A long and comfortable life: Hartford president and COO Thomas M. Marra sees a healthy future for longevity products.

The life insurance industry is becoming serious about longevity insurance, which might typically be bought at age 65 to provide a guaranteed income stream at age 85. It also is developing the ability to sell future guaranteed income as an option within 401(k) plans. Thomas M. Marra, president and chief operating officer of Hartford Life Insurance Co., recently spoke with Best's Review about the new kinds of products.

Is it in the cards for the life insurance industry or individual insurers to advertise specific products directly to the public, as the drug industry has done?

With the competing and scarce resources for advertising dollars, I wonder whether going that way, specific to the customer, would be the way to go. There is one commonality. Customers don't go directly to Pfizer to get Viagra. They go to their doctor. And you don't go right to the insurance company to get your longevity protection. You go to your adviser, who prescribes the product. In that sense, it's an interesting concept. If we had the money, I'd do it.

What kind of obstacles do you see in selling the new products you're talking about?

With any new product, the biggest obstacle initially is awareness and understandability. I think we have a real chance here. We've done focus groups with advisers, and there's a real feel for the concept. It's easy to understand--pure longevity insurance.

And from 65 to 85, knowing that they have this protection in place, people will feel more able to spend assets?

Right. Advisers can plan better if they integrate this with another plan. Advisers have known intuitively that they couldn't just plan to age 85. If their clients have no money at age 87, they know that's not good. I think a product like this gives the confidence and assurance that they will have a more secure overall retirement.

This is why I say others will plug into us. Here is a way for banks to meet some clients' needs. We're in the risk business. It's what we do. It gives us the opportunity to provide a hub to which other players can plug in.

Isn't it an obstacle that distributors don't want to give up the assets they manage, and they don't want to sell products that don't provide them a good commission?

The product goes a long way to address those concerns. It will pay a commission, an annuity-like range of commission, but the fact that it doesn't command the whole asset base is important. Let's say the client has $1 million, but he only uses $100,000 for the protection. The other $900,000 is within the control of the individual and, theoretically, his adviser.

So the advisers would be willing to give up 10% of assets?

If they don't do it, they're providing an incomplete plan because they're not covering longevity. Let's say their plan is to draw 4% of clients' assets a year. Well, they may not earn 4%. Or they may earn 12%, in which case clients have left a lot on the table that they could have been spending.

Are there many insurance companies that currently offer this kind of longevity insurance coverage?

A short list currently, but I think it's going to be growing.

The idea of including a defined-benefit investment option in 401(k) plans sounds like a great idea.

I predict that within five years, almost all 401(k) plans will offer a defined-benefit option because the next generation is going to have no pension. One way to prepare for retirement is to accumulate a whole bunch of cash and then deal with retirement income as you get there, but another way that a lot of people will use is to incrementally purchase a future guaranteed stream of income.

Many of those 401(k) plans are provided by non-insurance companies. Will part of the plan be to work through them?

Yes. We will become the hub because non-insurers that provide 401(k) services will want to plug into an insurer to provide this part of the package. So from that perspective, we're operating on a business-to-business basis. We don't need to control all of the assets, and we don't even need to run all of the service.

Is the insurance industry prepared for this kind of underwriting?

We're assuming healthy lives with the first generation, so no underwriting is required. People will select the product. From a sales standpoint, you want disclosure, you want customers to know this is intended for healthy lives. If an unhealthy life bought it, they'd get a bad deal.

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Hartford Life Insurance Co. (Hartford Life Group)

A.M. Best Company # 06518

Distribution: Independent agents, brokers, banks and wirehouses

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