“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty”—Winston Churchill
Churchill’s quote could be seen as applying to our industry this year more than most. On one hand, we are facing a rapid onslaught of challenges that would make it easy to be pessimistic about the next few years—increased regulatory scrutiny, volatile equity markets, rising but still low interest rates leading to spread and margin compression, and changing consumer preferences led by the rise of online immediate shopping and instant gratification. On the other hand, it is easy to see these as opportunities for the right organization – those with scale, capital to invest in technology, innovative leadership to explore new markets, and the willingness to challenge the status quo. The first list is clearly for the pessimist —there is difficulty in every opportunity we seek. The second list is for the optimist who can see the opportunity to rise above the crowd because of these very challenges.
At Columbus Life, and through our parent organization Western & Southern Financial Group, our culture allows us to see the opportunities in the difficulty. First and foremost, our solid balance sheet, with a capital-to-asset ratio near the top of the industry, enables us to weather market volatility, invest in technologies of the future and look for strategic acquisitions to bolster our business. This is evident in our multi-year transformation plan that has resulted in multiple millions of dollars invested in back office technologies. Finally, it allows us to be diligent and early adopters of new regulations without significant business interruption.
Columbus Life has enjoyed another year of significant growth and success. In 2018, our life premium increased by more than 30 percent over the prior year and our policy volume increased over 15 percent, representing both a true underlying growth in unit volume as well as the attractiveness of our product offerings to larger sales. This caps a now six-year run of more than 22 percent life premium growth per year.
Of course, we have not been without our challenges. Market volatility and continued low interest rates tested our return rates in our industry-leading IUL product and margin compression required a reprice of our GUL portfolio. But we believe these challenges were prudent decisions with the long term in mind—decisions we believe will allow us to continue our more than century-long commitment to the life and annuity space and our independent distribution partners. In these tumultuous times where many companies have been forced to make tough decisions about which businesses to continue and which ones to exit, we believe prudent financial decision making will allow us to honor our long-term commitment to the marketplace and be a partner that distribution can count on.
But we know the future can’t just be about product design. To compete in the future—both with companies in our industry and with new potential entrants—we must recognize and face changing consumer demands. The “Amazon effect” has changed consumer preferences forever. We are all accustomed to finding and purchasing any product we want with only a few touches of a screen. Most often those products are then delivered to our doorstep in just a day and sometimes less (and sometimes at no delivery cost). Furthermore, consumers are accustomed to 24-hour real-time data regarding their products and service providers. When they purchase a product they expect immediate acknowledgment and real-time status updates.
For these reasons we continue to invest in sales cycle technologies—mobile apps that provide real-time data on the status of pending business, electronic application and policy delivery methods that make new business more efficient and faster, and accelerated underwriting programs that shorten the policy acquisition time. While adoption is just starting to really grow in these areas, we believe it is foundational to meet the needs of current and future consumers and the distribution that serves them.
We must also continue to develop new methods to reach underserved markets’ profitability. For years the industry has touted the opportunity that exists in the underserved middle market. The unspoken reality is that, while the marketplace is large and clearly underserved, the ability to serve the market profitably is a continual challenge. Distribution often finds the middle market a challenge due to the volume of policies needed to be sold to meet income targets. Carriers find it a challenge as the amount of advertising investment, direct-to-consumer infrastructure and underwriting efforts can be expensive in comparison to the average sale.
But this is again where opportunity knocks. Distribution partners are becoming more innovative at methods to reach this market. Direct-to-consumer efforts are progressing via insurtech efforts. But the speed and effectiveness of all of these efforts will need to increase if we want to truly penetrate the middle market.
For more than 110 years Columbus Life has been committed to independent distribution in the life and annuity space. We have a long tradition of helping our producers build their business and helping our clients preserve and protect the vitally important things they have worked so hard to build. We have also remained deeply committed to continuing our legacy of consistent, profitable financial performance and financial integrity.
As we look ahead to 2019 and beyond, we will continue to build upon our rich heritage while consistently investing in innovative technologies and exceptional experiences that make doing business with us faster, easier and more rewarding for all. [SS]
Columbus Life Insurance Company, Cincinnati, Ohio, is licensed in the District of Columbia and all states except New York.
Life insurance products are not bank products, are not a deposit, are not insured by the FDIC, nor any other federal entity, have no bank guarantee, and may lose value.
Steven J. Sanders, LLIF
Senior Vice President and CMO, Columbus Life Insurance Company