Pre-retirees and retirees may produce immediate retirement planning profit for insurers, but Generations X and Y also need to start planning for retirement. So how do insurers focus on all generations? "Take a step back and develop a more client-centric approach," says David Schehr, a research director at Stamford, Conn.-based Gartner Inc. "An insurer's technology choice is a reflection of its business choice. There is a perception out there-and there is some reality behind the perception-that insurance organizations tend to approach retirement much as a product sale. In reality, the insurer should first determine its risk tolerance. If an annuity is appropriate, set goals in a retirement planning process. Ask all of the client-centric questions and, from there, if it's appropriate, develop an annuity illustration."SEPARATING THE GENERATIONS

The younger generations are asking for, and even demanding, different technological functions be made available from insurers, including automatic plan features. America's young workers (ages 21 to 30) are eager to embrace a new approach to the design of the nation's retirement programs, believing "automatic" plan features, such as the auto-enrollment provision in the Pension Protection Act, would produce better financial results and lead to more secure retirements, according to a survey conducted by Prudential Retirement, a business of Newark, N.J.-based Prudential Financial Inc. Its "Fifth Annual Workplace Report on Retirement Planning" study found that 66% of workers between ages 21 and 30 would feel "grateful" or "optimistic" if employers automatically enrolled them in workplace-provided defined contribution plans.

"Today's youngest workers are keenly aware that the existing 'do-it-yourself' approach to managing workplace-provided defined contribution programs isn't delivering the retirement security Americans want and need," says John Kim, president of Prudential Retirement.

But others would disagree, saying pre-retirees, including the boomers, are taking education and action into their own hands. "The boomers didn't grow up to become their parents. People who are in retirement now were the core market 10 to 20 years ago when a lot of the early technologies and business models were developed," says Schehr. "Their parents were the WWII generation, a generation of conformists, deferential to authority, and we've kind of built up this advisory model known as the 'father knows best' model."

Data from Gartner research reveals that the real gap in use of the Web overall for basic financial services is between the boomers and the pre-boomers. "The boomers are quite comfortable in using the Web, and they're being trained for that by their banks, by their 401k providers, even by the insurance companies when they enable online billing and other online functions," Schehr says. "Once you move beyond the current retirees to anyone prior to retirement, from the boomer generation to Gen X and Gen Y, the Web and automated services are not a nice-to-have, but a need-to-have."

Insurers, particularly annuity writers, have received the message. Annuity writers are focusing on improving policyholder service, according to "U.S. Annuities: Market Trends and Key IT Issues" from Boston-based Celent LLC. Nearly half of the annuity respondents to a CIO survey from Celent were spending "some" or "significant" new project dollars on policyholder portals, and 40% were spending "some" new project dollars on contact centers.

Annuity insurers are being held to customer service expectations set by banks, brokerages and mutual funds rather than the traditional life insurance model in which policyholders rarely interact with their policies, according to Celent. Variable annuity contract holders expect to be able to check values and change positions as easily as they can with their brokerage accounts.

In a Celent survey of the prime annuity market (older, affluent consumers), 28% of consumers over age 60 reported checking their insurance policy values online regularly, but 38% reported checking their investment account values online. For Generation X professionals (affluent consumers in their late 20s and 30s), 47% use the Web as their preferred method for communicating with financial services providers, and 75% use their brokerage firm's Web sites.


With all of the consumer-focused tools, what role does the agent/adviser play? Schehr expects agent and adviser's roles to transition to more of a coach or a sounding board, not someone making the final decisions for the investor. "The move has to be to a more collaborative environment, where you can't just assume that these somewhat paternalistic business and advice models are going to transition well."

Many advisers believe their clients don't need technology, says Greg Salsbury, executive vice president of Jackson National Life Distributors LLC, the distribution arm of Lansing, Mich.-based Jackson National Life Insurance Co. "They would say, 'That's what we're here for.' Their comfort level navigating the Web site is really irrelevant; I do all that for them."

Jackson created tools advisers can use, starting with an educational campaign for its advisers to use with their clients. It's "But What if I Live? The American Retirement Crisis" project began in 2005. It consists of a book written by Salsbury and an educational DVD, which contains everyday consumers and advisers commenting on the challenges inherent with retirement planning. "We saw early on that the bigger battle is going to be on investor education and so we were early to the table with our American Retirement Crisis presentation, and it's easily been the most popular and successful campaign we've ever developed at Jackson," says Salsbury.

Jackson also is upgrading its Web site over the next 18 months to improve education and make access to their product information easier for its advisers. A new online tool, the Living Benefits Selection Center (LBSC), is a Web-based application designed to help advisers and their clients understand the optional living benefits offered within Jackson's variable annuity family. The adviser enters key retirement data from a particular client, and the LBSC helps determine what variable annuity benefit is best for the clients.


In most cases, financial firms want a single system to manage sales and provide service to the client, which is a shortsighted goal, according to Schehr. No one solution (product or technology) will always be the right fit. Technology-based solutions-benefiting clients and the financial firm itself-will play a critical role in supporting the complex activities regarding this new kind of retirement.

Schehr suggests leveraging a flexible service-oriented architecture (SOA) to provide robust enterprise infrastructures. "You've got to have flexibility, whether you're talking about what you need for the boomers or what you need for Gen Y. Change is constant, so you must have systems that can grow and evolve, and having some kind of standardized infrastructure is critical. If you have a lot of legacy point solutions that are hard to try to adapt and evolve, it will be difficult for you to provide new functionality."

He uses the example of using a premium payment processing system that was built in the era when checks were sent through the mail. "If you want to start accepting payments via the Web, ACH transfers or credit cards, it's not going to be easy to link your Web site to your back office payment system," Gartner's Schehr says. "But if you're moving to a more standardized, componentized architecture such as SOA, even if you put an SOA wrapper around the payment system, you can link them more easily."

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