Confidence is a theme that seems to be surfacing a lot lately. The issue came up this week when the Committee of European Securities Regulators, Paris, said that many of the 96 financial services companies including insurers who were surveyed did not meet mandatory disclosure requirements in their 2008 annual reports.
While there have been no similar findings that there is a widespread problem with mandatory disclosures in U.S. filings, there has been a call for greater transparency both in GAAP and statutory insurance filings for a number of years.
And, much of the work of the Financial Accounting Standards Board, Norwalk, Conn., and the International Accounting Standards Board, London, has to do with ensuring that there is adequate transparency so that investors can make truly informed decisions.
Why should such emphasis be placed on restoring confidence to a still skittish investing public? The opening remarks by Robert Kerzner, president and CEO of LIMRA and LOMA, Hartford, Conn., and Atlanta, respectively, during the organizations’ annual meeting in New York last week provide some insight into the importance of confidence.
Kerzner detailed the slip in confidence in life insurers. “Our industry really took it on the chin. There was a virtual collapse in our business. In October 2008, barely 12% of consumers have strong confidence in the insurance industry.” Kerzner noted that at least part of the poor showing can be attributed to a reaction to A.I.G.’s problems as well as negative comments from politicians. As he spoke, a clip from an interview with Nancy Pelosi, Speaker of the House, ran in the background. The outlook was a little less bleak in October 2009 with 18% of those polled expressing confidence in the industry.
Attendees were told by consumers were nearly twice as likely to listen to parents or other relatives than to a life agent or broker (27% compared with 15%,) more than twice as likely to listen to a financial advisor (34% to 15%) and neck-in-neck with their human resources department (14% to 15%.) That says a lot when consumers trust HR more than their life agent or broker.
Kerzner went on to note that there are opportunities for the industry as well as challenges. The challenge, he continued, even though there will be signs of recovery in 2010, consumers have changed their behavior.
I think that this lack of confidence and spotty transparency with financial services in general is a wonderful opportunity for insurers to step up and offer better transparency both with regulatory and statutory financial data that it makes available as well as the cost of products and commissions that consumers pay.
Perhaps, if the industry can take that first step, it can reach out to the Generation X and Y folk that Kerzner says is important to life insurers’ future. Not to mention, the legions of boomers and those that are marching with time into boomer territory.