ASISA Assembly 2014
Robert A. Kerzner
President and CEO
LIMRA, LOMA, LL Global
The Trusted Source for Industry
Knowledge
Learning &
Development
Research
Research
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Development
Professional Networking
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Nearly 100 Years of Providing Industry
Research and Knowledge to:
More than 800 member companies in
65 countries worldwide
Leading Media Outlets
• Wall Street Journal
• Bloomberg
• CNN
Policy-makers/regulators/legislators
• Treasury Department
• Insurance Commissioners
• GAO
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LIMRA Research—A Catalyst for New Ideas
Benchmarking and Sales Trends Research
Distribution Research
Consumer/Customer Engagement
Research
Technology Research
Custom Research
International Research
The LIMRA Secure Retirement Institute
LIMRA employs 80 researchers to provide this research to our members.
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Life insurers infused
R176 billion
into the South African economy
through death benefits
paid to beneficiaries in 2013.
Source: ASISA Annual Report, 2013
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The financial services industry makes up
20 percent
of South Africa’s GDP.
Source: ASISA Annual Report, 2013
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LIMRA’s Market Maturity Model
China
I
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The Dichotomy of the
South African Population
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Forces of the Future
Demographics
Major Driver
of Growth/Change
Focus
on
Retirement
Risk
Regulation
&
Legislation
Technology
Unknown
Legislative Changes
Create New
Markets
External
Forces
The
Change Agent
Possible
Disruptors
How We Engage
Interest Rates &
Investment
Climate
How We Become
More Effective
Globalization
OR
Rules/Regs Make It
Hard to Do
Business
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South Africa Has a Young Population
South Africa - 2050
Male Population
100+
90-94
80-84
70-74
60-64
50-54
40-44
30-34
20-24
10-14
0-4
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Source: U.S. Census Bureau’s International Data Base
Female Population
Advice Model
Under
Scrutiny
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Commission Advice Under Pressure
Commissions Banned in 2007 and 2008:
Finland
Norway
Countries Where Commissions Were Banned in 2013:
United
Kingdom
Australia
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Netherlands
Regulators Believe:
Commission sales are inherently “conflicting”
— lead to lack of objectivity.
Fee-based sales remove all bias.
Consumers are willing to negotiate
& pay for advice.
Low-cost, free advice will be more
available.
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Consumers Say They Prefer Flat Fees
Commissions
Develop and implement a
plan for retirement income
9%
Flat Fee
Annual Fee
55%
13%
Develop and maintain a
financial plan
Advice on insurance type,
amount, and options
10
55
13
9
58
8
Advice on which types of
investments to buy or sell
11
54
11
Source: Bye-Bye Commissions, LIMRA 2012
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1 in 5
Consumers are willing
to pay more than $100
for advice
80 percent of U.S. consumers
will pay less than $100
Consumers are willing to pay
far less than the cost of providing advice.
Source: Bye-Bye Commissions, LIMRA 2012
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In UK, Consumers Won’t Pay
for Advice
Half of consumers are not willing to pay more than
£50 ($80) for an hour of professional advice
Source: Bye-Bye Commissions, LIMRA 2012
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Consumers in UK
84%
not aware of RDR or
that they will have to pay
for financial advice
54%
Source: Deloitte, 2012
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said they would
refuse advice rather
than pay a fee
Impact of Retail Distribution Review (RDR)
in United Kingdom
Number of IFAs and tied-agents
40,566
31,312
Pre-RDR
Post RDR
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New IRDA Rules Resulted in 20%
Drop in Agents
Number of Agents
(millions)
2.6
2.4
2011
2012
Source: IDRA Annual Reports, 2011, 2012, 2013
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2.1
2013
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Regulation in China
•
2010 reg. # 90 banned insurance advisors from
selling in bank branches
•
Limits banks to selling no more than three of a
given insurers’ products
•
Unit linked products can only be sold through
wealth management centers
•
Sales staff must hold specific designations and
experience to sell investment and UL products
Source: interviews with Chinese members
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New Regulations Dampen
Bancassurance Sales
In 2011, CIRC and CBRC released new rules to impose stricter control.
Bancassurance Market Share
2010
2011
China Life
50%
46%
Ping An Life
11%
13%
New China Life
67%
60%
China Pacific Life
55%
48%
Taiking Life
74%
68%
A 2014 regulation resulted in a 60% decline in
bancassurance policy sales by eight major
life insurance companies in China
Source: 2012 Special Report: Asia-Pacific Life – Review & Preview. Growth Pauses
in Asia-Pacific Life Markets as Insurers Seek New Routes to Expansion (2012), AM Best,
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Shanghai Securities News
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7 in 10 Canadians Prefer to Purchase
Life Insurance Face-to-Face
Future Preference For Buying Life Insurance
Canada
U.S.
6%
9%
Face-to-face
11%
Worksite
16%
7%
76%
18%
57%
Internet
Direct by mail
or phone
Source: 2013 Canadian and 2010 U.S. Life Ownership Studies
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In general, consumers don’t trust life
insurance agents or advisors
64%
41%
32%
25%
More interested in fees
& commissions than
what's right for you
Can assist with wide
range of products
Provide clear
explanations of policies
Are trustworthy
Source: Advisor For Life, LIMRA 2009
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But when it comes to their advisor…
83%
of consumers who
work with a financial
advisors, trust them
Source: Finding the Right Mix: Retirement Income Attitudes and Preferences, LIMRA Secure
Retirement Institute, 2014 (in progress).
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Advisors Make a Difference
Contribute to a Retirement Plan
78%
43%
With Advisor
Source: Use of and Impact of Advisors, LIMRA, 2012
Without Advisor
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Consumers Who Use Advisors Also
Save More
Percent of consumers who defer more than 7% of their income into employer’s
defined contribution retirement savings plan.
61%
38%
With Advisor
Source: Use of and Impact of Advisors, LIMRA, 2012
Without Advisor
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Pre-retirees who worked with advisors feel
more prepared for retirement
Pre-retirees (age 55 or more) Preparedness for Retirement
40%
39%
34%
31%
19%
18%
16%
3%
Well Prepared
Moderately Prepared
Work with an advisor
Poorly Prepared
Not Prepared
Do not work with an advisor
Source: Retirement Income Reference Book, LIMRA Secure Retirement Institute (2012)
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Retirees working with advisors are
more confident
60%
60%
56%
52%
46%
38%
37%
28%
32%
36%
29%
33%
Currently very involved Periodically I spend time Pay attention to the
More willing to take an Investing in the stock
Confident that I'll be
in monitoring and
investigating and
financial ratings and
investment risk in my market is appropriate for
able to live the
managing my savings deciding whether to buy stability of companies I DC plan than with other
me
retirement lifestyle I
a specific financial
invest with
investments
want
product
Work with advisor
Do not work with Advisor
Source: Retirement Income Reference Book, LIMRA Secure Retirement Institute (2012)
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Pre-retirees who have advisors have done
more planning than those without an advisor
Pre-retiree Retirement Planning Activities Completed
58%
56%
52%
50%
42%
39%
40%
32%
30%
23%
24%
18%
Calculated the
Determined what Determined what Estimated how
Identified the
None of the above
amount of assets your income will your expenses will many years your activities you plan
you will have
be in retirement
be in retirement assets will last in to engage in and
available for
retirement
their likely costs
retirement
Work with an advisor
Do not work with an advisor
Source: Retirement Income Reference Book, LIMRA Secure Retirement Institute (2012)
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Three in 10 U.S. Households Have
No Life Insurance
83%
83%
81%
78%
76%
78%
72%
70%
65%
62%
55%
54%
46%
53%
52%
52%
50%
50%
49%
44%
1960
1976
1984
Total
1992
Group
Source: LIMRA Household Trends in U.S. Life Insurance
Ownership, 2010
1998
2004
2010
Individual
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Americans Households Owning
Individual Life Insurance
72%
65%
62%
55%
50%
50%
44%
1960
1976
1984
Source: LIMRA Household Trends in U.S. Life Insurance
Ownership, 2010
1992
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1998
2004
2010
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Canadian Household Life Insurance
Ownership at Record Lows
78%
79%
75%
68%
59%
56%
60%
54%
50%
55%
52%
43%
1982
1999
Total
2006
Group
2013
Individual
Source: Canadian Life Ownership Studies
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American Households That Say
They Need More Life Insurance
Source: LIMRA Household Trends in U.S. Life Insurance
Ownership, 2010
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Canadian Households Needing More
Life Insurance at All-time High
2013
2006
1999
6.1 million
45%
38%
4.7 million
3.6 million
Sources: Canadian Life Ownership Studies (LIMRA) and Statistics
Canada
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33%
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Americans’ Top Financial Concerns
Extremely concerned
Very concerned
Concerned
67%
Money for a comfortable retirement
58%
Paying for long-term care services
Supporting self if disabled
57%
Paying for medical expenses
57%
48%
Paying monthly bills
43%
Losing money on investments
Reducing credit card debt
42%
Paying my mortgage or rent
42%
Burdening dependents financially
if I die prematurely
39%
37%
Burdening others with final expenses
33%
Leaving an inheritance
Paying for a child's
schooling/college
Source: 2013 Insurance Barometer Study, LIMRA & LIFE
29%
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Living Expenses Have Increased
Peanut Butter
Average Price
2002 - $1.96
2012 - $2.75
Coffee
Average Price
2002 - $2.92
2012 - $5.98
↑40%
↑90%
Orange Juice
Average Price
2002 - $1.84
2012 - $2.69
↑46%
Gasoline
Average Price
2002 - $1.44
2012 - $3.73
Electricity – kw/hr
Average Price
2002 - $0.091
2012 - $0.130
↑158%
↑42%
Source: Consumer Price Index, Bureau of Labor Statistics
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Every day expenses limit achieving
financial goals
 61% energy costs (oil, gas, electric)
 58% every day living expenses (food,
clothing,
transportation)
 50% debt payment (credit card balances,
loans, equity lines of credit)
 46% housing costs
 43% taxes (income, sales, property)
What limits your ability to save
for goals or for discretionary items.
Source: 2008 Middle Market Study
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Americans’ Disposable Income Has Been
Dropping for 30 Years
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South Africans Have Other Priorities
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Behavioral Economics
Helping us understand the seemingly
irrational decisions of consumers about
investments, savings and insurance.
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Which Would You Choose?
70%
Consumers who chose chocolate
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Source: Presentation by Dr. Barbara Fasolo, Senior Lecturer in Behavioral Sciences, London School of Economics
Self-control is not a problem in the
future
I start my diet
on Monday….
Solution: Commit to save later
Offer programs that allow employees to
commit future income to retirement plan
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Source: Presentation by Dr. Barbara Fasolo, Senior Lecturer in Behavioral Sciences, London School of Economics
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We live…NOW
Thinking about “future self”
elicits neural activation
patterns that are similar to
neural activation patterns
elicited by thinking about a
stranger.
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Source: Presentation by Dr. Barbara Fasolo, Senior Lecturer in Behavioral Sciences, London School of Economics
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Age Progression
Age 70
Age 10
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Using Virtual Games to Show People their
“Future Selves”
In a 2011 paper, Professor Jeremy Bailenson reported that those who had seen
their future selves in the virtual mirror subsequently put twice as much money
into a savings account as those who hadn't.
Source: Increasing Saving Behavior Through Age-Progressed©Renderings
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Jeremy Bailenson, Stanford University
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Visceral Reaction:
“A visceral perception of some risk is a
necessary condition for any action taken to
manage the risk. Putting it negatively, a
purely analytic judgment of risk will have
little or no affect on the behavior.”
Elke Weber
Columbia University
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Why don’t they buy?
•
•
•
•
•
•
•
Think they can’t afford it — 74%
Can’t decide on amount — 52%
Haven’t gotten around to it — 50%
Worry about wrong decisions — 43%
Put money in other financial products — 40%
Have never been approached to buy — 29%
Don’t want to think about dying — 20%
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Benefits
Traditional
Version
Behavioral
Version
Behavioral
Economics
Tactics
Go over financial
needs and ways life
insurance can help a
family
RealLife story about
financial needs and
how life insurance
helped a specific
person
Concrete instances
overcome optimism
that the client will not
die prematurely.
.
“Mark died of
pancreatic cancer.”
Vivid and personal
information is more
effective than
statistical
information.
“You could come
down with cancer.”
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Source: Improving Sales Presentations: Using Choice Architecture to Influence Buying Decisions, LIMRA (2009)
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Likelihood of Buying
Definitely
Would Buy
29%
increase
7
6
4.56
5
Uncertain
4
3.54
3
2
Definitely
Would Not Buy
1
0
Traditional
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Source: Increase Sales Through Behavioral Economics, LIMRA (2005)
Behavioral
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Sales Reps Connecting
with Consumers
Directly
Immediately
When Consumers Want
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MetLife Partners With Walmart to Sell Life
Insurance in Stores
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Diversifying into sales of
financial service products
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Bradesco using POS machines to sell life
insurance
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Mobile technology is changing how
people want to buy…
South Africa ranks 5th
in mobile data usage
(U.S. ranks 7th)
80% of South Africans
who use the Internet
use only their mobile
devices
Source: Neilson 2014 Survey
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