There currently exists what would appear to be a once in a lifetime opportunity for life insurance companies who are essentially the manufacturers of asset decumulation products such as annuities.
If I were running a life insurance company, I would allocate as much money as possible to marketing and PR campaigns dedicated to helping the public understand that “we’re different from them.”
“Them” would be the large swath of the financial services landscape that either played or continues to play key roles in creating the financial crisis, or those companies that continue to operate with gross conflicts of interest vis-à-vis their customers.
The objective should be to differentiate in order to build and maintain some semblance of trust with customers.
Who in their right mind actually trusts financial services institutions these days when:
- Banks take hundreds of billions of dollars in free taxpayer money and make very few loans to those same taxpayers. The money multiplier in our fractional-reserve banking system is essentially nil at the moment. Same applies to velocity of money. Bank reserves, on the other hand, overflowing.
- Those same banks not only sit on the taxpayer money but likely lend it back to the government to earn what is a free (and essentially risk free) spread on the reserves.
- Those same banks more than likely have funneled much of the “profit” (much of it from techniques described above) in the direction of employee bonuses.
- Banks are allowed to trade for their own accounts through positions that are directly opposed to the advice and products they are creating and selling to their clients.
- Retail investors are encouraged to continue to punt with their life savings in the highly volatile capital markets / casino.
The danger for the asset decumulation industry involves getting lumped into this morass.
Why not build a PR campaign around revisiting some of Jim Cramer’s calls about the risk of variable annuity providers during the peak of the financial crisis? How many life insurance companies actually went under? How many policyholders were harmed?
Even the AIG story could and should be spun in a positive light. The main source of the company’s demise was its capital market operations—AIG Financial Products. The highly regulated insurance businesses continue to operate perfectly well and the insurance customers have not been harmed.
The vast majority of the life insurers are highly regulated, well managed companies that provide valuable products and services to their customers. Moreover, many of these companies have been doing so consistently for hundreds of years. No other financial services institutions have the culture or ability to make and deliver on the long-term promises that are provided by life insurers.
The industry has a golden opportunity to help the public understand this story.
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