A New Need for Life Insurance in the Senior Market: Income Protection

A New Need for Life Insurance in the Senior Market: Income Protection Walter H. Zultowski, Ph.D. WZ Research + Consulting, LLC

SOA Life and Annuity Symposium May 22, 2012

The Life Insurance Purchasing Lifecycle

Socio-Economic Status

Higher

Income Protection

Income Protection

Lower

20

40

60 Age 2

80

100

Current Environment: Academic Coverage “…working longer is the key to a secure retirement for the vast majority of older Americans…” What is the Average Retirement Age? Center for Retirement Research at Boston College

“…for many Americans, the foundation of their retirement strategy is simply to not retire or to work considerably longer than the traditional retirement age of 65.” The New Retirement: Working 12th Annual Transamerica Retirement Survey

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Current Environment: General Media Coverage

“Many older people are finding themselves in a position they never expected to be in at retirement age: still working or in need of a job.” For Many Seniors, There May Be No Retirement The Wall Street Journal

“Many older workers are responding to the economic downturn by postponing retirement, but even so it will be a struggle to make up for market losses in their retirement plans.” ‘Scary’ Economy Delays Retirements The Hartford Courant

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A Perfect Storm of Demographic and Economic Events… Demographic • • • • • •

Delayed household formation Divorce and household reformation at later ages Increased longevity Increasing likelihood of health care needs Longer number of years supporting adult children Increasing need to support “old – old” parents

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A Perfect Storm of Demographic and Economic Events… (cont’d) Economic • • • •

Increasing costs of health care and long-term care Disappearance of defined benefit pension plans Fragility of existing public and private pensions Decimation of retirement “nest eggs” during the “Great Recession” • Housing no longer a “Bond Fund” • Fear of a “Double-dip Recession” and/or stagnant economic growth • Widespread job layoffs affecting people in their 50’s and 60’s 7

Exacerbated by…

• 20- or 30-year term life insurance expiring before the need for coverage has expired • Disappearing employer-sponsored group term life insurance, resulting from job change or layoffs

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Case Study How one company is acting to penetrate the senior market for life insurance

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Amica Life • • • • • •

Lincoln, Rhode Island Wholly-owned subsidiary of Amica Mutual Legendary for customer service and satisfaction Primarily provides term life insurance Marketed through direct response/call center Primary market is the Amica Mutual P&C policyowner base

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Potential Within the Amica Mutual Market # of Life Policies Issued

# of Auto Customers