know Anything, which discusses financial risk and guarantees.

Our next post will focus on the retirement planning ideas we hold about our 401k savings and paying off debt.

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Video: Six Rule 151A Courses of Action for Insurance Marketing Organizations

noreply@blogger.com (Insurance Insight Group) — Wed, 21 Jan 2009 14:28:00 +0000

Insurance Insight Group sees six courses of action independent insurance marketing organizations can take concerning Rule 151A. We put together a presentation with Insurance News Net to explain specific tactics that can be effective in such a changing time as this.

The most important thing to keep in mind regarding Rule 151A is that change is inevitable. But, whenever there are major changes in any marketplace, there are opportunities for insurance marketing organizations to embrace the changes, respond aggressively, and grow their businesses.

We hope the presentation, Surviving a 151A World: A Six Part Action for Insurance Marketing Organizations, offers extra insight.

Share your thoughts by clicking on the “Add Comment” link below.

Rule 151A – Go Away!

noreply@blogger.com (Insurance Insight Group) — Tue, 20 Jan 2009 14:57:00 +0000

On Friday, the SEC’s new Rule 151A was published in the Federal Register. This is the rule that will make index annuities subject to securities legislation effective January 2011.

A coalition of insurance companies and independent marketing organizations, the Coalition for Indexed Products, promptly filed suit, seeking to overturn Rule 151A in federal court. Insurance Insight Group hopes the lawsuit is successful and the court strikes down Rule 151A.

Index annuity products provide much stronger guarantees of principal than securities products. At a time when investors in securities have lost trillions of dollars of their wealth, index annuity policyholders have lost nothing.

The SEC’s initial rationale for proposing Rule 151A was that there was, in the SEC’s view, rampant abuse in the sale of index annuities. It is hard to give this assertion any credibility when you consider that gaping regulatory failures in the securities markets are plainly evident to the general public. It seems to us that the SEC has misallocated its resources, attacking a class of insurance products that pose no risk all the while ignoring other areas with rampant abuses.

Index annuities are popular with retirees and people planning for retirement because they provide safety of principal with the possibility of higher interest crediting over time than traditional fixed interest rate savings vehicles. There is little doubt that Rule 151A would dramatically decrease the number of insurance agents selling index annuities, limiting the availability of these popular retirement products to consumers building a retirement strategy.

In September, then presidential candidate John McCain said that SEC Chairman Christopher Cox had “betrayed the public’s trust,” and “If I were president today, I would fire him.” While Mr. Cox’s term of office has ended, we hope that the federal court “fires” Mr. Cox’s misguided Rule 151A. It would be in the public’s best interest for Rule 151A to go away.

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What To Do When the Financial Experts Don’t Know Anything

noreply@blogger.com (Insurance Insight Group) — Fri, 16 Jan 2009 19:28:00 +0000

It seems that almost all the financial ideologies we have relied upon in recent years have turned out to be houses of cards.

It’s time to start picking up the financial mess that has been strewn across both Wall Street and Main Street. What is a consumer to do to ensure that their retirement savings will be their when they need them? Who and what retirement products can be relied upon? And, what assertions can a responsible financial advisor make to a consumer and know that he is truly standing on firm ground?

Over the next four posts, I’m going to talk about the retirement planning beliefs that have been shattered by a failing economy. With each point, I will also revisit a time-tested financial planning truth we can expect to be championed again. You know – those that were too conservative – too stodgy. Not surprisingly they are suddenly seen as wise advice again.

Failed Belief No. 1: Risk can be controlled.
No. 1 Merrill Lynch sold itself in hardship to Bank of America, and No. 4 Lehman Brothers and No. 6 Bear Stearns failed and went out of business. If these firms, each employing tens of thousands of the best financial minds in the business, could not control their risk enough to stay in business, how can the average future retiree expect to do so? And why should any retiree rely upon similar firms, their strategies, or their advice?

Time-Tested Truth No. 1: Nothing is a guarantee unless it is a guarantee.
When risk cannot be reliably controlled, and when wise management cannot achieve consistently excellent returns, guarantees matter. The good news is that whether you are offering annuities (index annuities, multi-year guaranteed annuities, etc.), cash value life insurance, or any other type of insurance product, there usually is an excellent selection of products that provide long-term guarantees and that are offered by solid, strong insurance companies. During the financial boom times, current and future retirees sometimes lose their focus on guarantees. But today, consumers and financial advisors can easily see the value of strong, long-term guarantees.

Share your thoughts by clicking on the “Add Comment” link below.

Our next post will focus on whether smart money management can achieve consistently excellent returns.

What Twinkies and Insurance Marketing Have in Common

noreply@blogger.com (Insurance Insight Group) — Tue, 09 Dec 2008 17:42:00 +0000

Getting the attention of your audience is getting harder every day. That's why you need to consider what supermarket aisles of Twinkies and doughnuts have in common with insurance marketing – and it’s more than you might think.

Consider thinking of the insurance marketing organizations or distribution partners you work with as supermarkets. Now you’ve probably spent a considerable amount of time and resources building relationships with these organizations. But so has your competition.

Insurance wholesalers stock their hypothetical shelves with annuity and life insurance products they offer to producers. They also have many more products than prime shelf space. So the question for you is: What shelf is your insurance product on? Is it eye level at a prime spot with the Twinkies and the doughnuts? Or, is it on the top or bottom shelf like the Streusel Cake and dessert cups?

The point is, you’ve made significant investments in building your product and getting the attention of the insurance marketer who can sell it.

Now, how do you get your audience to pay attention to your marketing message and take action? How do you get your product or service to be top of mind – or as in our example – get that prime shelf space?

It all starts with a good marketing plan. You must design comprehensive communication plans in a way that maximizes your marketing results. The next challenge is to get your audience to take action.

Insurance promotional efforts are all too often the “me too” variety and not truly unique. Which camp do your promotional efforts fall into? Truly unique promotional efforts will put you on the prime shelf space and allow you to stand out from the crowd to attract more premiums.

Truly unique campaigns, in short, digestible increments that speak to your audience are a must to be on the prime shelf space in today's insurance marketplace.

Do you create unique campaigns that get your audience to respond to your message and your product?

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Stock Market Crash of 2008 – Where Will Americans Put Their Retirement Savings?

noreply@blogger.com (Insurance Insight Group) — Mon, 13 Oct 2008 05:50:00 +0000

Going into the week of October 6, 2008, the stock market was having a dismal year, since the Dow Jones Industrial Average was already down 27% from its high one year earlier. Then, the Dow almost inconceivably plunged 18% in one week. The already inadequate retirement savings of the Baby Boomer generation took a staggering hit.

American citizens have seen big banks fail. They have seen a major insurer, AIG, require a government bailout. They have seen a money market fund break the buck. What does it all mean for where they will put their savings in the future?

I suspect it means two things, one of which is immediately good for the fixed annuity industry, and the other of which will require us to adapt.

The first implication is that consumers have again been acquainted with what investment risk really means. Whoever wasn’t already spooked by the stock market decline of 2000 – 2002 is now terrified thanks to the incredibly rapid decline of 2008. Thus, people will value safety and will be perfectly happy with the modest level of returns offered by fixed annuities.

The second implication is that people want to be able to move their money quickly and without penalty when they see the need to move it. This is where the fixed annuity industry needs to change. Our competitors, banks and mutual fund companies, enable customers to move money around quickly and without penalty.

Thanks to the stock market crash of 2008, our message of safety and stability will sell very well in the future. If we can pair that value with high-tech service processes and giving our customers flexibility to move their money, we have the potential to move alongside mutual funds as the American public’s savings vehicle of choice.

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SEC Rule 151A: What Happens Next?

noreply@blogger.com (Insurance Insight Group) — Wed, 24 Sep 2008 04:58:00 +0000

Rule 151A is the new rule proposed on June 25 by the U.S. Securities and Exchange Commission which would declare indexed annuities to be securities that must be sold through broker/dealers.

The official comment period for proposed Rule 151A ended on September 10. Counting form letters, the SEC received over 2,000 comments from insurance agents, registered representatives, insurance carriers, industry associations, and other interested persons.

Some within the insurance industry have characterized 151A as a raw grab for power by the SEC. They believe that the SEC will move forward with the proposed rule’s implementation regardless of the merit of any of the comments it has received. It certainly was not promising that the SEC received a letter signed by 18 members of Congress – a letter that merely asked the SEC to extent the comment period – and the SEC did not grant the extension.

So, now the entire industry waits for the SEC to show its true colors. Will it consider the merits of some of the comments, make changes to the proposed rule, and open a new comment period? Will it quickly move implementation forward with the existing proposed rule, as many fear? Or, will it surprise everyone by withdrawing the proposed rule completely?

Two things seem clear. One is that if you look at the entire landscape of the U.S. financial markets, index annuities should not be a major issue on the regulatory radar. The stock market, the credit market, the mortgage market, and the housing market are all a mess. Major retail and investment banks are faltering and failing. The federal government even needed to bail out Freddie Mac, Fannie Mae, and AIG at an enormous cost to taxpayers. Compare that to the index annuity market, where no policyholder has lost money other than by voluntarily taking an action that triggered a relatively modest surrender charge.

The other clear item is that if your income relies upon sales of index annuities, now is the time to prepare for this rule, just in case it is enacted. Increase your sales efforts related to traditional fixed annuities or life insurance. Those products have a lot of merit, and in fact, sales of traditional fixed annuities have increased dramatically this year. Also, study to obtain your securities license. It is best to be prepared. You cannot afford to have this rule take you by surprise.

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Where Will We Get New Life Insurance Agents?

noreply@blogger.com (Insurance Insight Group) — Sat, 09 Aug 2008 21:42:00 +0000

And, who will sell our products? Those are the big questions that will plague the insurance industry in a few years.

There is a fascinating article on this topic in the August 2008 issue of InsuranceNewsNet Magazine entitled “Is Wall Street Killing Life Insurance?” Here are some key statistics from the article:

More than 40% of the U.S. adult population has no life insurance whatsoever.
From 1985 to 2006, the number of life insurance policies sold declined by 39%, while the number of households with children increased by 19%.
There are 11% fewer producers today than twenty years ago. Some industry analysts say the number of producers could drop by 40% by 2017.

The article notes that the cause of these issues is that Wall Street does not reward investment in distribution. Insurance carriers have boosted profits by cutting their expenses related to developing tomorrow’s producers, and Wall Street has rewarded them with higher valuations.

Alternative distributions systems, such as banks and direct marketing firms, are not selling substantial amounts of life insurance. In the meantime, our country’s agent force is aging and shrinking. Get this: “Thirty years ago, the median age [of an insurance agent] was 38. Now it’s 53 and going up at the rate of one year every year. Half of the active producers today will retire over the next 10 years.”

Many industries will face a crisis finding workers in the future as our country’s entire workforce ages. But, the insurance industry looks like it will have even bigger problems than most simply because, as an industry, far too few organizations are even attempting to bring young people into a career selling insurance.

Of course, starting an insurance career from scratch has always been extremely difficult. It will be a shame for our country, however, if the general population becomes more vulnerable to financial risks as a result of the insurance industry’s underinvestment in future distribution.

How do we fix this problem?

Click the “Add Comments” link below to share your thoughts.

What Will SEC Regulation of Indexed Annuities Mean for Insurance Marketers?

noreply@blogger.com (Insurance Insight Group) — Thu, 26 Jun 2008 20:28:00 +0000

On June 25, the Securities and Exchange Commission announced that it will propose a new regulation regarding indexed annuities (Release number 33-8933, Proposed Rule 151A). The details provided by the SEC regulators made it clear that essentially all currently popular indexed annuities would be considered securities once the regulation goes into effect.

To back up the need for the new regulation, the regulators showed clips from the April 2008 Dateline NBC report called “Tricks of the Trade,” which purports to show abuses in the sale of indexed annuities. The regulators also mentioned the role of surrender charges in exposing purchasers to the risk of loss.

Without question, the insurance companies who write indexed annuities and the insurance industry lobbying organizations that they work with will attempt to vigorously oppose this proposed new regulation. They may even be successful in modifying the regulation or stopping its adoption altogether.

However, if I was the owner or CEO of an insurance marketing organization heavily dependent upon the sale of indexed annuities for my profitability, I would not wait to see how that process plays out. The risk to my business is too great not to work on a solution starting right now.

There are two primary courses of action that an insurance marketing organization can take. One course is to attempt to build the segments of its business that are not under regulatory attack, such as traditional fixed interest rate annuities or life insurance. Fortunately, in today’s environment of low bank CD rates and declining equity returns, traditional fixed interest rate annuities have tremendous appeal. The other course is to become securities licensed by setting up an RIA firm and/or a broker/dealer firm. This will not only allow me to offer indexed annuities, but a whole variety of securities as well.

The problem for annuity marketing organizations is that many agents will choose not to become securities licensed. So, the primary challenge for these annuity marketing organizations will be a training and motivation challenge – to induce as large a portion of their existing agent force as possible to become licensed and productive in the sale of securities.

As in any environment of intense change, there will be firms that aggressively embrace the changes taking place to grow and profit, and there will be complacent firms that suffer dramatic declines in sales and profit. The key question for each marketing organization principal is this: are you willing to make the effort?

Click the "Add Comments" link below to share your thoughts.

Annuities Are Never Stupid

noreply@blogger.com (Insurance Insight Group) — Mon, 16 Jun 2008 16:00:00 +0000

On June 12, 2008, The Motley Fool published an article by John Rosevear entitled “Are Annuities Ever Not Stupid?” The article mentioned that “we [the Motley Fool] really don’t like most annuities,” and it referred to equity indexed annuities as “ugly.”

In our opinion, Mr. Rosevear did not adequately answer the question he posed, so here is our answer. We believe that our answer does a better job of explaining why annuities are popular financial products.

Are annuities ever not stupid? Of course. Immediate, fixed, indexed, and variable annuities all provide an attractive value proposition to certain customers.

Immediate annuities: Retirees face a dilemma. They have a limited amount of savings, and if they dip into the principal to provide an adequate cash flow during retirement, they face the prospect of running out of money one day. Immediate annuities are the one financial product that can allow you to liquidate your principal yet be guaranteed not to run out of cash flow, no matter how long you live. This is because insurance companies pool the longevity risk across a large number of annuity owners, ensuring that there is adequate money to pay those who live a long time. As Mr. Rosevear mentions, the March 2005 issue of the Motley Fool’s Rule Your Retirement newsletter includes an article showing how adding a lifetime income annuity to your retirement portfolio can help ensure you don’t outlive your retirement savings.

Fixed annuities: Fixed interest rate annuities include so-called “CD-style” annuities. They are available in a variety of durations with a variety of interest rates. They are very comparable to bank CD’s and are often sold by insurance-licensed employees of banks. Because of the different investment strategies employed by banks versus insurance companies, there are times when fixed annuities offer much higher interest rates than bank CD’s of the same duration. When they do, fixed annuities are a smart choice for consumers who would otherwise put their money in bank CD’s.

Indexed annuities: Indexed annuities get some bad press because some writers and consumers by mistake think that these annuities are designed to replicate stock market returns. They are not designed to do that. They are designed to have similar safety of principal features as bank CD’s, money market funds, and savings accounts. They are an excellent choice for consumers who are looking for safety of principal yet the potential for a higher return than those other comparable products. You can even make a good argument that indexed annuities are more attractive than bond mutual funds. See our article, “Turning the Fixed Indexed Annuity Critic into an Advocate.”

Variable annuities: Variable annuities get some bad press because some writers (including most at the Motley Fool) believe that all customers should be willing to bear stock market risk in order to achieve stock market returns. But there is some risk of losing money in the stock market, even over long periods of time, and many consumers cannot stomach bearing that risk. So, variable annuities offer a way for such consumers to put money in risky securities. Consumers give up some of the return in the form of fees to the insurance company, which provides various guarantees to protect the invested principal. This provides a way for risk-averse customers to achieve some element of stock market return at a risk level that is comfortable for them.

Why do you think most commentators ignore the fact that annuities are a good option for consumers who are looking for safety of principal? What can we do as an industry to better educate these commentators? Click the “Add Comment” link below to share your thoughts.

Positioning Annuities for the Retirement Wave

noreply@blogger.com (Insurance Insight Group) — Sat, 07 Jun 2008 18:49:00 +0000

The June 2, 2008 issue of the Wall Street Journal includes an article entitled “Riding the Retirement Wave.” It is an article about the latest trend in mutual fund product development: managed payout mutual funds, which are designed to help boomers turn their savings into a steady stream of checks.

The advantages of the new managed payout funds are that they invest in multiple asset classes, they allow investors to withdraw their money at any time just like a traditional mutual fund, and the account balance can be passed along at death. The catch is that the funds’ values and payouts will fluctuate based on market returns. The funds can plan and promise projected payouts, but ultimately there are no guarantees.

According to the article, “most firms quickly point out that these [managed payout fund] products shouldn’t be considered substitutes for guaranteed annuities. For those whose nest egg is just sufficient to cover their expected cost of living, annuitization is likely the right decision because these retirees can’t tolerate much risk.”

This begs the question, what do some customers find unsatisfactory about annuities? The article answered that the disadvantages of annuities are that consumers fear the loss of liquidity, they feel that annuities have hidden fees, they don’t know how their money is being used (lack of transparency), and they feel that many annuities are too complicated.

So, as an industry, we can see our challenge. Part of the challenge is positioning. Annuities are criticized as complex and non-transparent, yet managed payout funds are surprisingly complex and non-transparent products. Regular statements are needed for these managed payout funds to show investors what fraction of each payout came from income earned by the fund, capital gains, and what was made from return of capital. The amounts paid out by the funds will fluctuate based on market returns.

Also, just because a fund carries a certain label, it does not necessarily make that fund consistent with other funds carrying the same label. For example researchers, at Financial Research Corporation in Boston recently looked at the assets of 58 mutual funds designed for workers planning to retire in 2020. Their findings were that the amount of holdings invested in stock, stock funds, and related instruments varied from 51% to 95%!

So, we must conclude that the mutual fund industry has taken very complex financial products and successfully positioned them as easy for the consumer to understand. Also, annuities are criticized as having hidden fees. Yet, every so-called “no load” mutual fund has an expense ratio that is never revealed on an account statement, only in a prospectus.

The payout phase of life is the phase where annuities should take center stage over mutual funds because of annuities’ guarantees and other safety features. If the mutual fund industry manages to capture the lion’s share of client assets during the payout phase of life, it will leave our collective retirements less secure, which could be a tragedy for us all.

What can we, as annuity creators and marketers, do to position the benefits of our products more successfully? Where should we focus?

Click "Add Comment" below to share your thoughts.

Whatever the Name, an Annuity Is A Much Needed Financial Product

noreply@blogger.com (Insurance Insight Group) — Thu, 05 Jun 2008 05:24:00 +0000

On May 29, 2008, the Iowa Insurance Commissioner published Bulletin 08-07, which outlined procedures that insurance carriers should follow for annuity illustrations.

Interestingly, there has been an NAIC Model Life Insurance Illustration Regulation on the books for over a decade now, but there is no similar regulation on annuity illustrations. Fortunately, most carriers have carried the spirit of that life insurance regulation over to the annuity side, in that they have included detailed disclosures on their illustration output and have limited the latitude agents have in projecting future product performance. But apparently there have been some exceptions.

The most interesting aspect of the Iowa bulletin is this directive: “Illustrations for fixed annuities which contain a ‘fixed interest rate’ which is specified in the annuity contract must clearly state whether or not the ‘fixed interest rate’ is actually permanently fixed or based upon an index. Consumers must be told if the ‘fixed interest rate’ may in fact vary, as determined on a contract anniversary.”

What makes this interesting is that indexed annuities were originally called “equity indexed annuities” by the industry. Then, when some in the securities industry started asserting that these annuities should be regulated as securities because of the equity link, the industry switched its terminology to “fixed indexed annuities” and started emphasizing that they are a form of fixed annuity. Apparently, this has led to some confusion with consumers who expect the annual interest credit to be steady, i.e. “fixed”, from year-to-year.

The wonderful thing about equity indexed annuities, fixed indexed annuities, or whatever you would like to call them, is that they are innovative and much needed financial products. Wouldn’t it be wonderful if we could come up with a brand new name to describe them, one that would not confuse consumers, agents, or regulators? A rose by any other name would smell as sweet.

Click on the “add comment” link below to suggest a name or leave a thought.

Let's Make Insurance Product Marketing More Personal

noreply@blogger.com (Insurance Insight Group) — Sun, 01 Jun 2008 16:27:00 +0000

Since I have an insurance license, every couple of weeks I get some big package in the mail from some random insurance carrier. It usually cost the carrier about $4.80 to mail and I’m willing to bet, especially for the last one I received, anywhere from $5 to $10 to print (the last one was really nice). My first thought is, “Wow. Someone just spent close to $15 to market their insurance product to me and they don’t even know me.” They usually get my name and address from some list they bought.

So what do I do? Well, I usually take a quick look at the material and skim the cover letter. I usually give it at least that much attention because I am an insurance marketing strategist and I am interested in how other people market insurance products. My next step after that is to usually pitch it into the recycling bin. Then I usually wonder how many of these product promotions go into the trash and wind up in a landfill. It makes me a little sad to tell you the truth. Sorry, I’m here to focus on insurance marketing and not saving the environment. Let me get back on track.

Is this “spray and pray” marketing really effective? To me it’s kind of the equivalent of randomly meeting someone on the street and offering a marriage proposal all at the same time. Call me old fashioned, but where is the courtship? What about letting me get to know you and building a relationship? After all, isn’t marketing and sales about relationships?

I have a problem with this type of marketing and producer recruiting. One, I think it is overwhelming to the recipient. How is someone supposed to digest all that information all at once – and why would I want to? And, honestly, if I have that much time to review all that material I’m probably not setting any sales records. Two, I believe it is very impersonal. You have to have a pretty big marketing budget for that kind of marketing. Why not use that marketing budget more strategically? There are so many options to create a marketing strategy that can be viewed by your audience more effectively and seen as being more personal.

As attention spans get shorter and shorter we should all be looking at ways to engage our audience in a way that makes them feel like they are the only person we are communicating with at that time. The communications can be concise, targeted, economical, and still get our point across.

What are your thoughts? Click on the “add comments” link below to share your thoughts.

Road to Retirment - People Want What Annuities Offer

noreply@blogger.com (Insurance Insight Group) — Fri, 23 May 2008 18:02:00 +0000

In the May 26, 2008 print issue of Fortune Magazine, there is a special 7-page advertising section entitled “The Road to Retirement.” Sponsored in partnership with the National Association for Fixed Annuities, this section discusses the benefits of owning an annuity.

Even though it is a paid advertisement, it's refreshing to see something in print that discusses the benefits of owning an annuity instead of criticizing the product.

At the end of the day, real-life customers want the things that annuities offer: safety from market risk, tax deferral, and assured income. Customers are not necessarily looking for the highest possible return when the stock market does well. They are looking for good returns consistent with assured preservation of their capital.

The material presented in the advertisement should make each of us in the annuity market feel a little more confident in ourselves. We are not selling a second-class product. We are selling an outstanding product. Even if the financial press sometimes seems biased against our product, customers are what count. And, they like what we are offering.

What more can we do to promote the benefits of annuities? What are your thoughts?