The U.S. economy has seen a number of improvements since the Great Recession began five years ago. We recently caught up with John Davidson, FSS, LUTCF, NAIFA past president and chairman/chief executive officer of Davidson Insurance and Financial Services. John described some of the changes and trends he is observing in the financial services industry.
NAIFA: What new products or trends have hit the industry in the last year?
John Davidson: Insurance companies are looking for products that will allow them to remain profitable and garner market share. I have seen an increase in the sale of newer multi-use products like combination life insurance/annuity/long-term care insurance (LTCi) products.
We also have had about a 30 percent increase in our business because of clients buying permanent life insurance, whether it was traditional whole life or universal life insurance to help fund their buy-sell agreements. They are looking for a safe place for their money and they also want guarantees.
NAIFA: What other products have become more popular in the last five years?
Davidson: Multiple-use products, which I mentioned earlier, are being sold by nearly all companies. A lot of these products have life insurance, LTCi and annuity components. For example, there is the Asset Preserver from New York Life, a universal life insurance product with an LTCi component. The key feature with this product is that the buyer has a 100 percent money-back guarantee from day one.
This is good for clients who have money sitting on the sidelines, but do not want to buy an annuity or an LTCi product, and want security and guarantees. Clients put their money in these particular products and get a minimum guarantee, minus mortality and expenses. They have access to their money while maintaining life insurance and LTCi protection, without incurring any risk.
Also, many firms are offering equity-indexed life insurance and annuities.
NAIFA: Five years ago, what was the focus of most employers in regard to employee benefits?
Davidson: Their main focus was to attract and retain quality employees, try to balance their benefits portfolio and still maintain a profitable business. With the economic downturn, the biggest problem employers faced was maintaining that balance. A lot of them reduced their contributions to employees’ health insurance plans, eliminated retirement benefits or made the plans voluntary because they could not pay for them.
NAIFA: What was the employees’ biggest concern?
Davidson: It was making sure that they were working for a solid company that provided them with quality benefits. Many employers were not providing a lot of retirement benefits. Companies diminished their 401(k) plans, and key person policies were not as prevalent as they had been previously. This gave us an opportunity to talk with employees about using some of their own money to secure individual retirement accounts or individual permanent life insurance.
NAIFA: Many advisors appear to be more optimistic than they were a few years ago. Do you feel more confident?
Davidson: Yes. I am one of those perennial optimists. I have been on my own since I was nine years old. I have learned not only to be independent, interdependent and self-sufficient, but also to look at things optimistically. I am the guy who looks at the glass as half full, but I also want to know who drank the other half.
I would say that this is the best time to be in the life insurance industry. Never before has there been a greater need for insurance agents and advisors to interact with the buying public and, more importantly, to create the environment for success and to help people understand that we are not just selling financial products. What we are selling is financial security and peace of mind. That is what we deliver.
Ayo Mseka is editor-in-chief of Advisor Today, the official publication of the National Association of Insurance and Financial Advisors. Contact her at [email protected]
John Davidson, FSS, LUTCF, is past president of NAIFA and chairman/CEO of Davidson Insurance and Financial Service in Thousand Oaks, Calif. Contact John at [email protected]