If you’ve been in the insurance business for practically any length of time, you’ve likely experienced several sweeping changes. New products and markets — such as consumer-driven health plans and life settlements — have gained speed in the past few years as consumer awareness campaigns run by carriers and organizations continue to touch prospects through the mass media.

Pundits have been pondering changes to the existing health care system as news stories repeat sobering statistics on the number of uninsured and underinsured Americans. And new combination products, such as life/LTCI policies, have begun entering the market to meet the shifting needs of consumers.

Trends can tell us much about the future, but what’s around the corner is a mystery to many. To that end, we spoke with several industry experts to hear their educated predictions on major markets’ performance in the year to come. Take a peek at their opinions to help yourself prepare for 2008 — and beyond.

Annuities
Jonathan Neal | Senior partner, CCG-Capital Consulting Group, an Atlanta-based sales and marketing consulting company
I don’t know where interest rates or the Dow, S&P, or any other market index will be a year from now. What I do know, however, is that we have a very uncertain and volatile equity market — interest rates are under pressure from numerous areas, both housing and mortgage markets are in shambles, inflation is looming, and 2008 is a national election year. With that in mind, I can’t think of any product that can meet income and accumulation needs in almost any portfolio better than annuities can, in particular index annuities. As such, I believe annuity sales will rise sharply over the next year.

Melody Juge | Managing director, Life Income Management LLC
As of the fourth quarter of 2007, deferred annuity assets grew to more than $2 trillion, according to a December 2007 LIMRA report. Within this staggering number lies the sales of fixed immediate annuities, which have continued to grow and were up more than 9 percent in 2007.

I see the retirement market as being split between baby boomers and senior retirees. The baby boomers will continue needing an accumulation component in their retirement plans, while retirees settling into the final distribution phase of retirement will want, for the most part, the certainty of guaranteed lifetime income even if only for a modest percentage of their monthly income. Following this reasoning, there will likely be an ongoing increase in the sale of fixed and fixed immediate annuities.

Health insurance
Robelynn H. Abadie | President/CEO, Abadie Financial Services
Health care reform is a major topic and will be one of the decisive issues in the 2008 presidential campaign. After reviewing the candidates’ position papers, it appears that all are making a commitment to make changes to the health care system. However, many states are not waiting on the elections and are now actively pursuing innovative plans to cover the almost 47 million uninsured Americans.

Health insurance premium increases fell to 6.1 percent in 2007 — an eight-year low. Health insurance providers posted an overall profit margin decrease from 4.4 to 3.8 percent.

Despite the favorable trends that we hope will survive the 2009 inaugural year, adjustments are expected.
More employers are adding HDHP/HSA plans, and the often steep learning curve for employees is expected to flatten, which will increase both participation and further cost savings. It is certainly time for reform in all sectors that affect health insurance premiums, and it will be very interesting in the next two years to see how those plans unfold.

Grace-Marie Turner, | President, The Galen Institute
Many presidential candidates, governors, and members of Congress are proposing that an “individual mandate” is the path toward achieving universal health insurance coverage. But, as we have learned from Massachusetts, the country’s first experiment with individual mandates, this proposal can have dramatic and far-reaching consequences for individuals, businesses, and the health insurance market.

When political leaders pass a law requiring everyone to have health insurance, government authorities must decide what qualifies as acceptable coverage. The insurance market could then quickly morph into a government-regulated utility as politicians, rather than the marketplace, determine the terms of the coverage and regulate how much people must pay for the policy. In Massachusetts, a new central-purchasing collective was created that regulates the health insurance choices that are available to those purchasing coverage through the exchange. Further, an individual mandate almost immediately turns into an employer mandate as political leaders determine how much employers will be required to pay for their employees’ coverage.

Many people see the high cost of health insurance as the main reason they don’t buy coverage. Massachusetts, however, essentially enacted an individual mandate without addressing many of the root issues that have made health insurance unaffordable for hundreds of thousands of its citizens — policies such as community rating, guaranteed issue, and a tightly regulated insurance market that has crowded out most genuine competition. Political leaders would be wiser to begin instead with new initiatives that would free agents to match insurance policies with the needs of their clients and foster a more competitive market for insurance by lightening the regulatory burden.

Life insurance
Doug Mishkin | President and CEO, Algren Associates Inc.
As I look ahead to the upcoming year, I anticipate that index UL sales will continue to gain momentum. More and more carriers are introducing competitive index life products to the marketplace. However, we are probably still a few years away from seeing this product line gain any significant market share. On the term and secondary guaranteed UL front, I do not foresee as many significant rate decreases.

Additionally, with the aging boomer market, we’ll see more bundled products combining life and annuity products with LTC. I believe that carriers will continue to refine underwriting at the older ages to further curtail STOLI and IOLI business. However, “legitimate” premium finance programs will continue to gain momentum in the older age and large-face-amount marketplaces. Although interest rates have crept up, these concepts still make sense for the right client.

Finally, I believe that the re-insurance market will ease up; however, it will probably remain tighter than it was a few years ago.

Prof. Edward Graves | Associate professor of insurance, The American College
The coming year for the life insurance industry is likely to bring a continued emphasis on annuity contracts and other accumulation products. This segment of the business is now more than twice as large as life insurance in terms of new product sales.

Life insurance sales in 2008 are not likely to significantly change from their 2007 status in terms of the number of new contracts. There may be a shift away from variable life policies, given market volatility. This may also result in rising index universal life sales. The average policy size may also increase because of inflation. Term life is likely to represent a larger segment of new sales.

Long term care insurance
Jesse Slome | Executive director, American Association for Long-Term Care Insurance
Sales of individual long term care insurance policies are projected to increase in 2008 compared with 2007, with more significant growth in the multi-life or small-group marketplace. The increase in sales will occur because of heightened consumer awareness resulting from more states participating in the federally funded “Own Your Future” campaign, the expansion of LTC partnership plans, and more positive articles within major media outlets. The number of long term care specialists will remain steady at about 3,500 nationwide. The number of incidental insurance producers who sell between one and 10 policies a year will increase slightly, but the number of financial planners and investment advisors offering LTC insurance will grow by more than 10 percent.

Marilee Driscoll | Speaker and consultant on marketing PR to long term care-related business, Founder, Long Term Care Planning Month
New sales remain extremely disappointing, yet I remain rationally optimistic of the long-term viability of the LTCI industry. The national growth of partnership policies will help aid growth by reminding consumers that they still need coverage, but these same policies will make it harder for non-specialists to write LTCI.

Obtaining consumer awareness was the battle two decades ago, but it no longer needs to be fought. Consumers are aware, yet they’re not buying. So, instead of beating a dead horse, the LTCI industry needs a credibility-building campaign for agents and consumers. Both groups have been scarred by the reality of rate increases, companies fleeing the market, and other concerns.

Overall, the reality is this: Legitimate media that covers personal finance has been overwhelmingly positive when it comes to LTCI. Companies, agents, and consumers will all win if the truth, warts and all, is clearly communicated through a reality-based media campaign.

Variable and index products
Sheryl Moore | President and CEO, AnnuitySpecs.com
The index annuity market will continue to grow from a sales standpoint, but not with nearly as much momentum as it experienced at the turn of this century. The impact of FINRA’s Notice to Members 05-50 has hampered sales, although not directly. From a product development standpoint, the 10/10 rule that broker-dealers have adopted as their guideline for “approved lists” is now a bible for actuaries, and the days of 10 percent bonuses and 10 percent commissions are gone.

The index life market will continue to grow in sales and strength. Carriers both small and large will rapidly enter the market, adding further credibility to the product line. Newer innovations will pique interest in the market, such as international indices and living benefits riders. A flight to quality will urge new entrants to launch products with simple guarantees and easy-to-explain illustrated rates. However, controversy will continue to spark interest over these illustrated rates, particularly when used with products utilizing variable loans for income.

Marian Sole | Senior vice president, national accounts, AXA Equitable Life Insurance Company
I think the market for variable universal life is coming back. Why? Because VUL is not what it used to be. Now, flexible premium VUL products offer the upside potential of investing in the markets and, for an additional fee, the ability to:

• Elect optional extended no-lapse guarantees (subject to limitations) that ensure the policy will not lapse for a specified time, regardless of investment performance.

• Offer supplemental retirement income with guaranteed minimum distributions. These optional riders offer the ability to establish a guaranteed stream of periodic payments from the VUL policy’s accumulated value. As long as the annual distributions don’t exceed the guaranteed amount, the policies may also include a no-lapse guarantee.

• Protect retirement assets from unexpected long term care costs through long term care riders. With these riders, in certain circumstances, the death benefit of the policy can be accelerated to pay for qualified long term care services should the need arise.

Such VUL options may be a good strategy for the client who seeks death benefit protection but needs to change course on cash accumulation. The increased longevity of aging Americans has created a need to plan for longer retirements and increased health care costs. With variable life products, agents may now better meet these needs.