> This show, provided by the Prudential
Insurance Company of America, based in Newark,
New Jersey, will discuss financial topics,
concepts, and tax information in general
and does not constitute legal, tax,
accounting, financial or investment advice.
Consult with your legal, tax,
accounting, and financial advisor,
based on your specific circumstances.
We do not make any warranties to the
accuracy or completeness of this information,
do not endorse any third-party companies,
products or services described here,
take no liability for your
use of this information.
[ Intro Music ]
> Welcome to Sound Insights from Prudential,
where you'll hear from thought leaders
and industry experts discussing the life
insurance industry's most relevant topics
and trends.
Today, you'll hear from Mark Hug, Executive
Vice President of Product and Marketing
for Prudential's individual life
insurance business and Michelle Fry,
Vice President of Product and Solution
Marketing, discussing their thoughts
on the future of the life insurance industry.
> Thank you for joining with
Sound Insights, I'm Michelle Fry,
and I'm pleased to have Mark Hug, Executive
Vice President of Product and Marketing
for Prudential individual
life insurance with me today.
We're going to talk about the future of
life insurance as an industry and sort
of the consumer need and the way that we can
best reach consumers in a changing environment.
And I want to probe with Mark a little
bit on where we are today in the industry
and where we could be heading, what
some of the opportunities could be
for life insurance carriers
like Prudential in the future.
Mark, thanks for joining me today.
> Thanks for having me, Michelle.
It's a pleasure for me to have an opportunity
to talk about this very important topic.
> Well, and I know that we hear all the
time from member statistics and other sources
that life insurance is at an
all-time low in terms of ownership,
how does that fare for us as an industry?
> Well, it's easy to give an impression that
the mood is very gray around life insurance,
mainly because, as you said, life
insurance is at an all-time low.
And, the relevance that life insurance
has with the consumer is probably
at an all-time low, for a whole host of reasons.
However, I do believe that there are
other issues and other things at play here
that make life insurance a little
more positive in the future.
> So, some of those things, so to elaborate,
what would you say some of those factors are?
> We've faced a lot of headwinds over the
last several decades around life insurance
and I think all of them have combined to give
life insurance a really, fairly faint impression
in the marketplace and actually
caused that irrelevance, if you will.
We've had an economic headwind and, by that
I mean, interest rates have continually come
down over the last 30 years, since the 1980s.
And interest rates really have been, in
the past, the lifeblood of life insurance.
Interest rates allow policies
to accumulate faster and to get
to their end mark quicker
and make premiums smaller.
So, as interest rates have come down,
the exact opposite has happened.
Accumulations have been slower and the
price of that accumulation has gone up.
So, as people see that, they wonder, well
wow, is this still a good deal for me?
So, that, that whole economic relationship
that life insurance has, has had that headwind.
We've also had some regulation.
Regulation has increased
significantly over the last 30 years,
all of which has impacted life insurance,
whether it's the amount of liabilities
that we have to hold for
the future death benefits,
or whether it's interest rates causing
us to have to increase our liabilities,
or whether it's the disclosures that we've
had, all of that has really, I believe,
hurt the industry in terms of our ability to
be flexible and innovative in the marketplace.
And, I think, lastly, we've had
the headwind of behavior changes.
Just look around us, and look at how
the consumers have reacted to all
of the changes we've seen in the
marketplace, whether it's the digital age
or whether it's the social media age
and I think that's impacted us a lot.
In many cases, life insurance still follows
the same processes that we did 30 years ago.
And so, that all adds up to, wow, you
know, when you talk about life insurance,
you talk about a yawn, or you don't
get the same kind of excitement
that you might have gotten 30 years ago
about the importance of life insurance.
> Well, and that instant gratification, right,
where it's such a transaction oriented world,
where everything you get, you can get from
the click of a button or a quick purchase
on your iPhone, or your smart phone.
What's interesting that you just described is,
sort of the environment and some of the things
that are challenges, the fundamental need
for life insurance though
is as strong as ever, right?
I mean, we all have a life
expectancy, maybe that's longer now,
and maybe that even makes life insurance more
appealing in some people's eyes, or should.
But there's sort of this reality of how
people are used to consuming and engaging
with different providers and
carriers of products that sort
of creates this interesting contrast for us,
but where there's a need and a difficulty
in sort of reaching that audience.
> You're absolutely right.
The new reality, if I can call it that, we
face is this idea of a different generation,
the Millennials becoming older and wondering
just how important life insurance is
when they have so many other issues that they
have to deal with, whether it's student loans
or whether it's retirement or something like
that, that they haven't even thought of.
And yet, you know, where is life
insurance in that conversation?
We also have a major sandwich
generation, in terms of,
we have the folks who really should be buying
life insurance dealing with older parents,
at the same time dealing with
Millennials still at home.
And it becomes a priority issue of where do
they put life insurance among all the different
priorities that they need to deal with?
I believe life insurance needs to respond in a
very different way in order to be successful.
And, if we do, I think there's no better
time to be in our life insurance space.
If you think about it, with ownership at an
all-time low, with all of these opportunities,
with just a huge Millennial generation,
coming to the point in time and in their life
when they need life insurance the most, I don't
think it's been a better time than now to look
at life insurance and it is importance.
> Can you say a little bit more about that,
what does that mean as a head of product
and marketing for a large insurance company,
what does that signify to
you in terms of opportunity?
> I think it means change.
I think the opportunity is large, but if
we think we are going to be able to capture
that opportunity doing the same things that
we've been doing over the last 30 years,
we're going to be mistaken and we're
going to miss this opportunity.
So, if you think about the change, we have to
start thinking about how we change how we think,
how we act, and really how we engage both
consumers and customers in what we do.
This is a major difference from
today, but I believe we're ready
and I believe there are opportunities to be
had if we can take advantage of those changes,
think differently, act differently,
and engage differently.
> I've heard you talk before about, you
mentioned earlier, headwinds that we face
as an industry and you've also
talked a little bit about tailwinds.
Can you say a little bit about that?
> Sure. Part of the reason that I believe
there's all these opportunities is that,
in addition to the headwinds, or
counter to the headwinds we have,
really are these tailwinds that I also see.
The first one I've already mentioned,
which is this Millennial generation.
There are almost 80 million
Millennials that are out there,
the oldest of which is approaching
35, 36 years old.
They are now starting to buy homes, they are
now having children, they are getting married.
All of this adds to the need for life insurance.
So, that's number one.
Number two is, we have this
huge multicultural market,
which I believe has been underserved until now.
And, while you may hear about the fact that were
going to be a multicultural majority by 2050,
I put something much more realistic, which is by
2020, 40% of the United States is multicultural.
Also, 100% of the growth in
our market is multicultural.
So, 100% of this population growth that we're
seeing is all coming from multicultural.
We have to change how we think about
multicultural and the blossoming middle-class
and mass affluent class that's
coming from this market.
I think it's very, very critical.
And, I guess, lastly, technology has never been
stronger in terms of what we can deal with.
And that includes everything from the
digital age and how we take advantage of that
to data analytics that we can take care of, to
making our processes better, all of that adds,
I believe, to the tailwinds
that we have behind us.
And, it's a matter of how do
we take advantage of that?
> So, it's interesting you mentioned
multicultural as one of the opportunities
that we have, how would you define that?
I mean, we've talked a lot, and
I've heard in industry discussions
around target markets, how do you define that?
I mean multicultural can signify some type
of ethnic background or cultural differences,
are you thinking about that
broadly in terms of target markets?
And, you've mentioned a couple of target
markets, but I know there are others.
> Yes, actually when I talk about
multicultural, actually I'm thinking
about all the different cultures
that we have in the United States.
And, probably a better word is total market.
And, when you hear total market,
you think of all the cultures
that make up the different markets.
These cultures are not only ethnic cultures,
but also lifestyle cultures,
gender cultures, age cultures.
So, you have the Millennials as part of
that multiculturalism, you have the women
versus men being part of that
multiculturalism, you have LGBT,
you have families with disabilities,
you have veterans,
and you mix that with the typical ethnic
cultures, and I believe you get a melting pot
that offers huge opportunities
for us in the future.
And so, that tailwind is just a matter of
learning and understanding the culture.
When we look at our research in this
regard, over 90% of these cultures say
that they don't need to have somebody who looks
like them or who is in their culture to buy
from them, but rather they want somebody
who understands where they're coming from.
And, that's kind of the definition of a good
advisor, if as an advisor you don't understand
where the person is coming from, you don't
understand their background and the culture
that they may have grown up in,
then you're not a very good advisor.
And, I think advisors need to take that leap
and do a really good job of
better understanding them.
> So, it's interesting, I agree
with you completely and, in fact,
I was talking with someone the other day
who was asking me, well do you really think
that this target market or
multicultural approach is necessary,
or it is more of a focus
on sort of, life stages?
And, sort of, you know, whether you're
Millennial or you're Gen Y or Gen X
or Baby Boomer, it may be less relevant, or is
it more about where you are in your life stage?
Like, I just bought a house and I had my
first child versus I'm getting ready to retire
versus I'm dealing with someone with
a chronic illness in my family, right?
So, how do you sort of reconcile
those two things,
where it's sort of this lifestage approach
to how we communicate and target to audiences
and overlay that with an approach that gets
at what you were describing,
which is target market?
> I believe it's a little of both.
And, I think both kind of play into the culture.
For example, where you are in your
life stage, let's forget about the fact
that life stages are changing
a little bit, because now,
some couples have children before they get
married, and marriage is a big deal maybe five
or ten years after they've been together,
so life stages change a little bit,
but nonetheless are very important.
And, it's that time when you recognize
that somebody is dependent upon you
or that if you die, you leave a burden on your
family or loved ones, and when that happens,
life insurance becomes more important to you.
And, therefore, life insurance
is critical in that time period.