Saving the retirement myth: creative life insurers can gain business as traditional pensions dry up.

The check is in the mail ... sure it is! How many times has this promise proved false? Well, get ready, because just as about 60 million of us prepare for an extended retirement, this promise is being broken in a very big way.

After almost a century of asking employees for loyalty, hard work and dedication to a corporation in exchange for a guaranteed monthly check during retirement years, corporate America is in a bull-rush stampede to renege on its promise. Earlier this year, a front-page headline in The New York Times reported, "Many Companies Ending Promises For Retirement." We all know about the airlines and their troubles, but over the past year some of the most famous names in the business sector--Verizon, Lockheed Martin, Motorola, IBM, General Motors, NCR--and scores more have either abandoned, frozen or closed employee pension plans. And, clearly there are more to come.

These actions portend literally a cataclysmic shift in the way security for old age is provided. For decades, workers could suppress the concern for retirement needs because the federal government and employers combined to promise the assumption of both the liability for retirement and the risks of old age. That is no longer the case. Rapidly, the liability and risk of retirement years are being transferred from the government and employer to the worker. Workers now have to wonder: Will I have enough money? Will it last long enough? What about inflation? What about investment risk? What if I get sick?

While the prospect of these failed promises can be frightening for workers, especially middle-aged and older workers, the situation does present a unique opportunity for the life insurance industry. The need is so great that its solution could well propel the life insurance industry back into a preeminent role in the financial service market. Certainly no life insurance company--or any segment of financial services--can assume the liability for an individual's retirement years, but the insurance industry is in a unique position and has the experience to assume the risks inherent in an extended retirement.

In order to benefit from the opportunity available, life insurance companies need a new mission: to protect life, not death. In recent years, the life insurance industry has done a pretty good job of developing products that encourage the safe accumulation of funds, but now they have to go further--much further. Now needed are products that can effectively and safely "de-cumulate" those funds.

With the failed promises of corporate pensions, many consumers may not have the time to accumulate sufficient funds for retirement.

What about an insurance product designed to safely "stretch" what funds are available as far as possible? With the risk of mortality, especially the extension of life, an uncertainty, life insurance companies should look to develop income producing products that go well beyond the primitive concept of single-premium immediate annuities.

Consider these potential products:

* A single-premium immediate variable annuity with a base guarantee and variable upside;

* An insurance product hedged and indexed to assume the risk of long-term inflation;

* An income annuity with payments that increase in the event of a debilitating illness.

The point is that the new needs of the consumer--a safe livable retirement--have presented the insurance industry with the opportunity to recover the momentum of growth and profitability squandered in the latter part of the last century. However, to take advantage of this opportunity the life insurance industry must exhibit two traits that have recently been sorely missing--creativity and innovation.

As the Financial Times recently headlined, "Wanted: a pensions model for the new century." The article went on to ask: "Will answers be found in incremental change or a radical social revolution?" How the life insurance industry answers that question will determine the future promise of the industry.

Robert W. MacDonald, a Best's Review columnist, is principal of CTW Consulting in Minneapolis and former CEO of three major insurers. He can be reached at [e-mail].