Robert A. Kerzner, CLU, ChFC, president and CEO of LIMRA, LOMA and LL Global, opened the 98th LIMRA Annual Conference in New York earlier this week by examining changes in consumers’ demographics – and expectations – and exploring the impact on the financial services industry.
Throughout his remarks during the opening session at the event, Kerzner encouraged executives to adopt new approaches to better engage with consumers to help them make better financial decisions about protecting their families with life insurance and saving systematically for retirement.
“Consumers and their household circumstances are not as homogenous as they once were and – not surprisingly – their needs, expectations and desires on how they want to shop and buy our products have changed as well,” said Kerzner. “Companies need to look at how other industries have adapted and adopted new technology, social media, data analytics and gamification, to attract and connect with consumers.”
Kerzner highlighted key market segments – in particular women and Millennials – that are playing more prominent roles in the purchasing decisions of financial products, showing how differently these consumers gather information to make financial decisions.
“These consumers look to third-party outlets, like Angie’s List, Yelp and Amazon, for reviews and recommendations for products and services,” Kerzner noted. “How can we leverage these sites to promote the good our industry does?”
• Related: Former IBM Chairman and CEO Louis Gerstner tells LIMRA annual meeting audience the emergence of e-marketplaces should be a particular focus for the industry. “The consumer will be doing almost everything through e-marketplaces in the future — payments, banking, investments — and maybe also life insurance purchases. Standing between you and these e-marketplaces is only the regulatory environment,” Gerstner said. Read more from Gerstner here.
Kerzner noted we are competing for the hearts and minds of consumers who don’t necessarily understand or trust our industry. He provided examples of how companies have used gamification to teach consumers the importance of saving and staying out of debt. “It is imperative that we start teaching consumers about the ramifications of their financial decisions in an interesting and engaging manner.”
Citing examples like Zip Car and Modcloth, Kerzner also showed how startups are upending the business model in their various industries, finding success by identifying a need through consumer feedback and coming up with a non-traditional solution.
“Are we developing products that will meet consumers’ needs or are we building products that fit our business model?” questioned Kerzner. “We need to listen better to what consumers are really worried about, like remaining mentally sharp, maintaining their social network and who will take care of them when they get sick. Our focus on retirement has been too myopic. We are focusing too much on consumers’ money and too little on what keeps them up at night.”
The conference theme, “The Leadership Challenge: Connecting in a Distracted World,” focuses on how industry leaders leverage the latest technology to address the changing dynamics of the market and meet the evolving expectations of consumers.
More than 500 senior leaders from life insurance and financial services companies worldwide attended the meeting.
Parents providing financial support to adult children; half say it’s hurting their retirement savings
A new LIMRA Secure Retirement Institute study finds that 6 in 10 American parents provide financial support to their adult children, which could undermine their retirement readiness.“Research shows that Millennials have weathered the most significant repercussions from the recent economic downturn. While Millennials are the most educated generation in history, nearly 4 in 10 are unemployed and many more are underemployed,” said Deb Dupont, associate managing director, LIMRA Secure Retirement Institute. “Parents of Millennials, even those over the age of 22, are providing considerable support to their children at a time in their lives when saving from retirement should be a priority.”
Parents are most likely to help pay for cell phones/mobile service, rent/mortgage, college expense/loans debt, and entertainment — movies, sporting events, etc. Only 37% of U.S. households with adult children indicated that they did not provide any financial support.
The study also found the majority (57%) Americanswith adult children have at least one adult child living at home. Nearly three quarters of households with adult children ages 18-22 have at least one adult child residing in their home.
“Only 45% of parents who have financially supported their adult children in the past year say it has negatively impacted their retirement savings,” noted Dupont. “We believe people are likely to underestimate the collective impact of incremental costs. Prior LIMRA Secure Retirement Institute research found that more than 50% of pre-retirees have less than $100,000 in financial assets. Even $100,000 in total savings will not be enough money to fund the 20 to 30 years these individuals are likely to face in retirement.”
The findings are based on a nationally representative survey of 1,009 Americans. The survey was fielded in July 2014.
The more people know about annuities, the more they like and buy them
Another new LIMRA Secure Retirement Institute study found that the more knowledge someone has about annuities, the more likely they are to have a positive attitude about them and eventually own one.“Knowledge and attitude are the key factors,” said Jafor Iqbal, associate managing director, LIMRA Secure Retirement Institute. “Households with positive attitudes are six times more likely to own an annuity than those who are unfamiliar with or have negative attitudes about annuities.”
Iqbal recommends insurance companies and advisors communicate the benefits of annuities and debunk the myths surrounding them. While about a third of households own an annuity, there is a great deal of opportunity to promote them in the context of retirement planning, especially in the area of lifetime income.
Peace of mind, stable income and lessening the risk of running out of money in retirement were cited as the top three reasons to create a guaranteed lifetime income among households that owned annuities, as well as those that did not.
Among annuity owners, 4 out of 5 said they are a “good fit” for their financial needs and 70% are willing to recommend annuities to friends and family members.
Iqbal said clients and advisors can benefit from information from credible sources and cited the recent Treasury ruling on longevity annuities as an example of a public endorsement of their value to consumers.
“Annuity owners show a noticeable improvement in confidence about their ability for a secure retirement compared to those without an annuity,” said Iqbal. “This is consistent across all the wealth segments we studied.”
The study involved consumers age 50 and older with at least $100,000 in investible assets.
LIMRA, a worldwide research, learning and development organization, is the trusted source of industry knowledge, helping more than 850 insurance and financial services companies in 64 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com.