39 minute read
Training for Greatness — with Harry Hoopis
Training for Greatness
HARRY HOOPIS shares what it takes to successfully recruit new agents and inspire veteran agents through training and education.
An interview with Paul Feldman, publisher
Harry Hoopis created one of the largest and most successful financial services firms in Chicago. After decades breaking records for sales and agency growth, his company’s mandatory retirement age forced him to step down. He turned to his passion for training, which had been such an important driver in his success, and founded Hoopis Performance Network to help insurance and financial professionals reach their true potential.
Hoopis is CEO of HPN, which boasts over 100,000 learners in its system. He always has recognized the importance of continuous learning, having provided self-improvement opportunities to staff during his highly successful career at Northwestern Mutual and later growing that experience into HPN. He partnered with LIMRA to produce the sales effectiveness program “Trustworthy Selling,” which has enriched the skill sets of more than 30,000 advisors.
He is the author of the best-selling book The Road to the Bountiful Life. Hoopis prizes the art of listening and lives by his Ten Rules of Life. He believes in working hard, and he recognizes the advantages that recent changes, such as virtual client visits, bring to the industry. He recently was presented with the life insurance industry’s highest honor, the John Newton Russell Memorial Award, in recognition of his contributions to the profession.
Most important, he believes in building trust with a client. “When trust is at the highest point, that’s when the sale is made,” he said. “You don’t have to ask for it. They’ll ask you, ‘Who do I make this check out to?’”
In this interview with Publisher Paul Feldman, Hoopis discusses his lengthy career and his thoughts on developing advisors to the fullest.
Paul Feldman: You have had such an illustrious journey through the insurance industry. How did you get into the business?
Harry Hoopis: I’m celebrating 51 years in the business. It’s kind of a funny story. I was studying accounting at the University of Rhode Island, and because I had dropped the class, I had to take it in summer school. I gave up my construction job, which was paying $4.25 an hour. I needed something
to fill in around summer school class. So, I went down to the placement office, and when I walked in, there was a big sign on the wall. I can still see it. It said: “Sell life insurance part-time, $75 a week guaranteed. Northwestern Mutual Life.”
I’d never heard of Northwestern Mutual, never thought about selling insurance, but I thought $75 a week was just what I needed to help me scrape up $2,500 for the next year’s tuition. I took the interview and got started in the business in 1968. That’s how it all began. That program was experimental, and eventually it became Northwestern Mutual’s internship program, which today is a very highly successful program.
Feldman: How did your career develop when you started with Northwestern Mutual? You started part time. Tell me what happened next.
Hoopis: I sold life insurance my entire senior year in school and decided that I would not go into accounting, but instead would pursue a career in life insurance. I graduated in June and went full time. I qualified for the Million Dollar Round Table that year and was really enjoying things. I got into management rather quickly as what we now call a college unit director. I recruited people to do what I was doing in my senior year.
I did that for a few years and then became a district manager in the southern part of Rhode Island. Eventually, in 1974, I was invited to go to the home office and get into a management development program. That eventually led me to being appointed as general agent in Chicago in 1977. I operated the agency there for 35 years. I was the youngest general agent appointment in the company’s history. And when I was done, I was the longest serving in company history for that reason. It was a good run. I retired at the mandatory age of 65 in June 2012.
Feldman: When you were building up the agency, how did you build up a successful team? How did you bring in new people and keep the ones that you had motivated?
Hoopis: That’s an interesting process. As I look back over those 35 years, I realized that I had perhaps five or six different teams. We had a good management system. I liked to get young people involved in management as early as I could. Over that period of 35 years, I believe we appointed nine general agents from my office to take over in other cities for Northwestern Mutual.
What you learn in that process is that each time you lose a person, the team is reshaped. The process of bringing people into the management system was organized. We did it with small groups of young people who came to classes once a month to talk about recruiting, coaching and training in general. We always had a steady flow.
In the early days, the thing that changed our agency more than anything else was that I created the position of recruiter. Up to that point, they never had a person
dedicated to recruiting. The recruiter was always the manager. You kept your eyes open, found somebody and talked them into the business. But I had an idea that we could grow more quickly if I had somebody who was dedicated to sourcing names and running the process. There was a very talented woman on our team, and I suggested that she might take on this newly created role of recruiter, which she did. Our recruiting went from 17 people in 1983 — which was a good number in our company at that time — to 35 in 1984. And then we recruited 34 in 1985. And then we recruited another 30 or 35 in 1986. All of a sudden, I found myself with approximately 100 new Four Facets of Trust people in less than three years in the business. And they were everywhere. They were working in closets — we didn’t have any room for them. From that group, I was able to cull per-
INTEGRITY haps 20 really good people who wanted to be in management. So then we had the multiplier
BENEVOLENCE that we needed. And that momentum carried us forever. It literally carried us until the day
DEPENDABILITY I retired.
Feldman: How do you think recruitment has changed
CHARACTER BASED SKILL BASED over the years?
Hoopis: It’s always evolving. I often hear that you can’t find good people anymore. I object to that notion. There are many very talented people in the marketplace. You just have to work harder to find them. There are many who really do want to make an important impact in the work they do. Having the ability to get them engaged in the business is critically important. How has it changed? It’s still a very difficult task. I talk a lot about the importance of having a better selection of people in our business. As a new manager way back in 1977, I was dedicated to only bringing people into my organization who showed a propensity to succeed in sales. I tried to find the 20% of the population who have the ability to sell. I think the mistake that our industry has made over and over
TRUST COMPETENCE Benevolence Putting another person’s interests ahead of your own.
Integrity Adhering to sound moral and ethical principles; being honest. Dependability Delivering on your promises; predictability. Competence Demonstrating ability, expertise, and knowledge.
again is trying to get people to sell who have no talent to do so.
It takes a lot more work to find those people who can sell. We used psychometric profiling to help us find the right people.
Feldman: Tell me more about psychometric profiling and its importance in recruiting new agents.
Hoopis: Profiling is available even for people who are independent. What I loved about psychometric profiling — whether it would be LIMRA’s Career Profile or the Self Management Group’s POP (Predictor of Potential) test — was that people tell you about themselves. And we should listen to that.
You know, if you take one of these profiles and it says this person probably can be successful in a sales career, you need to believe that.
In one test, for example, they ask, “What do you think people think of you? Do they see you as outgoing? Do they see you as a hard worker?” Well, as you answer that question, you really express your own preference. When they boil that down and they put it through the algorithms and it comes out and it says, “Yeah, we recommend this person for the business,” or worse, “We don’t,” you had better listen to that recommendation.
You need to believe it because with both the LIMRA and Self Management Group profiles as examples, they prove this out. You can see what the retention and productivity is for someone who has the right profile versus someone who doesn’t fit the profile. The way things have changed today, it is even more important to have strict selection standards when you consider the amount of time and money that we put into a new advisor coming in the business. We’re going to spend $20,000 or $30,000 in the first year or so to get them launched, and yet we don’t want to spend a relatively small amount on a profile to be sure we’re launching the right person.
That’s how you end up with better retention. Average industry retention? Let’s be generous and call it 15%, four-year retention. My organization ran at 30% or 35%, four-year retention. We had very high productivity and a good retention rate, which equals a successful operation. That would work for anyone.
Today, we’re seeing agents and advisors recruited who never even get face to face. They’re in Zoom meetings. It’s incredible. At the height of the pandemic, of course, nobody was going face to face. The big change today — which I think is a big bonus — is that it has never been easier to keep the number of appointments that people need to succeed.
There were three benchmarks for me, which I call the “SEA Change” (Selection, Education and Activity). One is better selection. The second is higher and better education, which I think is what drove me to create the Hoopis Performance Network. And the third was higher activity. Let’s call it the three-legged stool. If you did all three of those things, you couldn’t help but succeed.
In terms of activity, I’ve never seen an agent reach the Million Dollar Round Table by doing 40 appointments a month. But I do subscribe to the idea that you can do this if you see 60 people a month. I used
to say, if you see 60 people face to face. Now with Zoom and this new world that we live in, I see agents keeping 70 and 80 appointments a month. And they never touch the steering wheel of their car. They’re saving all that time. And if they’re good, they turn that saved time into productive time.
Clients — particularly existing clients — have become comfortable with this idea.
Harry Hoopis was among those honored at a recent LAMP session
Feldman: For a new agent coming into the business, getting in front of 60 to 80 people in a month, as you recommend, is a tall task. What are some strategies to accomplish that?
Hoopis: We used to say 60 appointments kept is the job, not the goal. Whether you’re going to recruit young people or older people, we must teach them what constitutes work in our business. So, what is work? Getting 60 to 80 referrals. Work is keeping 60 appointments in a month. You work 15 days or 20 days in a month. If you have to, you work 25 days. But you’re going to keep 60 appointments. That’s how you build success.
Feldman: You know, we used to do all of this face to face. We had to do it that way. Now technology and the internet make it so easy to learn and work remotely.
Hoopis: Yes, it’s remarkable. If you look for the silver lining in the COVID-19 cloud, if you will, it accelerated e-learning at least by five, if not 10, years. I was a big supporter of being face to face in the training room. I couldn’t imagine that you would do it any
other way. But today, everyone’s delivering it via a Zoom-type meeting.
Feldman: What are the most important things in your training that every agent and advisor should look at today?
Hoopis: There are several things that never change. First, we must work with referred lead prospecting. We always say cold calling is God’s punishment for not prospecting. We’re in a less trusting world today. The sales effectiveness training HPN and LIMRA did in a joint venture is
called “Trustworthy Selling.”
The very first thing is learning how to establish trust. The four facets of trust in financial services are benevolence, integrity, dependability and competency. Competency is considered table stakes. In other words, you are knowledgeable until you prove otherwise. But what we teach in
Trustworthy Selling is how you build rapport with people. How do you create that sense of benevolence and integrity, and that follow-through in dependable behavior? That’s a very important piece.
Once you have that foundation, that leads to your business development, which for us is prospecting. The best thing you can do is to spend your time working with people who have been referred to you by those you have done business with. In the Hoopis University, we have 70 or 80 videos just about prospecting.
It might seem trite, but the next most important piece is listening skills. They are extremely important skills for a person in sales. I’m in so many sales situations where I watch somebody just talking and talking — and not listening. It’s amazing. I always taught my people that the first thing you should ask someone is: “Why did you agree to see me today?” They have something on their mind when they agree to see you. Having listening skills leads to better fact-finding. If you work with people you are referred to, and you do a good job fact-finding, the close is automatic.
Tension is high when we first meet someone. Our trust is at the lowest point. When you apply the proper skills, you gradually see the tension drop and trust goes up. When that person’s tension is at its lowest point, and their trust is at the highest point, that’s when the sale is made. You don’t have to ask for it. They’ll ask you: “Who do I make this check out to?” We teach these things because saying the right things the right way makes all the difference.
So now it’s 12 years later, and 30,000 advisors have gone through Trustworthy Selling. And guess what we found? The average improvement in productivity in the 12 months following the program is 25% to 30%. We’re teaching people how to express what’s in their heart. They can get so caught up in sales language that they forget to be real.
Harry Hoopis, honored at the 2008 International Insurance & Finance Congress.
Feldman: You started HPN when you retired from Northwestern Mutual. Tell me more about that.
Hoopis: At Northwestern Mutual, we put a very high emphasis on education. Going back to 1985, when we recruited new agents, I put a program in place we called the “class program.” It was curriculum linking agents to systems for success. I charged them a modest tuition. When they took the Chartered Life Underwriter exam and passed the test, Northwestern Mutual reimbursed them.
I would use that money to bring in people to teach prospecting. I would bring in someone to teach etiquette to new agents. I believed that it was important that if I’m sitting down and having lunch with a good prospect, I should know which fork to use and which side the bread dish is on. We literally would set up tables in our conference room, and we’d serve a plated lunch. We’d have someone standing there explaining everything that was going on. This was the kind of training.
We taught memory training. We taught product training. We taught speed reading. I would do anything that I could do to help the person develop personally, professionally and financially. Our mission was to help agents grow — to create an environment where agents continue to grow personally, professionally and financially.
That led to the creation of the Hoopis University within the agency. Around 2007, I came across a learning management system that was designed to be used by a lay person. In other words, I could take video of a person speaking in my agency, and I could put the video up on this learning management system so that other people could watch it repeatedly.
We did invest in that LMS, and before you know it, we had 50, 75, 100 programs in there. Then some of my colleagues at Northwestern Mutual said, “Hey, can we use that?” I said, “Well, sure.” I said, “But you know, it’s going to cost me, so I have to charge you.” So we started charging a small fee.
I would go to my industry groups, and they would say, “Hey, can we get access?” Before you know it, we had a business going. My associate Joey Davenport [now president of the Hoopis Performance Network] was running Hoopis University. When I retired, we took it and made our move to full time. Today, we’re in about 70 companies. We’re in almost 30 countries, four continents, and we have more than 100,000 learners in our system. We have about 3,000 active videos in the Hoopis Performance Network University. That’s how we got into the business. It was an evolution. If you had asked me in 2000 if I would I be doing this today, I wouldn’t have had any idea that this would happen.
It really points out the tremendous need for training — for giving advisors what they need. Our experts are Million Dollar Round Table producers. Our consultants are the Tom Hegnas, Bill Cates and Joe Jordans of the world. Those are the people who understand and speak our language, and that’s what makes us unique.
We’ve seen e-learning grow very rapidly in the industry. E-learning is here to stay.
ESG rules face growing backlash
The environmental, social and governance movement’s noble intentions are running into stiff resistance with growing backlash while a Department of Labor rule moves ahead that would allow limited ESG goals in investing.
During the Trump administration, the DOL proposed ESG rules that would require retirement fund advisors to put pecuniary interests ahead of ESG goals in investing, replete with a note from then-DOL Secretary Eugene Scalia deriding social goals in ERISA-protected plans. The Biden administration took back the rule to
realign it with ESG objectives, but ultimately kept the primary focus on monetary considerations.
The Securities and Exchange Commission is casting a skeptical eye on companies’ ESG claims to guard against “greenwashing.” The SEC has proposed rules requiring publicly traded companies to disclose their ESG plans. When the SEC created the Climate and ESG Task Force within the Division of Enforcement, with the express purpose of identifying ESG-related misconduct, many public companies and investment advisors started preparing for expected enforcement actions.
The task force is working with such SEC divisions as corporation finance, investment management and examinations as it seeks gaps and misstatements in issuers’ disclosures of climate risks and ESG strategies.
DIVIDED GOVERNMENT UNLIKELY TO BRING BIG CHANGES
A divided balance of power in Washington will bring something of a stalemate to government over the next two years, a consultant said. Geoff Manville, partner and government relations leader with Mercer’s law and policy group, said that with Senate control in Democratic hands while the House of Representatives moves to Republican control, “the Democrats’
policy agenda — what’s left of it — will be on ice for the next two years.”
Health care “is not as much of a priority for Republicans as it is for Democrats,” Manville said. “But tax and budget issues are more of a priority for Republicans.”
Manville made a few predictions for the post-midterm environment. He believes the new Republican House will be checked by the President Biden veto and the Democratic Senate. In addition, he said, bipartisan deals are possible despite razor-thin majorities in both chambers of Congress.
POST-MIDTERM PERIOD COULD BE A GOOD ONE FOR STOCKS
The markets went through a rocky patch during the first three quarters of 2022, but better days may be coming now that the midterm elections are mostly over. That was the word from a Carson Group expert who said that the midterms are giving the markets a much-needed boost now that the uncertainty surrounding who will control Congress over the next two years largely has been settled.
“We know that midterm years tend to be rough on equities during the first three quarters, then you get a rally,”
said Ryan Detrick, Carson Group chief market strategist. “The calendar seems
to be playing out here again where you have a rough stretch and then a boost. Some of the best quarters for stocks
are here,” he said, noting that years two and three of a presidential cycle tend to be strong-performing years for the S&P 500.
The midterms “could give us tailwinds,” Detrick said, as midterm years tend to see a big bounce off the lows for the S&P 500. He
QUOTABLE
Persistently high inflation undermines the ability of our economy to perform at its full potential.
— New York Federal Reserve President John Williams
noted that the S&P 500 average intra-year pullback in a midterm year is -17.1%, with the average return of 32.3% a year after the lows. Stock performance historically has been weak in the second year of a new presidency, Detrick said. But stocks bounce back stronger in year three.
INVESTORS ‘DOOMSCROLLING’ ON THE BRINK
Americans are anxious about their investments but not pulling out, although some would like to. They’re spending cash on necessities rather than buying assets in a down market. They have one eye on their lives and the other on their sinking investments as they doomscroll on the brink. Those are some of the findings from a couple of recent surveys, although one of them found some glimmers of optimism about next year.
A Wells Fargo survey found that two-thirds
(66%) of investors are anxious about their money and three-quarters (77%) are spooked by market volatility. Two out of five (42%) would like to cash out of their investments, with 29% saying they wish they could cash out their retirement funds without tax penalty.
Inflation is a key driver pushing Americans to shift their priorities. Even with a down market offering bargains for assets, 25% are investing less as they spend more on basics such as groceries, gas and housing.
DID YOU KNOW ?
Long COVID-19 may be ‘the next public health disaster’ — with a $3.7T economic impact rivaling the Great Recession.
Term life is more popular than it’s been in years. Millennial buyers are driving demand, coupled with a wave of life event triggers like home purchases, having children, or even a brush with COVID. With a commoditized product and razor-thin margins, making money from term life sales can be a challenge – how
for your business? The answer is life insurance that does more for both you and your clients: Assurity’s new 3-in-1 life insurance bundle, StartSmart. Term life can feel like more trouble than it’s worth. It doesn’t bring you much extra revenue, and customers purchase low-cost policies that exhaust their term before providing any benefit. The middle market desperately needs products that provide more value than base coverage, and that can be converted to permanent protection later in life. It starts with expanded 3-in-1 coverage that goes beyond what most term life policies offer, bundling life insurance with our Critical Illness Benefit Rider and Monthly Disability Income Rider. These living benefits help guard against the financial impact of critical illness or total disability, all built into the term policy. The riders don’t deduct from the death benefit, meaning the life insurance remains untouched if clients need to use their living benefits. StartSmart is fully convertible to permanent coverage, including the riders – so your clients get an opportunity to keep their coverage and you can make another sale.
By Nathan Driskill, Vice President of Individual Sales, Assurity Get more value from Applying is a breeze using our convenient e-application your life insurance sales platform. It includes built-in accelerated underwriting
Term life is more popular than it’s been in years. Millennial buyers are driving demand, coupled with a wave of life event triggers like home purchases, having children, or even a brush with COVID. With a The middle market desperately commoditized product and razor-thin margins, making needs products that provide money from term life sales can be a challenge – how do you translate consumer interest into more revenue more value than base coverage, for your business? The answer is life insurance that does more for both you and your clients: Assurity’s new and that can be converted to 3-in-1 life insurance bundle, StartSmart. permanent protection later in life. Term life can feel like more trouble than it’s worth. It doesn’t bring you much extra revenue, and customers purchase low-cost policies that exhaust their term The advantages of StartSmart are immediate: You get before providing any benefit. The middle market desperately needs products that provide more value more revenue than you’d see selling straight term, than base coverage, and that can be converted to and your clients get better coverage that lasts for as permanent protection later in life. long as they need it. It’s a win for both of you, and a gamechanger for term life sales. You can use it with It starts with expanded 3-in-1 coverage that goes younger clients who want more bang for their buck, beyond what most term life policies offer, bundling life insurance with our Critical Illness Benefit Rider and clients who want to increase their coverage without Monthly Disability Income Rider. These living benefits applying for multiple products, or anyone who wants a help guard against the financial impact of critical sturdy financial foundation on which to build their lives. illness or total disability, all built into the term policy. The riders don’t deduct from the death benefit, meaning the life insurance remains untouched if At Assurity, we truly believe that StartSmart can clients need to use their living benefits. transform your term life business. And we’re here to help every step of the way, with a 130-year legacy StartSmart is fully convertible to permanent coverage, of partnership with independent distribution like including the riders – so your clients get an opportunity you. StartSmart is the latest way we’re helping you to keep their coverage and you can make another sale. to succeed, and it has the potential to make a real difference for your clients and your bottom line.
Term life sales are up. Your revenue isn’t. Here’s the one-of-a-kind solution. By Nathan Driskill, Vice President of Individual Sales, Assurity Applying is a breeze using our convenient e-application platform. It includes built-in accelerated underwriting
and instant decision for face amounts up to $1 million
to those who qualify, so you can get more clients approved faster. We designed it to be easy from beginning to end, all while doing more for you and your clients. The middle market desperately needs products that provide more value than base coverage, and that can be converted to permanent protection later in life. The advantages of StartSmart are immediate: You get more revenue than you’d see selling straight term, and your clients get better coverage that lasts for as long as they need it. It’s a win for both of you, and a gamechanger for term life sales. You can use it with younger clients who want more bang for their buck, clients who want to increase their coverage without applying for multiple products, or anyone who wants a sturdy financial foundation on which to build their lives. At Assurity, we truly believe that StartSmart can transform your term life business. And we’re here to help every step of the way, with a 130-year legacy of partnership with independent distribution like you. StartSmart is the latest way we’re helping you to succeed, and it has the potential to make a real difference for your clients and your bottom line.
assurity.com/startsmart assurity.com/startsmart
Let’s talk more about how StartSmart can help you increase your revenue while providing better coverage Let’s talk more about how StartSmart can help you – my team and I would love to talk more. increase your revenue while providing better coverage – my team and I would love to talk more.
Seeking Stability In 2023
How the industry is responding to economic conditions as it eyes the coming year
By Susan Rupe
Market volatility. Interest rate hikes. Inflation at a 40-year high. Those were the factors that dominated the economic news in 2022. How will those economic conditions impact life insurance and annuity sales in the new year? And is the health insurance market finding stability a decade after the Affordable Care Act went into force? Some industry observers are predicting a calmer 2023, which could lead to life insurance sales staying flat, annuities appealing to more consumers and health insurers offering consumers more choices.
Life insurance: Economic conditions and technology influencing 2023
Life insurance and annuities are heavily influenced by economic conditions, “and we’ve got a lot going on there now,” said John Carroll, head of insurance member relations and sales at LIMRA and LOMA.
“Our expectation is that the markets will calm down in 2023 and improve compared with 2022,” he continued. “As a result of that, we see interest rates peaking and tapering down a bit but still staying steady at least through 2024. We do see economic conditions still moderating over the coming year but not going back to where we were.”
A calming of the economic landscape is one change impacting the industry. Another is the continuing advances made in using technology to streamline underwriting and make it easier for those who need coverage to obtain it.
“COVID-19 made 10 years of change happen in the industry in 10 months,” Carroll said. “Now we’re seeing the benefit of streamlined underwriting. Automatic underwriting really has taken off, and it’s become predominant in the industry up to a certain level of policy size. And we’re seeing less reliance on paramedical exams.
“These are not only streamlining the carriers’ internal processes and helping reduce costs but also enabling companies to reach more people.”
But despite the industry making it easier for people to obtain coverage, “the life insurance need is still significant in this country,” Carroll added.
“In our data, we see that at least 4 in 10 households would face significant hardship within six months with the loss of a primary breadwinner. We’re thinking there’s over 100 million Americans who say they need or need more life insurance. So the need is tremendous.”
Carroll said the industry’s challenge is how to reach those uninsured and underinsured, especially when inflation and high interest rates mean families have less money to buy coverage. He said he expects life insurance sales could slowly tick upward if inflation slows down.
COVID-19 prompted a sense of urgency in people to protect their families, so life insurance sales saw a significant increase in 2021. But as economic challenges have replaced COVID-19 as being top of mind for consumers, “we’re seeing a settling down in life insurance sales,” Carroll said.
He predicted life insurance sales will stay around 2022 levels in the new year but will remain above pre-pandemic levels for the foreseeable future.
Flat sales in 2023, uptick in 2024
Whole life sales, which were strong in 2021, saw a drop in the mid-single digits in 2022. Carroll said one concern around whole life sales is that inflation is eating into the purchasing power of middle-market consumers who traditionally buy the product.
But if a recession occurs in 2023, it’s possible that whole life sales will improve, he added, as he looked back at the 200809 Great Recession.
“Going back to that time, we saw sales of whole life increase because not only were people looking for protection but also the guarantees that whole life offers were very appealing,” he said.
“We don’t know where whole life will go in 2023, but we certainly are seeing a softening. We expect to stay flat in 2023 and then in 2024 start to pick up again to a normal low-single-digit growth rate.”
Term life sales also are expected to slide in 2023 and then pick back up to pre-inflation levels, Carroll said, as consumers are more willing to spend money for coverage.
Variable universal life sales were up 73% in 2021 and continued to have a strong showing in 2022. Carroll predicted a leveling off in 2023 and then an increase the following year, “assuming the equity markets will stabilize next year and then continue to rise in 2024.”
Indexed universal life sales also are predicted to see a flattening in the coming year and an increase in 2024, although “at a more subdued, sustainable rate as opposed to what we’ve seen in the past two years,” Carroll said.
“Whole life and term are struggling relative to very strong 2021 numbers,” he said. “We see that sort of settling down and then see them coming back to a slow, steady growth rate going forward. And the UL space, again, growing dramatically,
staying strong and picking up after potentially leveling off and absorbing some of that high growth of the past two years as we go forward.”
Interest rates give carriers flexibility
For years, a prolonged low-interest-rate environment “had a dramatic effect on life insurance carriers,” Carroll said. “It really put up “a tremendous number of barriers and forced some product innovation.” As interest rates rise, “those higher rates give a lot more breathing room to the carriers. There’s a lot more they can do.”
Carroll predicted interest rates will level off in 2023, which he said will lead to more product innovation in the future. “Interest rates that rise slowly and steadily are good, but spiking interest rates are not,” he said.
“When there’s a huge spike, carriers can’t address pricing issues and product development that quickly. What we do see is that interest rates will level off at a rate quite a bit higher than where they had been for the previous 10 years.
“That gives the carriers much more flexibility in their product design, in their product pricing. It’s attractive to have a stable and somewhat more predictable interest rate environment — that can be very positive for insurance carriers.”
Annuity sales keep booming
Although life insurance sales are expected to be flat in 2023, annuities are expected to keep booming after a record-setting 2022, Carroll said.
Higher interest rates are a main driver of higher annuity sales, he added. An aging demographic is another factor making annuities attractive.
“When you look at the annuity environment, you have this higher-interest rate environment that automatically makes certain products more attractive. But you also see the population aging, the 65-and-older group increasing.
“Annuities are generally attractive to pre-retirees and retirees because of the protection they offer and the upside they offer. And we see consumers moving toward protection as they see the kind of market volatility we have been experiencing. So consumers are looking for products that offer protection while offering upside.”
Variable annuities continue to struggle, Carroll said. LIMRA is projecting 2023 VA sales to be between $60 billion and $65 billion. “That sounds like a big number, but in 2007, we had more than $180 billion in VA sales.”
Other annuity products are competing with VAs for attention and investor dollars. One such product is registered index linked annuities, which continue to grow in popularity. “In this product, you get some of the benefits of the VA, but there is a guaranteed aspect of it that is a crediting rate,” Carroll said.
He predicted RILAs to hit around $40 billion in sales in 2022, and that number will increase in the coming year.
Fixed annuities “will continue to be the big story in 2023,” Carroll said. Coming off of 2022, when sales hit nearly $100 billion, fixed annuity sales will continue to be strong in the current year, although maybe not quite at this year’s level.
“It’s simply because interest rates have gone up and you see carriers much more responsible and flexible on raising rates quickly on their products. When you see the environment where certificates of deposit and money market funds have been yielding less than half of a percent, and then they you look at rates of 4% or 5% on some annuities, that’s going to attract a lot of attention.”
If interest rates go down, then annuity rates will go down as well, Carroll said. “So I think it will be a question of when people continue to pour money into annuities before rates peak and maybe start to head down.”
Fixed indexed annuities also hit record sales in 2022, and Carroll said he expects growth to be driven by an opportunity to lock in higher interest rates before rates begin to fall.
Income annuity sales are rebounding from pre-pandemic levels, and Carroll predicted steady growth of that product sector over the next three to five years, again with aging demographics and higher interest rates driving that growth. “COVID-19 made 10 years of change happen in the industry in 10 months. Now we’re seeing the benefit of streamlined underwriting. Automatic underwriting really has taken off, and it’s become predominant in the industry... .” — John Carroll
“It’s a very good environment for people who are looking to use an income annuity as part of their retirement income plan,” he said. “It really comes down to whether the equity markets can settle down and rates settle in above where they’ve been for the past decade — you’ll see a strong environment for annuity sales going forward.”
Health insurance: A stable outlook
Health insurers are entering 2023 with the worst of COVID-19 behind them. But they are keeping an eye out for a possible recession after being hit with high inflation, especially pertaining to increased costs of care and higher salaries for health care workers. In addition, health insurers faced increased consumer health care usage after people deferred receiving care at the height of the pandemic.
That was the word from Brad Ellis, senior director at Fitch Ratings, who said “the health insurance market has been relatively stable even in the face of what we thought would be a strong test of its resilience.”
But the health insurance industry is facing headwinds from a possible mild recession hitting in the second and third quarters of 2023, Ellis said. Recession typically leads to lower enrollment for group health insurers as the unemployment rate goes up.
In addition, inflation is a factor that could impact health insurers’ bottom lines in 2023, as most aspects of care cost more and the health care industry is hit with a continued worker shortage and demands for higher wages.
Ellis said he does not expect inflation to hurt health insurers in the coming year.
“Health insurers typically have contracts with hospital systems that are three years in term. So when they review those contracts, that’s when they agree to higher payment rates. So for right now, the health insurers aren’t facing the inflationary pressures that the hospitals are. But that will slowly change over the next few years. And we all pay that in our health insurance premiums as well.”
But health insurers have an advantage in dealing with inflation, he added. “Because they have sort of a heads-up to this inflation, they can factor that into premium rates before they actually have to start paying out claims. So it gives them a little bit of a head start. This is supporting more stability in health insurers.”
Diversification is one factor that is contributing to health insurers’ stability, he said, pointing to the number of carriers offering Medicare plans as an example.
“If you look over the past decade, the proportion of the total enrollment of the large health insurers that is made up of Medicare business has grown. So that helps because the Medicare business is extremely resilient. It’s government funded and not impacted except in an extreme case. So that is helping carriers in terms of offsetting some of the loss from the group medical side,” he said.
More states are privatizing Medicaid, and that will mean more opportunities for health insurers to increase their business through managed care, he added.
More choices for consumers
Consumers who purchase individual health coverage through the Affordable Care Act exchanges will find more choices available to them as more carriers find ways to be profitable in that market, said Tara Straw, senior health advisor at Manatt Health.
After several years in which consumers in many areas of the country could find only one carrier offering ACA coverage in their county, more carriers have filled the void for 2023.
“People absolutely have more choices. It has been a very stable marketplace,” she said. “With the exception of COVID-19 disruption, it was a lucrative marketplace for some insurers in the couple of years prior to COVID-19 and
in the first year of COVID-19. That stable place for insurers to be has drawn in more insurers.”
Straw said enhanced premium tax credits that enabled more people to obtain coverage through the ACA marketplace also benefited insurers that offer coverage there. “Because not only are more people choosing to get coverage through the marketplaces, but also it’s easier for them to stay in that coverage,” she said. “One of the complaints that insurers have had about the marketplace is that people get into coverage and then drop it until they need it again.”
“Now, if you have more people who have zero-premium plans, they won’t go into arrears on premiums,” she continued. “So the more people you have in these zero premium plans, it becomes a more stable market for carriers. I believe the carriers have recognized that, and that’s why they are coming into the marketplace for every area of the country.”
The Great Unwinding will have an impact
The end of the COVID-19 public health emergency is expected sometime in 2023, and that will trigger what some call The Great Unwinding.
The Great Unwinding is how the Centers for Medicare & Medicaid Services refers to the undoing of many health coverage requirements and incentives put into place as a result of the COVID-19 public health emergency declaration and related legislation. When the public health emergency declaration ends, millions of Americans are at risk of losing Medicaid or ACA coverage.
According to an analysis by the Kaiser Family Foundation, an estimated 5.3 million to 14.2 million could lose their Medicaid coverage when the COVID-19 public health emergency ends.
Straw said The Great Unwinding will impact both ACA health insurance and employer-based insurance.
“How will people transition into employer-sponsored coverage if they’re eligible for that? Will employers be ready for that influx of people? Do employers — especially employers of low-wage or moderate-wage workers — understand that there will be an influx of people, or will they be aware of the number of people who could request special enrollment periods?”
The family glitch is fixed
In October, the Biden administration issued a rule that addressed what is known as the family glitch under the ACA.
Under the glitch, families were unable to qualify for ACA-subsidized health insurance when one member received coverage from his or her employer that was considered affordable — even if the cost of covering the entire family was unaffordable. The employee-only definition did not take into consideration the fact that the cost of family-based coverage is usually much more than the cost of employee-only coverage.
Straw said fixing the family glitch will drive more people to the ACA marketplace.
“For employers, they will potentially lose some people out of their risk pool who do not have an offer of affordable family coverage and will decide to go into the marketplace,” she said.
Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan. Rupe@innfeedback.com. Follow her on Twitter @INNsusan. “With the exception of COVID-19 disruption, it was a lucrative marketplace for some insurers in the couple of years prior to COVID-19 and in the first year of COVID-19. That stable place for insurers to be has drawn in more insurers.” — Tara Straw
