A New Need for Life Insurance in the Senior Market:
Income Protection
Walter H. Zultowski, Ph.D.
WZ Research + Consulting, LLC
SOA Life and Annuity Symposium
May 22, 2012
The Life Insurance Purchasing Lifecycle
Socio-Economic Status
Higher
Income Protection
Income Protection
Lower
20
40
60
Age
2
80
100
Current Environment: Academic Coverage
“…working longer is the key to a
secure retirement for the vast
majority of older Americans…”
What is the Average Retirement Age?
Center for Retirement Research at
Boston College
“…for many Americans, the
foundation of their retirement
strategy is simply to not retire or
to work considerably longer than
the traditional retirement age of
65.”
The New Retirement: Working
12th Annual Transamerica Retirement
Survey
3
Current Environment: General Media Coverage
“Many older people are finding
themselves in a position they
never expected to be in at
retirement age: still working or in
need of a job.”
For Many Seniors, There May Be No
Retirement
The Wall Street Journal
“Many older workers are
responding to the economic
downturn by postponing
retirement, but even so it will be
a struggle to make up for market
losses in their retirement plans.”
‘Scary’ Economy Delays Retirements
The Hartford Courant
4
A Perfect Storm of Demographic and Economic Events…
Demographic
•
•
•
•
•
•
Delayed household formation
Divorce and household reformation at later ages
Increased longevity
Increasing likelihood of health care needs
Longer number of years supporting adult children
Increasing need to support “old – old” parents
6
A Perfect Storm of Demographic and Economic Events…
(cont’d)
Economic
•
•
•
•
Increasing costs of health care and long-term care
Disappearance of defined benefit pension plans
Fragility of existing public and private pensions
Decimation of retirement “nest eggs” during the
“Great Recession”
• Housing no longer a “Bond Fund”
• Fear of a “Double-dip Recession” and/or stagnant
economic growth
• Widespread job layoffs affecting people in their 50’s
and 60’s
7
Exacerbated by…
• 20- or 30-year term life insurance expiring before the
need for coverage has expired
• Disappearing employer-sponsored group term life
insurance, resulting from job change or layoffs
8
Case Study
How one company is acting
to penetrate the senior market for life insurance
9
Amica Life
•
•
•
•
•
•
Lincoln, Rhode Island
Wholly-owned subsidiary of Amica Mutual
Legendary for customer service and satisfaction
Primarily provides term life insurance
Marketed through direct response/call center
Primary market is the Amica Mutual P&C policyowner
base
10
Potential Within the Amica Mutual Market
# of Life Policies Issued
# of Auto Customers
<25
25-34
45-54
35-44
Age Ranges
11
55-64
65+
A Two-Pronged Strategy for the Senior Market
Socio-Economic Status
Higher
Income Protection
(20-year level term)<->(10-year level term)
Final Expense
(Simplified issue whole life)
Lower
50
70
60
Age
12
80
Step 1: Market Research
Validating the Need
“I don’t think I’ll be as comfortable [in retirement] as I’d
hoped. It will be later than I thought, and won’t be as
luxurious. The stock market just whomped me. It’s
not what I envisioned it would be.”
“I retired two years ago. We built a home, and have
about 50% equity in the house. So if something were
to happen to me, my wife would have to sell the
house. She would have to downsize. I think I’d like
to protect against that.”
13
Validating the Need (cont’d)
“I’m concerned. I’m planning on retiring in about 12
years. I was planning on doing so sooner, but with
costs, the economy, and health care [it’s not going to
happen]. I had to make a job change a while ago, so
I’m not making what I used to make. So it’s one layer
after another layer after another layer; it makes me
cautious.”
14
The Role of Expiring Term Coverage
“It’s term life that my husband and I have. We worry
because it’s going to expire.”
“A good question is [what happens] when our term
insurance expires; will we need life insurance beyond
this point?”
“It’s the term dilemma. It’s hard to have that policy end,
and then have nothing.”
15
The Cost of Coverage When You’re Older
“I could probably get life insurance today, but it would
probably cost and arm and a leg because of my age.”
“I should have bought a longer term. It’s coming to an
end now, and to buy what I have now would be very
expensive.”
“I have a 20-year term; I wish I’d gotten a 30- or 40-year
term. Now trying to get another term policy, but it’s
not affordable.”
16
The Cost of Coverage When You’re Older (cont’d)
“I’m turning 70 next month. Today I just took delivery of
a brand new term life policy -- a 15-year policy. I was
able to get a premium non-smoker rate. Otherwise, I
could never afford something like that. I have life
insurance that is expiring this August, and that was
the trigger for this.”
17
Some Summary Comments
“The concerns are different. When you’re younger, it’s
all about your family. As you get older it switches to
you -- your health, ability to pay bills, etc. Once
you’re older, the concerns just change.”
“[Regarding the role of life insurance over time] the
burden shifts from others to us. When you have a
young family, it’s all about the children. When they’re
on their own, it’s all about us.”
“[Buying life insurance] it’s the last thing you have to do
to complete your retirement plan.”
18
Step 2: Developing Marketing Programs
• Direct Mail
– Use of targeted “advertorials”
– Training of the call center staff
• Future Marketing Activities
– On-line marketing
– Senior market microsite
19
Challenges to This Strategy
• The economy strengthens, retirement portfolios
rebound significantly, and the need to continue
working into one’s retirement years disappears in the
marketplace
(Would anyone bet on this scenario?)
• Due to health reasons and/or the economy, seniors
are unable to continue working, or are unable to find
work even on a part-time basis
20
Challenges to This Strategy (cont’d)
• Regardless of their personal health, many consumers
believe that life insurance is either unavailable or
unaffordable at older ages
(THEY BELIEVED US!)
• Many agents, while recognizing this trend in the
marketplace, have failed to translate it into a need for
income protection life insurance
21
Other Considerations
Product
• Keep it simple
Messaging
• Don’t make it sound like they failed to plan
Selling
• Educate the sales force regarding this need in the
marketplace
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