COVER STORY

@ōůĈýáŵżǍNjǍnj The Industry C-Suite Speaks Out

By Jennifer Rankin Senior Editor, LOMA (retired)

18 MarketFacts®:: YourYour ResourceResource forfor IndustryIndustry InsightsInsights // NumberNumber 1,1, 20212021 INDUSTRY TRENDS

he year 2020 upended the way we work, accelerated our use of digital tools, and demanded new levels of resilience, agility, T and creativity. The culprit? COVID-19 — an What’s ahead for sales and insidious virus discovered in China in January — that quickly spread globally. By April, the SURȴWVWHFKQRORJ\WKH was in the midst of a serious pandemic. Schools and Forecast 2021 FXVWRPHUH[SHULHQFHWDOHQW nonessential stores closed. Companies sent employees DFTXLVLWLRQFRPEDWLQJIUDXG home to work remote. Suddenly terms like N95, social distancing, and PPE became part of our vocabulary. While SRWHQWLDOEXVLQHVVGLVUXSWRUV the pandemic has yet to abate, vaccines are in the pipeline. DQGWKHUHWLUHPHQWFKDOOHQJH" Public health experts say the second half of 2021 will bring improvement, barring a surprise resurgence of the virus. +HUHPRUHWKDQDGR]HQ In addition to dealing with the business implications LQGXVWU\H[HFXWLYHVVKDUH of the pandemic, the financial services industry continues WKHLULQVLJKWV to recalibrate in the face of new regulations, evolving technologies, customer expectations, and more. Another year of low interest rates — including the unexpected rate plunge in 2020 — is pressuring investment earnings, product performance, and reserve and capital adequacy.

While the pandemic prompted a significant and sud- den downturn of the global economy, the markets, though rattled, seem to be weathering the storm. Capital markets affect equity-linked products. Sixty percent of variable annuities, for example, include guaranteed living benefits that are sensitive to capital market performance, according to Fitch Ratings.

Against this backdrop, we asked C-suite executives to share their thoughts on what 2021 will hold for the indus- try. The participants are members of the Board of Directors of LL Global, Inc. What they have to say points not only to headwinds, but also to a more positive outlook on the horizon of 2021.

Sales Outlook Most of the survey participants expect the global economy to stabilize and become more predictable in 2021. They foresee modest and annuity sales growth, albeit less than in previous years. “Everything depends on the economy, Federal Reserve, and control of COVID-19,” says Kevin Hogan, CEO, Life and Retirement, AIG.

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Despite a challenging business climate, executives point Their companies are focusing IT efforts on transforming out numerous opportunities for the industry. The first is a the underwriting process, improving the customer journey, renewed interest in and demand for protection and income exploring the possibilities of a virtual workplace, and boost- products. The COVID-19 pandemic has been a pointed ing efficiencies. They are deploying advanced data analytics reminder of the importance of , in particular. and artificial intelligence (AI) to accomplish these goals. “Consumers have never been more aware of their own mor- Accelerated underwriting is also top-of-mind. “Carriers tality and of the need for and value of life insurance,” says are relying much more heavily on advanced data analyt- Brooks Tingle, president and CEO, John Hancock. ics to dramatically improve the client experience,” says Executives also see opportunities for sales and profits in Grogan. “While this is true in many aspects of the business, the workplace benefits space, in-plan annuities, the grow- the advent of new data-driven underwriting capabilities ing advisory channel, and fee-based solutions. Emerging has been particularly relevant during COVID-19 when some markets are yet another growth opportunity. “We expect traditional underwriting inputs were simply unavailable.” that emerging markets will account for some 50 percent The value of data analytics extends beyond underwrit- of global life, health, and retirement markets,” says James ing. “We have seen great value emerging from the use of Weakley, president, Emerging Markets, Prudential Finan- advanced analytics and AI,” says William Gaumond, chief cial, “while growing at annual double-digit growth with financial officer, Life. “Use cases around distribution, attractive profit margins.” underwriting, operations, marketing, and HR have shown On the product front, participants anticipate an uptick very promising results in terms of improved efficiency, in the sale of term life and indexed life/annuity products; improved productivity, improved decision-making, and, in response to low interest rates, whole and variable improved targeting, and more.” universal life (VUL). Still, says Amy Friedrich, president, Companies are leveraging technology tools to trans- U.S. Insurance Solutions, Principal Financial, “Insurance form the customer experience — among them, e-signature, companies will need to manage their sales mix to help e-notarization, e-advisory, and e-delivery. “We want with profit margins, as low interest rates are continuing to to make each interaction with us smart, simple, and add pressure. As a result, we’ll likely see continued actions human,” says Michael Simonds, chief operating officer, related to interest-rate sensitive products, including prod- Unum Group. “It’s a stretch effort, but one we are aggres- uct pullbacks, repricing, redesigns, and the introduction sively chasing by mapping clients’ digital journeys.” These of new solutions.” tools also support the field. “When the pandemic hit,” ΖQIRUPDWLRQ7HFKQRORJ\ says Robert TeKolste, president, Sammons Independent Annuity Group, Sammons Financial, “our agents … needed When we asked which technologies have the greatest our help to pivot quickly into a virtual environment.” potential for the life/annuity industry, participants first The company prioritized e-application, e-signature, and emphasized that the COVID-19 pandemic compelled them e-delivery solutions. to ramp up their technology platforms and search for new technology solutions. “The pandemic has clearly acceler- Mike Temple, vice chairman and COO, Protective Life, ated the digital transformation of the industry that already sees tremendous opportunity with AI. “While we have was underway,” says John Grogan, EVP and chief product been hearing about the promise of AI from a scientific and innovation officer, Northwestern Mutual. “Digital perspective for decades,” he says, “we are just now enter- transformation [typically] centers on the use of data, ana- ing the era where technology can enable the science. lytics, and technology to reinvent business processes and This presents a massive opportunity for our industry … simplify the user experience,” says Jonathan Bennett, EVP with data at its core. From underwriting on the front end, and head of Group Benefits, . “The trend will to claim processing on the tail end, AI has the potential to continue, even accelerate, in 2021.” impact every aspect of the business.”

20 MarketFacts®: Your Resource for Industry Insights / Number 1, 2021 INDUSTRY TRENDS

a room and make drinking coff ee an experience,” says Friedrich, “then we can make protecting ourselves and our loved ones a meaningful experience.”

“The customer experience is, in my opinion, one of the most important catalysts for industry growth,” claims Neil 7KHFXVWRPHUH[SHULHQFHLV Sprackling, president, US Life & Health, . “If we can continue to improve [that experience], from policy issue RQHRIWKHPRVWLPSRUWDQWFDWDO\VWV through its lifetime, we will ultimately create a relationship IRULQGXVWU\JURZWK with the end consumer that other retail organizations have achieved. This is very much a work in progress.”

+XPDQ&DSLWDO How can the industry attract and develop the kind of employees it needs to succeed? “We have the key ele- ments of a compelling employee value proposition,” says Temple — “a strong social mission, meaningful work with career opportunities, attractive total compensation, and John Vaccaro, head of MassMutual Financial Advisors, good work-life balance. We [just] need to do a better job MassMutual, believes technology will support the shift to of telling our story.” That story includes the fact that the holistic fi nancial planning needs. “Aggregated client data, industry provides peace of mind and fi nancial security to analytics, and digital capabilities across protection and people when tragedy strikes. wealth is becoming increasingly important as clients seek Today’s top talent expects a healthy work culture, a to consolidate their fi nancial relationships,” he says. clear corporate mission, purposeful work, the opportunity &XVWRPHU([SHULHQFH to learn and grow in a career, and the knowledge they will Executives agree that customer experience is essential not be rewarded for performance with compensation and only to long-term business success, but also to a lasting benefi ts. Robust benefi ts are a critical part of attracting competitive advantage. Ensuring a successful customer and retaining great talent. “In an Employee Benefits experience involves listening carefully to consumers, Research Institute study from early in 2020,” says Simonds, watching their behavior, and interacting frequently. Well- “77 percent of workers said benefi ts packages are an trained employees who have up-to-date information and important factor in their decision to accept or reject a job.” technology tools are a key component, as is aligning all Several executives reiterate the importance of cor- facets of the organization to the mission of providing supe- porate culture. “Culture can make or break a business,” rior service. Relying on hard data, instead of assumptions says Friedrich. As important as they are, “the best benefi t about what customers want, is vital as well. “To remain packages can’t satisfy your top talent if you don’t have the competitive, we must make it easier for customers to do right culture.” Several participants say a successful culture business with us,” says TeKolste. fosters a diverse and inclusive environment. “Examples So what do customers want? They are looking for [at MassMutual] include providing immersive training for convenience, clarity, personalized solutions, and seam- employees and leaders to help them gain insights into less transactions. Consumer benchmarks are high, and systemic and unconscious bias, measuring workforce based on their last best experience with their most trusted diversity as part of our annual goals, and continuing to brands (think Amazon or Trader Joe’s). They also are look- champion causes and advocate for ideas that support ing for authenticity and meaning. “If people can sit in greater inclusion,” says Vaccaro.

MarketFacts®: Your Resource for Industry Insights / Number 1, 2021 21 &29Ζ'ΖQGXVWU\5HVSRQVH Doing the Right Thing

7KH ȴQDQFLDO VHUYLFHV LQGXVWU\ KDV SXOOHG RXW WKH :LOOLDP*DXPRQGFKLHIȴQDQFLDORɝFHU$OOLDQ] VWRSV WR VXSSRUW HPSOR\HHV FXVWRPHUV DQG /LIHΖQV&RRI1RUWK$PHULFD. “I like to say that we WKH ȴHOG GXULQJ WKH RQJRLQJ &29Ζ' SDQGHPLF rise to the top as an organization when we are faced +HUHH[HFXWLYHVIURPVRPHRIRXUPHPEHUFRPSDQLHV ZLWKVLJQLȴFDQWFKDOOHQJHVȃDQGZDVFHUWDLQO\ VKDUH WKHLU FRPSDQ\ UHVSRQVHV LQ  DQG WKHLU a testament to this. So, if there’s one thing I’m most IRFXVIRU proud of, it’s our employees. Their ability to step up “The pandemic was both a business and a on behalf of our customers, distributors, and share- personal crisis,” says Jonathan Bennett, head holders is commendable, especially when they are RI*URXS%HQHȴWV7KH+DUWIRUG, “but our team facing similar challenges themselves.” maintained their balance … to ensure that our cus- “I am tremendously proud of the way we have tomer promises were kept.” The company’s ongoing navigated the environment, remained true to our investments in digital tools that support remote YDOXHVDQGGHOLYHUHGUHFRUGUHVXOWVIRUWKHEHQHȴW working have been central to its success during of our policy owners,” says -RKQ*URJDQH[HFXWLYH the pandemic, according to Bennett. He believes YLFH SUHVLGHQW FKLHI SURGXFW DQG LQQRYDWLRQ ȵH[LEOHZRUNLQJDUUDQJHPHQWVZLOOODVWEH\RQGWKH RɝFHU1RUWKZHVWHUQ0XWXDO. The company has COVID-19 crisis. shifted to virtual work, given clients premium relief $LPHH'H&DPLOORFKLHIFRPPHUFLDORɝFHU DQG H[WHQGHG JUDFH SHULRGV HQDEOHG H[LVWLQJ OLIH -DFNVRQ+ROGLQJV//&, is most proud of “our com- policy owners to secure additional protection with PLWPHQWWRSXWRXUSHRSOHȴUVWȋ$QHZLQWHUQDOWDVN minimal underwriting, and adjusted internal poli- force ensures frequent, companywide communica- cies and standards to process business quickly. tion and transparency about Jackson’s response to .HYLQ+RJDQ&(2/LIHDQG5HWLUHPHQW$Ζ*, WKH SDQGHPLF -DFNVRQ DOVR ZLOO HVWDEOLVK ȵH[LEOH JLYHV NXGRV WR $Ζ*ȇV HQWLUH UHVSRQVH WKH RQJRLQJ ZRUNDUUDQJHPHQWVEH\RQGWKHSDQGHPLFȊ2΍HU- resilience of employees, and the industry as a whole. ing dynamic work schedules is essential to our *RLQJIRUZDUGKRZHYHURSHUDWLRQDODQGHPRWLRQDO ability to retain and attract talent on a competitive IDWLJXHZLOOLQFUHDVHȊ>$QG@LIDUHWXUQWRZRUN basis … and we [now] know many functions can be becomes possible,” says Hogan, “the big challenge performed successfully remotely.” will be redesigning the future [work] environment.” “Whether it’s our employees, customers, distri- Ȋ$VWKHSDQGHPLFUDSLGO\XQIROGHGȋVD\V0LFKDHO bution partners, or communities, we’ve never lost 6LPRQGVFKLHIRSHUDWLQJRɝFHU8QXP*URXS, sight of the fact that we’re here to help people,” “our priority was to take care of both employees and says $P\ )ULHGULFK SUHVLGHQW 86 ΖQVXUDQFH customers. Thanks to early investments in technol- 6ROXWLRQV 3ULQFLSDO )LQDQFLDO *URXS. “Roughly ogy, we were able to shift more than 99 percent of 95 percent of our global workforce is working our employees to remote work. It also forced us to remotely and that will continue into 2021. It can accelerate some of our digital projects, which ended be challenging for employees to help customers XSEHLQJDZLQIRUWKHHPSOR\HHDQGFXVWRPHUH[SH- ZKHQWKH\ȇUHH[SHULHQFLQJWKLVDORQJVLGHWKHPEXW rience.” Simonds believes remote work is here to we’ve accepted this uncertainty, knowing custom- stay, but he does not “think it will completely erase ers need us to be fast, practical, and creative.” the need for in-person collaboration, problem solv- ȊΖȇP H[WUHPHO\ SURXG RI KRZ RXU FRPSDQ\ ing, and creativity for businesses to continually responded to the crisis on many, many fronts,” says evolve and stay relevant.”

22 MarketFacts®: Your Resource for Industry Insights / Number 1, 2021 “As a reinsurer,” says Neil Sprackling, president have not skipped a beat while working virtually. of U.S. Life & Health, Swiss Re, “our most impor- Technology not only is playing an essential role tant role during the crisis has been supporting in keeping employees, distributors, and end con- carriers.” To that end, Swiss Re has collaborated with sumers connected, but also has accelerated the carriers to fast-track their accelerated underwrit- FRPSDQ\ȇV DOUHDG\ VLJQLȴFDQW LQYHVWPHQWV LQ ing programs, support the extension of premium digital and underwriting transformation. Tingle grace periods, and prepare them for the post- EHOLHYHVWKRVHLQYHVWPHQWVZLOOUHDSEHQHȴWVZHOO pandemic world in terms of technology adoption beyond the current pandemic. and integration of data. It also has conducted Because MassMutual’s leadership responded cutting- edge research on the implications of COVID - ZLWKIDVWH΍HFWLYHDFWLRQVLQVXSSRUWRIHPSOR\- 19 and shared the results throughout the industry. HHVWKHȴHOGIRUFHDQGFOLHQWVWKHFRPSDQ\KDV Sammons Financial Group quickly assessed and been able to meet client needs and minimize responded to the unfolding events of 2020, says QHJDWLYH LPSDFWV RQ VWD΍ DQG UHVXOWV DFFRUG- Robert TeKolste, president, Sammons Indepen- ing to John Vaccaro, head of MassMutual dent Annuity Group, Sammons Financial Group. Financial Advisors, MassMutual. MassMutual The company pivoted to a mandatory work-from- has addressed the pandemic on several fronts. home plan; implemented virtual interviewing, ΖW LPSOHPHQWHG UHPRWH ZRUN LQWHQVLȴHG FROODER- candidate selection, and onboarding; increased UDWLRQZLWKȴHOGOHDGHUVR΍HUHGȴQDQFLDOUHOLHI real-time communications with its agents and options and self-service capabilities to clients, partners via videoconferences and webinars; and and helped frontline healthcare workers with adopted new digital marketing tools. “Across the $3 billion of free life insurance. Vaccaro believes the board,” says TeKolste, “we learned much, adapted shift to digital and virtual tools is here to stay due RIWHQDQGEXLOWQHZWRROVWKDWZLOOȴQGDKRPH WRSRVLWLYHXQLQWHQGHGEHQHȴWVDQGHɝFLHQFLHV among our best industry practices.” The COVID-19 pandemic “has tested our busi- Mike Temple, vice chairman and COO, ness disruption plans to the limits,” says James Protective Life is proud of how quickly employees Weakley, SVP and president, Emerging Markets responded to the crisis, challenged themselves, and International Insurance, , gained new insights that will help Protective Life “but our employees have done an excellent job grow going forward. The company has accelerated [on execution].” Prudential has formed a response GLJLWDOWRROXVHDQGVKLIWHGVWD΍WRYLUWXDOZRUN:KLOH team, implemented remote work, given remote Protective Life has focused on the future of work for workers the resources and technology to function some time, “the pandemic enabled us to accelerate H΍HFWLYHO\HVWDEOLVKHGUHJLRQDOFRQWDFWSRLQWVIRU WKHVH H΍RUWV OHDUQ DQG HYROYH LQ UHDO WLPHȋ VD\V operations, and established contact points for busi- 7HPSOH ȊΖ EHOLHYH WKLV VKLIW WRZDUG PRUH ȵH[LELOLW\ ness functions such as HR and IT to communicate will help us attract and retain more top talent.” ZLWKDQGKHOSHPSOR\HHV*RLQJIRUZDUG:HDNOH\ Brooks Tingle, president and CEO, John believes business travel may become less frequent, Hancock is proud of how the company processed with videoconferencing taking its place, and that COVID-related claims quickly and how employees ȵH[LEOHZRUNFRXOGEHFRPHWKHQHZQRUP

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One tactic for attracting talent is to reach out to about the industry, because someone else is already schools, colleges, and universities to share the diversity doing so.” Among those disruptors are new technologies, of careers that are possible in the industry. Publicizing the InsurTech companies, continually rising consumer expecta- growing importance of data and analytics in the financial tions, long-term impacts of COVID-19, a renewed focus on services industry will attract the technically inclined. fiduciary duty in the new Biden administration, and, as a Another general selling point is the opportunity to engage consequence, regulatory change and new players that can with and resolve complex problems. simplify the sales process as well as offer more affordable, high-value products. )UDXG5LVN It’s no secret that fraud always has been an industry Another disruptor is the growing regulatory scrutiny of concern. In today’s digital age — with people working underwriting assumptions — more specifically, so-called remotely — the threat is even greater. “The risks in this proxy discrimination. Proxy discrimination is a complex, space continue to increase,” says Grogan, “even more so technical, and legal issue. It spins around the use of data of late, with a distributed workforce and increased digital analytics, AI, and complex algorithms to underwrite insur- enablement of clients, advisors, and employees.” ance products — an approach that may unintentionally discriminate against different classes of individuals. State Fortunately, there are more sophisticated tools available regulators and legislators currently are studying the issue. to identify risks and fend off perpetrators. Several executives Risks to the industry include the narrowing of permissible cite the importance of industry collaboration, including underwriting criteria and federal intervention. shared information, best practices, and intelligence to “Change is constantly occurring within the industry, strengthen security and detection. It’s also important to and at a greater rate today than ever before,” says continually refine information security efforts and tools. Grogan. “But if we’re waiting for or expecting change and “Beyond the core defenses established in infrastruc- disruption to come in the form of new regulation, new ture,” says Aimee DeCamillo, chief commercial officer and competitors, or other outside factors, then we’re missing president, Distributors, “identifying the opportunity and the broader point. We need to be will- fraud starts with properly educating our employees, ing to disrupt ourselves and business-as-usual. Innovation consumers, and industry professionals about the red and creative destruction from within are ultimately the flags associated with fraudulent behavior. Training and best antidote to disruption from external forces.” reporting protocols play a big role in this as well.” 5HWLUHPHQW&KDOOHQJH Other steps the C-suite is taking include appointing a For many executives, the retirement space holds chal- chief privacy officer; participating in the LL Global Fraud- lenges. Among them are educating consumers about Share program; partnering with private enterprises that are the importance of saving for retirement, addressing the developing increasingly sophisticated, bespoke solutions for omnipresent income-savings gap (whereby individuals companies; and, increasing awareness of and accessibility lack the income necessary to save for the long-term on top to avenues for consumers to report suspected fraud. of addressing their present-day needs), ensuring access to %XVLQHVV'LVUXSWRUV retirement savings solutions, and integrating guaranteed Other than the fact that we’re still struggling with a global lifetime income products into DC plan offerings. health crisis, what has the greatest potential to disrupt “Meeting the retirement challenge requires integrating business-as-usual in the life industry? insurance and accumulation planning tools,” says TeKol- “Disruptors have become a consistent force in our ste. “Ask yourself, how does life insurance merge with industry and many others,” says Bennett. “Savvy operators savings planning? What is the role of securities? We need must be willing to question all their deeply held beliefs to be able to provide the consumer with guarantees and

24 MarketFacts®: Your Resource for Industry Insights / Number 1, 2021 INDUSTRY TRENDS security, while protecting their investment principal. Insur- ance is just one tool and it fi lls a niche other tools cannot. 7KDQN

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