A Simple Transfusion of Creativity Could Pump New Life into a Business Crying for Innovation
The life and annuity insurance industry is stumbling and bumbling along as opportunity passes it by. The industry is devoid of real options, competition, innovation and creativity. This has led to a stagnation of ideas, opportunity and growth. It is as if the industry is on a treadmill; running hard just to stay in one place. The existing companies have shown that they lack the talent, culture and drive to step forward and lead by innovation.
While this situation is bad, it is also good, because it creates an opportunity for new ideas and concepts to appear on the scene to leverage and lead what has become a moribund industry. The only question is whether this will happen. More on that in a minute.
The current state of affairs in the insurance industry harkens back to the image of the industry for most of the 20th century. A handful of large companies dominated the industry with mirror-like products and innovation defined as rehashing the same old products. This was great for the big companies, but severely limited opportunities and options for employees, agents and consumers.
Then in the late 1980s things began to change. The “me-too-ism” of the industry opened the door to new companies that offered fresh ideas and new approaches to product. This created real options for company employees, agents and consumers. During the 1990s real competition was introduced. New ideas abounded and a whole array of new products was created – and the industry flourished. But, with the turn of the century, this began to change as the industry again looked inward and began to become defensive rather than aggressive.
Those who cannot remember the past . . .
If you think about it, the last truly new product concept to be introduced into the industry was the Equity Indexed Annuity, in the late 1990s. Every “new” product introduced since then has simply been a rehash of existing products. This was accomplished by either re-jiggering the product or adding cumbersome and confusing bells and whistles.
Passing time has produced only greater product uniformity rather than diversity. In an environment where all companies are selling basically the same product, the big companies – those backed by heavy resources – will always come out the winner. The losers will be the small- and mid-sized companies, the agents and the consumer who have few options.
The real loser, however, will ultimately be the industry itself.
Any industry asks for trouble when it turns inward and becomes defensive, rather than seeking out new opportunity and moving forward. That’s precisely what the insurance industry has done. One example of this in-the-box mentality is the insurance industry’s reaction when its best-selling product – Equity Indexed Annuity – came under attack. The response of the industry was to become paranoid and defensive, rather than confident and aggressive.
Some of the more cowardly larger companies wilted under the attacks on the product. They willingly deserted the agents who had been selling it by getting in bed with the very competition that had attacked the product. Some of the smaller companies – having fewer other options – expended valuable time, effort and resources to fight the attacks. For this, these companies deserve credit. Still, the attack on the Equity Indexed Annuity became a serious threat to the industry because the flow of new ideas and products had dried up, causing the industry to become dependent on a single product.
In another area, the industry has been presented with perhaps it greatest opportunity – the retirement income market – yet its inability or unwillingness to innovate means that it is selling income annuity products there were invented 80 years ago and intended mainly for widows and orphans. It is an opportunity that will be wasted unless new ideas can be presented to the market. Alas, new ideas have become an anathema for the insurance industry.
The Bitter Pill has Arrived
As the industry’s interest in and ability to innovate has waned, many companies have been forced to withdraw from the market and leave it to only the very largest. It is like bigger is better, not better is best. This situation may be what the largest companies want, but those who pay the price are agents and consumers who are left with a Hobson’s choice: do business with these few insurance behemoths or do no business at all. This is not a good choice at all — especially for the health of the insurance industry.
The good news in all this, and it’s there if you really look for it, is that by seeking sameness rather than diversity, the companies have forfeited the future and opened up an opportunity for those who have the creativity, innovation and desire to offer new concepts to support those selling the products and the real needs of the consumer.
And the Moral of the Story …
There has been no new blood in the insurance industry for almost 30 years and there have been few new ideas for the past decade. This has allowed the industry to retreat to the old ways where bigness and sameness were valued over creativity and innovation. The options and power are in favor of the big companies and that’s the way they like it. However, it is the very same attitude that caused the old industry to lose it credibility with the distribution system and the consumer. And, it can happen again.
What is needed in the industry is a fresh set of concepts and ideas that will create products and services the agents can sell and the consumer will want to buy. This calls for innovative thinkers who can zig and zag as the rest of the industry lags.
The opportunity is there and the only question is if it will be taken . . .