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Crafting Successful Product Portfolios for 2010 and Beyond March 2, 2010 Timothy C. Pfeifer, FSA, MAAA Pfeifer Advisory LLC.

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Presentation on theme: "Crafting Successful Product Portfolios for 2010 and Beyond March 2, 2010 Timothy C. Pfeifer, FSA, MAAA Pfeifer Advisory LLC."— Presentation transcript:

1 Crafting Successful Product Portfolios for 2010 and Beyond March 2, 2010 Timothy C. Pfeifer, FSA, MAAA Pfeifer Advisory LLC

2 Our Panel Offers Two Distinct Perspectives on Future Products  Consultant’s Perspective: Tim Pfeifer  Direct Insurer Perspective: Phil Polkinghorn Our focus will be the future of life insurance and annuity products, over the next five to ten years. 2

3 Primary Drivers of Product Portfolios of Future 1.Aversion to risk 2.Doubts about value of active management 3.Increasing role of technology in commerce 4.Accommodating product and tax regulatory environments for income, LTC 5.Tougher financial regulation and sales practice regulation 6.Concerns about inflation 7.Willingness to flatten sales compensation year old core clientele

4 Profitability Dynamics of the Future Depends on risk-free rates, but most lines sold through independent channels will be 10% businesses Greater profitability potential in low-to-mid market for customers/agents Successful efforts to de-heap upfront commissions key to unlock more profit Capital expectations have continually increased, and not likely to decline

5 Selling Dynamics of the Future Growth in sales requires re-oriented sales force Greater comfort with Internet, Online sales Adoption of external marketing principles Middle Market versus Affluent more women, African American, Hispanic, Asian presence greater pool of intelligent new hires only straightforward products, but model still needs improvement smooth purchase decision, promote “free”, relationship building and branding target both, but distinctly different challenges

6 Regulation of the Future +- Favorable tax elements, particularly surrounding income, LTC Disclosure and suitability Interstate Compact-speed, not creativity Increased focus on securities treatment Principles-based elements (Term) Principles-based elements (VUL, VA) 6 Biggest unknown is Federal vs. State (primarily financial regulation)

7 How Will Products Get Done in the Future? 7 Fewer Products More Modularity Greater Upfront Evaluation Increased Focus on Efficiency-to- Market versus Speed-to- Market Execution vs. Creativity Aim for True Distribution Partnerships

8 What Products/Concepts will Drive the Headlines Between Now and 2020? 8 Single most important factor is level of mid-term interest rates Need for Portfolio Balance Providing income guarantees inside and outside of traditional insurance products Many patents, but less protection Thumbs Up: Term Indexed Life Inflation-linked Rebound of VA guarantees Thumbs Up: Term Indexed Life Inflation-linked Rebound of VA guarantees Thumbs Down: Fewer VA Subaccounts Variable UL Steeply heaped comp Longevity Insurance in present form Thumbs Down: Fewer VA Subaccounts Variable UL Steeply heaped comp Longevity Insurance in present form Mixed Results Combo products Competitive simplified issue NLG UL Mixed Results Combo products Competitive simplified issue NLG UL


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