Article discussing longer term implications of the current challenges facing the industry and likely structural changes that will occur over time. Technology, talent management, operations and service differentiation are all discussed.

1. By Jennifer C. Rankin
cover focus
10 March 2012 RESOURCE
What’s Ahead?
Our Industry in 10 Years
What will the insurance sector be
like 10 years from now? Resource
turned to some seasoned industry
executives for answers.

2. www.loma.org 11
t the end of 2011, Resource asked
insurance industry leaders to share
their thoughts on what the year
ahead holds for sales and profitabil-
ity, structural change, information
technology, and customer service, publishing
their predictions in January (see “Forecast
2012”). Here, we bring you their answers to
three questions with a longer time horizon:
What do you think our industry will be like
a decade from now? What opportunities does
the future hold? Will the industry be drast-
ically different and, if so, how will it be different?
The executives who answered these
questions are a cross section of the board
of directors of LL Global, the umbrella
organization for insurance industry trade
associations LOMA and LIMRA, plus other
key industry players. They are:
Neal Baumann, global insurance leader,
Deloitte
Benjamin Qiao Bujia, FSA, general manager,
corporate planning department, Huatai Life, a JV between
ACE Life Assurance and Huatai Insurance Group
Thomas P. Burns, CLU, ChFC, chief distribution officer,
Allianz Life
Steve M. Callahan, CMC®
, ChFC, CLU, FFSI, FLHC,
FLMI, senior consultant and practice development director,
Robert E. Nolan Company
Michael R. Fanning, executive vice president,
U.S. insurance group, MassMutual
Doug French, managing principal, insurance actuarial
advisory services practice, Ernst & Young
Peter A. Golato, CLU, ChFC, senior vice president,
individual protection, Nationwide Financial
W. Kenny Massey, FICF, LLIF, president and CEO,
Modern Woodmen of America
Paul Rutledge, FSA, president, SCOR Global Life Americas
Tim Stonehocker, executive vice president, individual
and AIC, Ameritas Life
Craig W. Weber, senior vice president, insurance, Celent
BAUMANN: Deloitte believes there could be noticeable shifts on
several dimensions. For example, we would expect to see more
consumer-centric business models, with simplified and easier
to understand products. We expect to see successful moves in
testing the prevailing conventional wisdom that
‘life insurance is sold and not bought’. We would
expect to see some noticeable shifts in stream-
lining key dimensions of the operating model—
focused essentially on reaching new heights of
operating efficiency and delivering a different-
iated customer experience. And we expect
to see noticeable movement from a con-
solidation perspective.
BUJIA: A decade from now, the core business
model and service of our industry will be
well established [in China]. More protec-
tion rider products will be available for
customer choice. The annuity business will
enjoy certain tax preferential treatment and
our industry will be acknowledged as retire-
ment service experts. On the distribution side,
Web-based sales will become a major channel.
Individual general agents will be able to
sell the products of multiple life companies.
The bank channel will be mainly focused on qualified
annuity business, which enjoys preferential tax treatment.
Immediate annuity products will become popular. Entry stan-
dards for agents will be much higher than current standards.
BURNS: Amid volatile markets and an uncertain retirement
system in the U.S. (lack of defined benefit plans, solvency of
Social Security, etcetera) the life insurance industry has a tre-
mendous opportunity to serve as the face of safety and security
for retirement savings. By laying the groundwork now through
continued product education and sharing our insights about
the future of retirement, we can help people prepare for the
challenges that tomorrow can bring. We expect to see con-
tinued convergence between traditional channels. This will
results in fewer “fixed only” insurance agents replaced by more
registered reps and registered investment advisors using insur-
ance products for a portion of their business. We believe there
will be a growth in the fee-based platform, using annuities to
provide income solutions for 401(k) and other retirement
funding alternatives.
CALLAHAN: First and foremost, the changing nature of the
market demographics as the shift continues towards greater
ethnic diversity amplified by continued high rates of legal
immigration. Buyer profiles and economics as well as cul-
tural expectations and even language shift along with these
demographics, bringing with them a challenge for carriers to
be able to effectively deliver upon. Multilingual agents, mate-
rials, and service centers will become increasingly import-
ant depending upon what markets a carrier chooses to pursue.
Companies
without a
social [media]
presence by
2022 will
effectively
be out of the
life insurance
market from a
share growth
perspective.

3. 12 March 2012 RESOURCE
Benjamin Qiao Bujia
Huatai Life
Neal Baumann
Deloitte
Thomas Burns
Allianz Life
Steve Callahan
Robert E. Nolan
Company
Mike Fanning
MassMutual
Even product design will be affected as the
needs of different cultures and generations
bring with them a different desired feature
set. Already, the shift from asset accum-
ulation to income streams has dramatically
impacted product design and focus as SPIAs
start to lead the way materially over other
products and only universal life (UL) sees any
real growth on the life side.By the year 2022, the
mix of cultures and ages will be broad enough to
require carriers to have successfully bridged the
gap in providing individualized attention and
solutions to each of the targeted market segments.
Which brings up the importance of being
increasingly more effective in identifying and
targeting the ideal and most profitable market
segments, while at the same time being willing
to walk away from other less profitable or even
unprofitable ones. With market segmentation
as a key need, and greater insights into behav-
ioral risk factors another, the growth in the
use and complexity of analytics will continue
well past 2022, and will become foundational
to all aspects of a carrier’s value proposition—
from product design, through selected distribution method,
to service standards and mode. Companies not already on
the analytics band wagon should quickly regroup and strate-
gize about the value of the long term role this combination
of technology and intellectual capital will provide, as many
competitors have already taken the leap and are well invested
in analytical warehouses and advanced, even predictive,
selection tools.
Distribution, while greatly facilitated by the internet
and online interaction, needs analysis, illustration, and even
submission will become more prevalent, there will remain a
role for the individual agent given the width of the genera-
tional constituents in the market in 2022—
Baby Boomers on the retirement income spec-
trum of the lifecycle will continue to demand
products with guarantees as the younger
Gen Y enter the market and start researching
and buying online. This brings up another
major change underway in the industry—
the integration of an online social media
presence into the marketing, sales and even
operations areas. The next large generation
of life insurance buyers is Gen Y, and they
grew up living online, which means their
purchasing behavior will vastly differ from
today’s Baby Boomers. Companies without
a social presence by 2022 will effectively be
out of the life insurance market from a share
growth perspective, and will taper along with
Baby Boomers expiring absent an urgent
catch-up effort. Social networking, and col-
laborating with the distribution channel to
assist them in providing a controlled presence,
is a key to successfully adapting to the reliance
upon the online communities for opinions,
research, and service experiences. By 2022,
social media and the Web will be an integral and almost
primary marketing investment and strategy in serving both
distribution and consumers directly.
Products will have had to shift to greater flexibility while
still providing simplicity and clarity of understanding. Com-
plex product bases with riders layered on top to cover a variety
of individual needs will need to gradually be phased out and
replaced by a more simplistic approach to coverage components
that can be assembled into individualized solutions. And these
solutions have to have conversion and migration options built
in to allow change to the elements of coverage as the insured
goes through life event changes and takes on different roles
Over the next
10 years,
all financial
institutions
will have
to adapt to
what is likely
going to be an
increasingly
intense and
complex
regulatory
environment.

4. www.loma.org 13www.loma.org 13
Peter Golato
Nationwide
Financial Services
Kenny Massey
Modern Woodmen
of America
Craig W. Weber
Celent
Doug French
Ernst & Young
Tim Stonehocker
Ameritas Life
Paul Rutledge
SCOR Global
Life Americas
and responsibilities. Hand in hand with product simpli-
fication comes greater standardized regulation across the
states, as the needs for transparency, clarity, and stability
drive stronger compliance with cash flow testing, solvency,
suitability, and disclosure. Distributors and carriers alike will
need to be prepared to disclose the intricacies of both product
design and composition as part of the sales process.
Technologically, the Web will provide a seamless presence
throughout life’s activities in 2022, putting the power of vast
amounts of information as well as opinions at the fingertips of
every individual. Companies will need to invest in compliance
systems, reputation monitoring solutions, and online content
management to ensure staying competitive with those carri-
ers willing to invest in a dynamic Web presence. Consider the
impact of Progressive’s Flo, whose fan page on Facebook
already has millions of followers, more so than many
companies themselves. This kind of creative leveraging of the
Webwillbecomethefoundationforbuildingouttheonlinesales
and service components of the 2022 carrier.
What opportunities demand action?
n Leverage social media to build awareness, serve customers,
protect reputation, and expand market access.
n Invest in technologies that will integrate with the commod-
itization of SaaS and Cloud solutions for the industry.
n Simplify products while looking at ways to more easily
integrate a variety of features that allow age, time, or event
driven conversion options.
n Integrate advanced analytics into all decision-making
processes across the company, investing in the ability to look
across functional silos at the data as a whole in determining
everything from pricing to sales and delivery methods.
n Seek ways to simplify the risk assessment process, focusing
on cycle time compression while maintaining book of
business integrity.
n Invest in the front-line staff, providing stronger tools,
scripts, training, authority, and discretion in order to com-
pete on the basis of service experience over product price.
n Contemplate global expansion, block of business sales
or swaps, and selective acquisitions as a way to create a
coherent market value proposition that optimizes product
portfolio and company strengths.
n Return to the basics of Porters management strategies,
environmental scanning, and focusing on that which can
be done with the least investment to the most advantage
over competitors.
Distractions abound as the economy continues to com-
press profit potential and challenge leaders to find alternative
solutions. In finding these solutions, while looking to the bottom
line, keep an eye on the future. Be there before your competitors.
FANNING: Ten years from now, I don’t expect our industry to
be drastically different, but I do think it will continue to evolve.
The biggest changes will likely come in the sales and service
processes. Technology will enable us to do things a lot more
efficiently, particularly in the underwriting side of the business.
I can see us someday being able to deliver a policy very soon
after a potential customer submits an application. As mentioned
earlier, social media is starting to change the way we all connect
with our customers, and I would expect even more dramatic
changes in the future. In some ways, though, I see what people
fundamentally value most in this industry remaining the same.
The economic conditions and volatility of the past few years
have shown that people demand security and stability from their
financial provider, and that’s why financial strength, quality
products, excellent customer service and a knowledgeable,
trusted financial professional will always be essential. If you have
all those, and you’ve harnessed technology to the point where
you can deliver a seamless experience for the customer, you’ll be
among the winners in our industry.

5. 14 March 2012 RESOURCE
FRENCH: Over the
next 10 years, all
financial institutions
will have to adapt to
what is likely going
to be an increasingly
intense and complex
regulatory environ-
ment. A more regu-
lated market will drive
enhanced consumerism and will result in
more transparency and disclosure around com-
pensation and commissions. Companies will
be forced to make their products less complex
and more understandable to the consumer.
Inefficiencies in distribution will need to be addressed, and
companies looking to stay competitive will make significant
investments in technology, particularly with the importance
of online presence continuing to rise. And for any organization
to effectively address these concerns, management will have
to adopt a more active approach than they traditionally did
in the past. Those who continue to be passive and reactive will
lose market share. The companies that will succeed will be
those who are more nimble and innovative, adapting to a
changing environment.
GOLATO: Ten years from now, life insurance will still be sold
by agents, but there will be more avenues for growth; trans-
actional products may find a niche in on-line sales and we may
see non-traditional carriers enter that market. Service will be
a key differentiator for carriers and technology will make
underwriting less intrusive for customers, even at larger
face amounts.
MASSEY: We must gain the high ground morally in the mind
of the public. [We must] be better at self policing our sales
practices at the sales level, be quick at the corporate [level] at
standing behind our product promises and representations, and
be an industry that is for the customer, not for corporate profits.
RUTLEDGE: Based on history, it takes more than a decade to
move the big ship of life insurance. However there are forces at
work both domestically and internationally that will manifest
themselves in the upcoming decade and have lasting effects on
our business. How U.S. regulators respond to global regulatory
and accounting changes is still unknown but we’re moving in
the direction of convergence.
Changing the way we account for insurance contracts from
book value to fair value will drastically affect the cost of capital
and could force the industry to merge and consolidate faster
than we had expected. It could also have a significant impact on
the types of products and services we offer, pos-
sibly to the detriment of the public. The propos-
als being debated favor simple, commodity-like
products, and may diminish or even preclude
the availability of long-term guarantees that are
valued by the public and lie at the heart of the
life insurance business.
The industry is at a tipping point. If it moves
in a direction that preserves the balance sheet
and aligns with public policy we’ll have a busi-
ness that is viable a decade from now. If not, the
unintended consequences are hard to discern
but will certainly diminish the industry’s ability
to continue to provide guarantees and value to
the public.
If the industry is not weakened by regulation and account-
ing regimes, it has a bright future with regard to protection
and savings products in general.
The aging of the customer base provides opportunities for
the industry but only if regulators and life insurers are open
to innovations in products and in ways to connect with the
customer base.
I think there are opportunities for both growth and
efficiencies in distribution, especially when the potential of
technology is more fully realized. Also, to the extent that prod-
ucts become simpler and less complicated, other marketing
venues will become more effective so insurers will be less reliant
ontheroleofthecurrentagencysystems.Thiswilllettheindustry
take advantage of opportunities in the middle market.
STONEHOCKER: A decade from now, we will be delivering our
services with greater technology and fewer people. We will have
fewer companies so will probably still be serving fewer people.
We will see more companies focused on the asset accumu-
lation side and failing on the protection side. Our tax laws will
be different so our products will adjust. Mutuals will make a
comeback as we are seeing today.
WEBER: I think our industry will have refined its value propo-
sitions to customers significantly. Right now, the insurance
sales process is still designed to match customer needs to an
existing suite of products, and we can’t always articulate the
real value we’ve provided, other than raw insurance coverage.
I consider this to be a missed opportunity. People buy insurance
for all kinds of reasons, and in the next decade we’ll develop
some insights into the many different value propositions that
result in a sale. Increasing our sophistication in understanding
consumer behaviors will give us better efficiency and better
customer satisfaction, and that will improve our fundamentals
in a powerful way. w
Other Views on Industry’s Future, page 16
I think our
industry will
have refined
its value
propositions
to customers
significantly.