Leading Distribution Forward
As we embark on 2021, I’m sure most of us are more than ready for the fresh start and clean slate that January brings, especially after 2020. As I prepared to write this forecast, I reflected on what I wrote last year, back in December of 2019. I must admit, I had to pause and laugh a little when I read my prediction that 2020 would be one of the most interesting years of my then 29-year career. Well, it certainly lived up to that expectation.
From the COVID-19 pandemic, to social injustice and unrest, to more industry-specific issues like low interest rates and an ever-increasing digital demand, 2020 has certainly been a challenging and poignant year for all of us. While I’m glad to have it in the rearview mirror, the past year also served as a meaningful reminder of our purpose at OneAmerica®—to be there for our customers when they need us most.
In many ways 2020 was a chance for us to deliver on our promises and to prove we mean what we say. We pride ourselves on focusing on the long term and being prepared for the unexpected so we can be a source of stability and certainty, even in turbulent times. We lead the way, facing what’s ahead and making the right decisions at the right times. We’re built to last and will continue to respond and adapt to our industry and customer needs, while at the same time staying true to who we are and what differentiates us.
Despite the ups and downs of this year, we’ve executed on our strategy and plan with a calm steadiness. We’ve weathered the storm, as we have a history of doing, and are emerging from this year anchored by our long-term financial strength. In addition to our ratings being reaffirmed, we’re also on track to share our success with policyholders by paying more than $31 million in dividends in 2021. This is encouraging news and tangible proof that we are who we say we are—a disciplined, relationship-focused mutual organization that’s stable, strong, trustworthy and experienced.
So, where is OneAmerica—and the insurance industry as a whole—headed in 2021? In my view, the answer to that question lies in examining three factors that converged and accelerated in 2020. Though two of these factors had been building for a while and the third came on unexpectedly, all three will have an impact far into the future.
Factor #1: The Low-Interest Environment
While the “lower for longer” environment has been approaching for some time, the events of 2020 accelerated the trend and, perhaps, industry consensus as it relates to forward-looking assumptions. At OneAmerica we made some market-leading pricing changes in 2019 in anticipation of the emerging low rates. These have proven to be prudent. Still, we have and will continue to see companies try to find their footing and significant headwinds persist for the industry on the low-interest rate front. We can expect some continued turbulence in the year ahead.
For much of my nearly 30-year career, products have attempted to provide both upside potential and downside protection. The extreme low-interest rate environment makes this dual value proposition increasingly difficult, which will have two major implications. First, carriers will have to bring more focus to the value of the insurance and protection aspects of their products—and how they fit into a broader financial security plan. I do believe people will continue to value certainty over uncertainty, but we won’t be able to easily piggyback on upside potential as we have in the past.
Second, given the likely direction of income tax rates, companies will look for alternatives to provide additional upside potential. This seems likely to open the door once again to variable product solutions, requiring policyholders to accept greater downside in return for the upside potential. Indeed, we’re already seeing some of this with index-linked annuities. Don’t expect to find your grandparents’ variable products; this is a space where we will see some forward-looking innovation and not a return to yesteryear.
So, despite the challenges, there are also exciting and innovative possibilities when it comes to product design. Much of our work in 2021 will focus on enhancing our already-diverse portfolio of life insurance, annuity, and asset-based long term care products. At OneAmerica, we’ll innovate by designing products, and processes, for individuals and business owners that are competitive, strategic and flexible, accommodating a wide range of protection and planning needs. This is good for our policyholders and distribution partners, and it helps us remain competitively positioned for all economic seasons.
Factor #2: The Digital Demand
Though our industry has been experiencing an ever-increasing demand for digital tools and services, the pandemic accelerated this trend and made virtual and digital capabilities an imperative. While this certainly poses challenges, I prefer to see an opportunity for change at an accelerated pace. Companies that want to compete going forward will need to view virtual and digital capabilities as necessary and essential for stakeholders. At OneAmerica we’re focused on more than just offering electronic options and, instead, on enabling a comprehensive and relationship-based experience that includes both a personal touch and digital tools and resources. We’ll provide transparency, engagement and self-service, with the understanding that continuous improvement and adaptation will be necessary to meet customer expectations. We’ll work to ensure our technology augments the in-person experience policyholders have with their financial professional or with our associates.
Factor #3: The Long-Lasting Impact of 2020
Though we’ve turned the calendar page on 2020, the lasting impacts of the past year are still very much in question and 2021 is poised to be a pivotal year for our industry as we absorb the impacts and implications. We know policyholders, distribution partners and even our associates are still adapting and evolving to all that’s occurred. While there’s certainly much to do, and actions that can and should be taken right away, 2021 will also be a time for us to continue to listen, to learn and adapt alongside our stakeholders as we all examine the implications and adjust our perspective. Staying acutely aware of customers’ needs, challenges and shifting priorities will allow us to keep our promises and help them navigate this new reality.
While we can’t say with certainty what 2021 will bring, we know OneAmerica is prepared to meet the challenges that come our way. We’ll build on our strong foundation, maintain our long-term perspective, enhance the relationships we have with our stakeholders, and stay committed to who we are. But, as we adapt and respond to the emerging environment, we’ll also be nimble and innovative, looking to evolve the tools and capabilities needed to enable our distribution partners. Through it all, we’ll continue to be there when our customers need us most. We’re honored to continue alongside all of you on our journey in 2021 and beyond. [DM]
OneAmerica® is the marketing name for the companies of OneAmerica. Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice.