Intensifying its focus on a market that analysts say is becoming increasingly competitive, ING U.S. Financial Services says it is slashing rates and starting an ad campaign for its term life insurance products, which will be offered through banks and other intermediaries.
The Atlanta-based subsidiary of the Netherlands' ING Group NV is developing a term life product specifically for the bank channel's middle-market retail customers, said Jim Gelder, its head of U.S. life insurance distribution.
"Term life insurance could be a phenomenal product for banks to distribute" because it targets mass-affluent customers - those with $100,000 to $500,000 of investable assets - whom banks and insurers have been courting with insurance offerings such as variable annuities, Mr. Gelder said.
"What better place for a middle-market consumer to buy insurance products than from the place where they bank?" he said. Mass-affluent customers have long been underserved by the financial services industry, he added.
ING has trimmed the pricing structure for its term life products, aiming to undercut its closest competitors, Mr. Gelder said. The insurer developed different target rates for its 10-, 15-, 20-, and 30-year term life offerings and the ages of the customers buying these policies, he said.
"Our competitors are reacting already," he said. "Quite frankly we know that the term life marketplace is very, very competitive." Indeed, Great-West, Genworth, and a few others are already in the market with simplified term life insurance targeted to bank distribution.
ING hopes to heighten awareness of its term life offerings with a print advertising campaign emphasizing producer-focused trade publications and conferences.
"As an industry, we have focused primarily on independent distribution, and independent distribution has moved farther and farther up-market," Mr. Gelder said. "Term life insurance is an ideal product for the middle market."
But banks have had "spotty or limited" success in selling insurance, partly because many insurance products' complexity hampers sales through bank platform representatives, who typically focus more on traditional banking products, he said.
"From big banks to small banks, there has not been any silver bullet that has solved the challenges that banks seem to have in selling insurance to their customer base," he said.
ING's term life offering, which is to be introduced "in the coming weeks or months," will address that hurdle by simplifying underwriting so as to let bank salespeople issue the policy on the spot, he said.
"The customer will have the full transaction taken care of in the bank," Mr. Gelder said.
Simplification is the key to selling term life in banks, said Kenneth Kehrer, the president of the Kenneth Kehrer Associates consulting firm in Princeton, N.J. "Essentially, what insurance companies have tried to do is make the product more transaction-oriented," he said.
Competition is heating up in the term life market as insurers cut rates, he added. And banks' volume has grown steadily for a few years, though remaining small in relation to industry sales. Banks sold $55 million of term life premium last year, compared with $25 million in 2001, according to the Kehrer firm.
Term life made up 26% of banks' recurring-premium business last year, up from 20% in 2001, Mr. Kehrer said.
"In the economics of life insurance, you get what we call an expense allowable on a per-policy basis," Mr. Gelder noted in explaining ING's term life push. "The more policies you have on the books, the more per-policy expense allowable you generate to cover operating expenses."
As policy counts decline in the life insurance industry, insurers need to put more policies on the books to offset those that are lapsing, he added.
ING also expects that term life insurance will create cross-selling opportunities, Mr. Gelder said.
"It's a halo effect," he said. "Producers or end customers who find our term products appealing and find our process environment competitive are more likely to consider ING for other products that we manufacture if they're comfortable doing term business with us."
Some of ING's "legacy companies" - those bought in recent years - have historically offered term life insurance, Mr. Gelder said, but the parent has lacked a cohesive term life strategy until now.
"Our competitiveness slipped and our focus slipped as we were integrating and consolidating," he said.
