The insurance industry worldwide is undergoing a significant change accelerated by the financial meltdown and changing demographics of its customer base. In this blog, we will discuss the challenges, approaches and possible solutions to dealing with the transformation that the industry has unwittingly entered into.

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Product offerings targeted at the retiring boomers – Still a priority?

For a few years, developing and launching new products have been a high priority in insurance companies. The Pension Protection Act (PPA) of 2006 opened the door for product innovation and design creativity by allowing the introduction of tax-advantaged combination annuity-LTC insurance products, starting in 2010. This in conjunction with the estimated $ 9 trillion baby boomer market driven by the unfunded life span presented a significant opportunity for Financial Services companies.

The recent economic events have changed the dynamics of the market. The unfunded life span presents a bigger problem for many given that the retirement savings and real estate are down sharply in value and many baby boomers have had to dip into their savings sooner than they had planned. However, this has also negatively impacted the purchasing power of this group. A McKinsey report (Serving aging baby boomers based on 2006 data) projected that in 2015, 60% of all consumption by boomers will come from those who are unprepared for but envision retirement.  This segment is likely to have grown in proportion through the last 9 months and will not be able to maintain their current lifestyle through retirement.

Posted by Srikanth Srinivasan on August 3, 2009 8:59 AM |

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Comments

I still believe that baby boomers are a definite priority. Might be the fall in investment markets have wiped off much of their savings, but it doesn't make sense (for those who can afford to hold back to their savings for some more time) to exit completely at this point and lose the benefit of an imminent booming economic cycle. Anyways, this has now spurred demand for variable products with a income guarantee and fixed account products.

Posted by: venkatakrishnan ramachandran | August 7, 2009 4:28 AM

Absolutely agree... The baby boomer market will still be a significant customer segment given their financial strength. The economic crisis has made this segment more conscious about their vulnerabilities and the need for planning for a secure future. Insurance companies should review the changing customer needs (and buying power) from this segment and make suitable changes to the customer segmentation, positioning and product portfolio to address them

Posted by: Anonymous | August 24, 2009 2:24 PM

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