A.M. Best's The Big Picture: How Can Life Insurers Position Themselves to Compete in a Challenging New World?

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--March 1, 2004

Best's Review looks at the new, sober mood of the life insurance industry as it takes on a set of intractable problems in the magazine's March cover feature, "Life at a Crossroads." The industry has ridden a roller coaster in recent years--soaring sales in the late 1990s, followed by falling profits since 2000, and most recently, an improving economy.

New leaders such as Frank Keating, president of the American Council of Life Insurers, have sought greater clout on Capitol Hill. Washington has given insurers cause for concern with policies on taxes and personal savings. State regulation has been a continuing hindrance, and major life insurers have sought an optional federal charter to simplify filing of products and licensing.

Sales have been a mixed bag, little more than flat overall. But some of the industry's wounds are self-inflicted, as producers have targeted the affluent over the middle class, reinforcing a perception that the industry serves the wealthy. In recent years, many life and annuity companies have found their distribution systems wanting and have looked to new channels, such as work-site marketing and the Internet. But personal sales by career or independent agents still predominate in life insurance, while annuities rely principally on independent agents and banks.

Career agents have proven expensive to train and hard to keep, but their clients tend to keep their policies longer-a boon to companies' profits. Overall, however, the agency force is aging and shrinking, a cause for deep concern in the industry.

The industry's variety of products helped it survive recent swings in equities, with variable products for the bull market and fixed products for the bear market. But the economy hurt profitability, as falling interest rates trimmed earnings on the invested money held by insurers.

"Life at a Crossroads" is the latest presentation of in-depth reports from Best's Review designated "The Big Picture." These comprehensive packages, appearing several times a year, examine timely topics from as many angles as possible, providing more information, more possibilities, more ways of looking at things and more views from more people--in short, the big picture.

For a comprehensive overview of insurance industry news and trends, turn each month to Best's Review. Read about the hot-button issues in Property/Casualty, Life/Health and Insurance Technology. Discover the latest thinking on the issues that cut across industry segments. A new edition appears online on the first of the month at www.bestreview.com.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.