Chicago — The aging of the baby boomer generation means that trillions of dollars in retirement assets will come into play. This fact has not escaped the notice of life insurers, who, as purveyors of annuities, are uniquely positioned to capitalize on this market.
Yet, insurers are hardly the only members of the financial services community eyeing the pot. Thus, it is imperative for life insurers to provide high levels of customer service to accountholders by maintaining efficient processing in both the front and back office. This means life insurers must invest in technology or bring in partners with the wherewithal to help them maintain high levels of service and retain customers.
Indianapolis-based
Hank Wong, senior director of Conseco, cites Open Solutions’ expertise in the CAA market as the primary reason for extending the contract. “What distinguishes Open Solutions from its competitors is its experience in the asset retention market,” says Wong. “Cost is always a consideration, but it is the value equation that draws us to Open Solutions in the CAA field.”
Open Solutions’ Customer Access Accounts (CAA) reduces the outflow of cash, retains investment income and disburses benefits to accountholders. The program fosters ongoing customer relationships with beneficiaries and claimants and earns investment income on funds that otherwise would have been lost to another financial services firm.
So, are such investments resulting in happier customers and higher rates of retention? A recent study conducted jointly by Windsor, Conn.-based
The study found that for all individual life insurance products combined, early policy year lapses have dropped to a 10-year low. This is driven in large part by the lower early year lapse rates on level premium term plans, and the fact that over time they continue to represent a larger portion of the total inforce business.
What’s more, the overall lapse rate for whole life plans for all product types and policy years combined was 3.5% on a policy basis, and 4.4% on a face amount basis in 2003 and 2004, down from 3.9% and 5.8% respectively in 2001-2002. Although first year lapse rates have increased slightly in recent years, at most durations, lapse rates are at levels similar to or lower than the past. Total lapse rates for term insurance for all products and all policy years combined was 7.0% on a policy basis and 6.2% on a face amount basis, a decrease of 3.2% points on a policy basis and 4.1% points on a face amount basis from the 2001-2002 report.
Sources: LIMRA, BusinessWire
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