Many Life Insurance CEOs Are Uneasy About the Future.

Slightly more than one-quarter of chief executive officers indicated that their life insurance companies were well prepared to respond to their top three issues, according to a new Tillinghast-Towers Perrin report on its recent CEO survey in the life insurance sector.

That percentage is down from the New York-based management consulting firm's 1997 biennial report, when one-third of participating CEOs said their companies were well prepared to face the future. The drop in confidence comes at a time the life industry faces an increasing pace of restructuring and consolidation within and across financial-services sectors, the report states. Also, the industry now is focusing on the savings-and-accumulation business, direct competition with investment-management companies and its quest for more productive approaches to distribution.

Data collected in July, August and September reveals that nearly three-quarters of CEOs believe that their companies are only somewhat prepared, while only 3% indicated that they are not prepared.

For its sector survey, Tillinghast mailed questionnaires to 270 CEOs and received responses from 65. Their top three strategic issues were distribution effectiveness (identified by 85%); increased competition, restructuring and consolidation (63%); and how to deal with the demands of better-informed customers (45%).

In general, small companies said they were less prepared than large companies. Only 19% of small-company executives said they were well prepared vs. 32% of large-company executives. Some 36% said they were well prepared to address distribution effectiveness and productivity, but only 10% indicated the same for information and technology management. About 15% said they were well prepared to address the changing market spawned by customer demands.

Top obstacles to preparedness were technology limitations (cited by 48% of respondents), the "hypercompetitive" environment (48%), inadequate control of distribution channels (42%) and difficulty in integrating cross-functional or cross-business efforts and resources (31%).

Many CEOs, however, report an optimistic view of current and prospective new business profitability despite evidence of companies failing to achieve their often-conservative profit targets. "This is hard to understand in view of the expected increase in competitive restructuring and the elimination of most barriers to cross-financial service sector competition," authors of the report wrote. "Given the serious challenges CEOs identified, we expected that more would find current and prospective profitability levels to be below their aspirations."

Looking ahead, CEOs predicted that payout products focusing on customer post-retirement needs represent an emerging and significant growth opportunity. They also were high on advice, planning and counsel as a means of customer acquisition, retention and development. They said information on sales charges would be disclosed to the consumer at the point of sale but that such disclosure carries a risk.

One executive wrote: "As people are more aware of the price that they are paying, they will become more aware of the opportunities to buy products elsewhere."