The Reed in the Storm
There’s a great line from one of Aesop’s Fables about an oak tree and a little reed. In the midst of a severe storm, the large oak tree is uprooted and toppled by the terrible conditions, “while the little reed, bending to the force of the wind, soon stood upright again when the storm had passed over.” It’s somehow reminiscent of North American’s story in the recent history of the financial services industry.
The past few years, especially, have been interesting, to say the least. Our industry has faced many challenges, from the continued economic uncertainty and slow recovery from the Great Recession to the adoption of regulatory changes like Actuarial Guideline 38 (AG38). We’ve seen a sustained, low-interest rate environment and, unfortunately, a nationwide decline in life insurance sales—the lowest since WWII.1 This turbulent economic environment has uprooted the strategies of many in our industry, resulting in several large “oak tree” type carriers having to change focus, stray from their core plans, or exit the business entirely. There were clearly many storms we’ve all had to weather, but through it all North American has remained upright—and has grown even stronger.
This endurance through the storm is a story we’ve been telling in this Carrier Forum issue for years. It’s one we’re proud to tell, and this year is no different. While the industry as a whole has seen only 4 percent growth in life premium,2 North American has not only weathered the storm—we continue to make headway. In 2013, we grew life sales by 36 percent over 2012,3 becoming the sixth fastest growing company in the industry.4 How are we doing it? By sticking to the fundamentals. It’s our long term planning and focus that have positioned us well to handle the turbulent climate of recent years and helped make us ready to stand upright through storms we may face in the future.
Our strength and stability do not mean we’re the biggest company around—we don’t have to be. Our roots aren’t tangled in the unsteady foundation of some publicly traded companies. We aren’t pressured by financial challenges to make short term decisions that can cause others to change their heading. Rather, it’s our ability as a privately owned company to make decisions that allow us to bend without breaking, so that we can remain focused on delivering on our commitments to policyholders, our distribution partners and our employees.
Insurance regulators continue to refine new guidelines mandating principle-based reserving methodologies and other rules and regulations yet unknown in our business. North American stands prepared to bend where we need to, scrutinizing and allocating resources with both caution and vigilance. The shift in the regulatory environment in recent years has left the industry in a rather unsettled state. In addition to changes in reserving, newly proposed tax treatments of income from life insurance and annuities have all eyes and ears on the Joint Committee on Taxation. North American is closely monitoring these issues and is contributing to the discussion at the highest levels, rather than sitting on the sidelines. And we will continue to flex to these changes, while remaining stable for our customers and competitive for our distribution partners and agents.
Part of North American’s growth success is the ability to look ahead and anticipate what’s to come—not just for our individual sales, but also for the future of our industry. There are storms yet looming on the horizon. As our population of agents moves into retirement, we must find ways to recruit a new generation to the field. We must break from old patterns of relying on the same demographic of agents and look to increase the presence of women in the financial services industry. We need to look to new modes of communication, such as social media, and new incentives that will attract Gen X and Gen Y to this profession. North American is utilizing social media to help MGAs navigate this new territory and find the right agents to attract.
In a broader sense, we’ve been involved in recent conversations with other industry leaders to address the issue of agent recruitment. We know that it’s going to take a combined effort of other carriers and interested parties to come up with a solution. Agent recruitment is too big an issue for one company to take on alone.
Back in the day, becoming a life insurance agent was a popular career choice. Life insurance agents were “company men” who typically sold one basic product to meet one basic need: death benefit only insurance. Fast forward to today and we’ve got a new breed of agents—independent agents—working with a vast portfolio of complex products, serving more of an “advisor” role to meet the needs of clients on multiple levels, from death benefit coverage to business insurance or retirement planning. There’s a whole middle-market, woefully underinsured and underserved by the conventional approach.
As the industry has changed, we need to change our recruitment tactics. How are we going to reach these new recruits? Perhaps it’s through people already in an independent sales position, like realtors or health agents looking to make ends meet. Perhaps it’s by showing young people that there is a way to do a truly meaningful thing for families, businesses and society as a whole, while still making a living and paying off student loan debt. Perhaps it’s partnering with community colleges or other educational institutions to create programs around entering the life insurance industry. It’s probably a combination of all of these things and more, but most importantly it’s going to take a collaborative effort from leaders across the industry—from the oak trees to the lone reeds.
As technology advances around us, we must find new ways to keep up with the digital demands of the world. From embracing social media to investing significantly in mobile technology and simplified electronic applications, North American is excited to be implementing these solutions throughout 2014. We have already seen great success with our mobile app for pending business, and are looking forward to even more major enhancements and new technology releases throughout the year.
At North American, we believe that the voice of the customer is ultimately what we should follow. We are helping our agents better meet their customers’ needs by operational and technological advancements, as well as enhancing our product offerings. In 2013, we added critical illness accelerated death benefit coverage to life insurance products, and in 2014 we have plans to continue flexing to meet market demands.
As we begin 2014, we can’t help but reflect on our past and feel excited, grateful and proud of our successes. We have weathered whatever storms have come our way—even those that have toppled some of the largest oak trees. This comes down to our ability to focus yet flex without losing sight of our priorities and the commitments we make to our policyowners, our agents and the future of our industry. [GG]
Footnotes:
1. “Household Trends in U.S. Life Insurance Ownership,” 2010, LIMRA.
2. “Retail Individual Life Insurance Sales in the U.S. Q3 2013 Report by Channel with All Splits,” LIMRA.
3. Internal Distribution Report, December 4, 2013.
4. LIMRA, 2013, op.cit.
The opinions expressed by this author are his own and not necessarily those of North American Company for Life and Health Insurance or its affiliates. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed as to accuracy. All material is for agent representative use only and cannot be used, in whole or part, with consumers.
