The Life Insurance Industry is to Ukraine as Ukraine is to…

You’ve got to give me props on this one, because it’s every bit as difficult as it is ballsy to find and combine in one blog post two subjects inherently less interesting than Ukraine and life insurance. I’m not of Ukrainian origin nor do I hold any particular portfolio for that suffering nation any more than other non-Ukrainians. But I do try to keep up on the news, and there has certainly been plenty lately in re: Ukraine, much of it bewildering and almost all of it dispiriting. I was particularly struck, however, by a recent article in The New York Times, which rather than rehashing the now-non-news of the conquest of the Crimea and Russian artillery vaporizing a Malaysian airliner, focused on details about the pending cease-fire between Ukraine and the Russian Federation: self-rule in the separatist territories “for three years,” Russian as an official language, the right of the separatist territories to deepen ties with Russia, amnesty for separatist leaders, and this kicker: “What is clear is that Ukraine, teetering toward bankruptcy, must foot the $8 billion bill for reconstruction.”

Wow, talk about adding insult to injury, let alone some less wholesome circumlocutions one might otherwise use to characterize the situation! So Putin “got everything he wanted by attacking Ukraine” and Ukraine got, well, you supply the verb. Yet what really caught my attention was the reference to Ukraine’s president valiantly spinning the cease-fire as “an historic victory” for his country — as opposed to “Capitulation!,” according to some Parliamentarians and independent analysts — whilst leading Parliament “in a rousing version… of the national anthem” — known as, get this, and I’m not kidding, Ukraine Is Not Dead Yet.

Which made me think of the Life Insurance Industry…

No, really, seriously, that’s what I thought, because The Life Insurance Industry Is Not Dead Yet. Specifically: The Life Insurance Industry is to Ukraine as Ukraine is to “Not Dead Yet.”

Okay, give me a break — give me a chance to explain.

Admittedly you don’t hear any life insurance CEOs saying the industry is not dead yet, and yet it’s the subtext of virtually everything they do say about the industry. In good corporate fashion, they speak voluminously of the “opportunities” out there to be grasped, never the problems they’re studiously avoiding recognizing, let alone mobilizing to resolve. Always look on the bright side of life is of course a CEO’s mantra, and a comforting one when you’re pulling down double-digit million dollars plus every year. Actually, our CEOs seldom speak of the state of the industry at all, preferring instead to extol the virtues and prospects of their company, the sometimes accurate but always cynical company-speak version of their own individual “I’ve got mine, Jack.”

If the industry’s problems are unspoken, however, they’ve certainly not unknown: Word does get around; whispers circulate in private and semi-private forums. I won’t rehearse the gloomy stats already laid out in my last post on this subject. Oh, hell, yes I will, because you may well have missed them, or skipped past them, or simply because I believe they deserve to be better known:

  • Industry-wide sales of life insurance are down 45% since the mid-1980s. Let’s repeat that: Life Insurance sales are down nearly by half over the past 30 years. About 30% of American households have no life insurance of any kind — meaning not even non-portable employer-provided or group policies — a decline of 19% from 30 years ago.
  • The number of affiliated (“captive” or near-captive) insurance agents has shrunk from ~244,000 in 1983 to ~174,000 in 2008. Independent (non-affiliated) agent numbers are similarly down, in this case to ~149,200 from ~163,400, from 2007 to 2010. I don’t have numbers for the last few years, but in both cases they are certainly even lower.
  • Despite mean income rising 4% to $87,200 per family, “median income actually fell by 5% to $46,700 between 2010 and 2013. The mean was driven by the fact that the highest percentile of the income distribution saw their income surge by 10% to $397,500 between 2010 and 2013.”
  • Here you have a veritable Trifecta: 1) Life insurance sales down by almost-half since the mid-‘80s, with many American households having no life insurance of any kind; 2) the life insurance agent “career” steadily disappearing; 3) median income for the mass of Americans on a more recent but quite undeniable decline. It’s true: The Life Insurance Industry is Not Dead Yet.

    What’s, who’s to blame? It’s complicated, of course, and there are no obvious villains — unless you’re looking squarely at the Investment Industry. Please read my Modest Proposal cited above for a much fuller explication, but in the meantime let’s count the ways that the Investment Industry is soaking up those declining disposable dollars of the Middle Class American household: 1) Mutual Funds; 2) Stocks and Bonds; 3) Variable annuities (granted these are insurance company-produced, but that fact is not particularly relevant in this context); 4) IRAs; 5) 401(k)s; 6) 529 Plans.

    And of course the Life industry then places its bets on these very investment products, even though they are but pennies to the dollar of their own life insurance products, profit-wise! Thus, we might say, the Life Insurance Industry is to the Investment Industry as Ukraine is to the Russian Federation — that is to say, as “Capitulation!” is to “historic victory.”

    And yet the industry persists in brandishing its increasingly worn-out and irrelevant shibboleths: Kitchen Table! Face-to-Face! The shibboleths, of course, are meant for the (remaining) agents as much as for the apparently deaf–to-the-need or weak-to-the-action American public. Here’s one example I happened to run across today, although there were plenty others yesterday and will be more tomorrow: You (the Agent) are “the human side of a business that needs its human side more than ever before.” Uh, yeah, arguably so, but so what? If life companies are no longer willing or able to structure the sales process to enable the Great Unwashed to obtain life insurance with real human agents able to make a decent living selling it “face-to-face,” what is the point of endlessly rehearsing the rhetoric? My guess is, it’s simply “Go out there, boys, win one for the Gipper, because the Gipper Isn’t Dead Yet.” Be brave, boys, make it work, you CAN do it, despite all the evidence to the contrary!

    That of course is pretty much the entirety of what the life companies preach to their troops, and it’s buttressed on the side by what the industry associations tell the public. Consider, for instance, these “Tweetable Facts” offered up by the Life Happens organization (formerly the LIFE foundation) for agents to use with their clients and prospects on Twitter:

  • 65% of adults agree they personally need life insurance and 27% say they need more than they have. http://lifehap.pn/1g7wUnM #LifeStats
  • 31% say they’d feel the financial impact from the death of the primary wage earner in 1 month. http://lifehap.pn/1g7wUnM #LifeStats
  • Financial priorities: 52% put expenses such as cable and cell phone ahead of buying life insurance. http://lifehap.pn/1g7wUnM #LifeStats
  • Financial priorities: 1 in 5 pay for activities like eating out over buying life insurance. http://lifehap.pn/1g7wUnM #LifeStats
  • I don’t doubt for a second that these are the facts, that they are eminently tweetable, and that they are as dispiriting in their own way as any recent news coming out of Ukraine. However, to see them as anything but guilt-tripping the public is duplicitous and disingenuous:

    You admit that you need life insurance or more life insurance, but you’re still not buying it? What the hell’s the matter with you? Are you stupid, lazy, irresponsible, or all three? Rather pay the cell phone and cable bills than buy crucial life insurance? Goodness gracious, you can’t sacrifice a few trips over to the Olive Garden for the sake of mitigating “the financial impact from the death of the primary wage earner”? Are you stupid, lazy, irresponsible, or all three?

    But let’s leave this little diatribe on a musical note, the wonderfully-named national anthem, “Ukraine is Not Dead Yet”: “Aleksander Kwasniewski, a former Polish president… noted that the Soviet Union and then Russia have used the same national anthem for decades, changing the words but not the music. The words that first glorified Stalin were rewritten and then changed a third time, all by the same writer. Mr. Kwasniewski sang a verse or two of each to illustrate the point, before issuing his own stark warning: ’This country might change the words, the lyrics, the vocabulary, but it will never change the tune.’”

    And so it may be said of the life insurance industry — although not only do they never change the tune, they don’t ever change the lyrics, either.

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    2 Responses to The Life Insurance Industry is to Ukraine as Ukraine is to…

    1. Mike Wise says:

      Brilliant beyond brilliant, Ken. Great way to illustrate the elephant in the C-Suite. The hope is that the Life Insurance C-Suite will actually see this post or something similar, or connect the dots themselves, or listen to their agents, or actually react to the flashing Check Engine light on their dashboard.

      As I’ve been running all over the place speaking to insurance executives, I’ve been thinking these very same thoughts. What I’ve come up with is that perhaps people just don’t want to buy life (and many other products) from insurance agents anymore. I think of the interactions between Phil Connors and Ned Ryerson in Groundhog Day, especially when Phil clocks Ned. See it here: http://youtu.be/xkW_ZkMtmlQ?t=3m1s Truth be known, I think that’s a deserving punch relative to how many life insurance agents have behaved – meet someone for the first time in a random location and go into the pitch within 30 seconds.

      So in order for the category to survive, a cultural change needs to happen. There’s just such a slim change for executives circa 2014 to change as fast and as completely as needed. So I think what needs to happen is that disruptive start-ups need to form – 100% digital front to back, 100% Social at every touch point, consumer-driven, data-integrated, and Uber cool and savvy to attract Millennials to buy and tell their friends. These will be led by savvy insiders, probably Gen-X’ers with enough wisdom and connections to pull it off, particularly those disgruntled with the current C-Suite, risk-takers who check-out of the corporate America scene and leverage crowdsourcing and outsourcing to build a spot-on business model that grows like wildfire, and perhaps that then get’s bought by a legacy insurer, sort of like what happened with Esurance in the auto insurance market.

      What do you think? Hey, let’s start one?!?!

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      • khittel says:

        Mike, thanks much for this. I, too, obviously hope this somehow finds its way into the C-Suites and, if I had to place a bet, I’d bet it gets there via agents rather than through the Twitterati (much as I love them all). Agents seem to understand this and, in my experience at least, are much less hostile to innovative digital experiments than are their “bosses” back in the respective Home Offices. Like you, like several others, I think the industry’s Napster Moment is either already out there, or will shortly be. What’s to be determined is whether, like the music industry, it simply won’t be recognized until way too late, or instead will seen, recognized, and embraced — or perhaps even launched by an industry player. But then I’ve made over-optimistic predictions before that haven’t turned out so well…

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