As IUL Market Heats Up, Large Carriers Focus on Service, Simplicity
September 12, 2017 by Jay Cooper
Competition is ramping up in the IUL landscape. Complexity isn’t.
A growing number of carriers have entered the indexed universal life (IUL) space, and product growth and other data points suggest an increasingly competitive marketplace. To maintain a strong foothold, large IUL incumbents say they have focused less on product innovation and more on making the purchase process simpler, the value proposition clearer and the service to clients more timely.
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Large carriers – Transamerica, National Life and Securian Life – are making some changes to stay competitive in the changing IUL landscape.
As IULs Gain Traction, Products Swell
IULs continue to be a popular option for customers. Sales of IUL products for the second quarter of 2017 were $485 million, according to data just released from WINK. That’s an 11% jump from the previous quarter, and nearly a 10% increase from the same period last year. The products are on pace for a record-setting sales year, according to WINK.
As IULs have become more popular, carriers have taken note. There are now 52 different insurers offering IUL products, and the number of products in the market has swelled 25% in the last three years to 141.
Market share has also shifted. Three years ago, the five largest players in the IUL landscape held 56.24% of total market share. Today, the market share of the five largest has slipped to 39.91%, according to WINK data.
“One of the main reasons IULs have gained sales and attention is the continued low rate environment,” says Sheryl Moore, president and CEO at WINK, “Low rates have made them re-evaluate product lines and where to make sales efforts.”
As a recordkeeper of IUL data, Moore has seen the market evolve product by product. She says recent product trends include an increase in hybrid indexes, a focus on living benefit riders and interesting bonuses that increase the amount of interest credited to a policy.
Indeed, some of the largest carriers of IUL products say they have tweaked products. But interestingly, much of their innovations in the past year are on the client service side, and in steps to make the product easier to sell and easier to understand.
National Life Eyes Faster Signup, Targeted New Products
At National Life Group, executives are less concerned about new entrants or new competitor products in the IUL space.
“I think at this stage, everyone who wants to enter the market already has,” says Achim Schwetlick, senior VP and head of the business innovation group at National Life. “We believe from a product innovation stand point, the market is saturated. It’s already a complex product. Making it more complicated doesn’t create a lot of value for customers.”
National Life has sought to remove the complexity from obtaining life insurance, and has also sought to ease understanding of which IUL product fits which client’s need.
At the end of 2016, it released a no-fluids, simplified underwriting process that allows customers to obtain coverage for its FlexLife IUL product within days.
National Life is also taking greater care to match new and existing products to a pointed need in the market. The insurer may eventually sunset a product if it doesn’t have as clear of a value proposition for a specific client need.
New products, meanwhile, will clearly articulate the need they are addressing. For example, National Life will launch a new PeakLife IUL product in the coming weeks targeted specifically to clients who desire high accumulation.
“Instead of going to market with a Swiss army knife and cramming a lot of features into one product, we want to have products that are more focused on a specific market or client need,” Schwetlick says.
Transamerica Seeks Informational Edge
Transamerica sees growing competition in the IUL market as a welcome sign of a successful product.
“We have a diverse marketplace. We have a lot of competition,” acknowledges David Coughlin, VP and national sales manager, brokerage distribution. “IULs provide great ways for the mass affluent to protect families but also act as an accumulation vehicle.”
The insurer remains open to product innovation for IULs; in recent months, the company has increased the long-term care benefit offering and added optional living benefits to its Transamerica Financial Foundation IUL.
But Transamerica is perhaps more focused on process innovation than product innovation.
“It’s not just product, but process,” Coughlin says. “How easy can we make it for an advisor or distributor to work with us?”
Coughlin says much of the industry has already moved to incorporate the “three E’s”: electronic application, electronic decisions (algorithmic underwriting) and electronic delivery. Now Transamerica is focused on maintaining the relationship with the customer and distributor as the client moves from accumulation to retirement.
To improve communication, the company launched the New Age of Advice website, where advisors and clients can get more information around financial planning, and the Transamerica Knowledge Place website, which covers a range of issues that are important to the client during wealth accumulation, approaching retirement and during retirement.
“Where we want to be leading is in providing information to our customers,” Coughlin says.
Securian Product Innovations Focus on Service
Securian Financial executives also note heated competition in the IUL space.
“More and more competitors are joining this market or looking to set themselves apart. The more competitive it gets, the more you have to come up with a product or new idea to set yourself apart,” says David McCoy, a senior life product research specialist at Securian.
The company introduced many of its newest ideas for servicing the client into its Orion IUL product, which launched in March. Similar to National Life, the product is easier to purchase; potential clients can bypass bloodwork or urine tests and receive an underwriting decision in as little as 24-48 hours.
The Orion product also includes a new built-in loan feature, allowing clients to access interest-free loans if they pay them back within 90 days.
Perhaps the greatest innovation within the product, however, is a service function that facilitates better communication between the carrier, advisor and client, McCoy says. The product allows financial professionals to set up email policy reminders that prompt them to take action around planned client events such as when the client wants to take distributions, or increase or decrease their face amount based on age or a life-changing event.
The policy reminder has since been passed down to Securian’s other individual life products, but the company hopes it will be a differentiator in the IUL space.
“It was one of the real value propositions we wanted to include when we created the product,” McCoy says.
