Life Insurance
A New Road Map

• Jeff Roberts
• November 2019
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Photo by Kim Bjorheim

Key Points

• Declining Ownership: This year, individual life sales fell 3% in the first quarter and 5% in the second.
• Uncovered: More than 40% of Americans are uninsured. Nearly half are underinsured.
• New Direction: LL Global’s Compass 2025 is a strategic plan for the next five years focusing on life insurance, retirement and workplace benefits.

The man's death was sudden and tragic.

A traffic accident had claimed the life of one of David Levenson's Japanese employees. And as the CEO of Hartford Life Insurance K.K. in the late 2000s, he would represent the Tokyo-based company in its mourning.

It was a solemn responsibility in the work-first ethos of Japan.

The native New Englander already had confronted the language barrier and the strict customs of the Japanese business environment. But at the funeral, he would come face-to-face with the disorienting cultural divide—and learn a few indelible lessons about people and the need to truly understand them, no matter the market.

It started with the suit he would wear.

“My charcoal suit wasn't sufficient,” said Levenson, who was told anything other than a formal black suit, black tie and white shirt would make him stand out, an affront in Japan and a gesture of disrespect to the family. “And without really knowing the employee and having never met his family, I was placed in the senior position, seated directly opposite the family.

“The whole experience was another reminder that the respect for seniority and for business is so profound. The greatest lesson I learned in Japan was you need to always understand what is on the mind of your customers and your employees and the value in it. The needs. The desires. The opportunities.”

Those lessons now inform his worldview as the new president and CEO of LIMRA and LOMA. Just as he needed to adapt to meet the needs of his Japanese employees and consumers, life insurers must transform themselves as technology advances, paradigms fall and customer expectations rise.

The biggest threat to the industry just might be the struggle of some of the 1,300 LIMRA and LOMA member companies that have been slow to evolve in a rapidly changing market.

“The industry is growing at a fairly slow clip in the U.S.,” Levenson said when asked to appraise the life insurance space in 2019 and 2020. “In Asia, it's moving much faster.”

Levenson sat in a rented conference room on a late summer morning in midtown Manhattan, just east of the bustle of Times Square. About a year ago and just down the block, he was introduced as the incoming CEO of LL Global, the parent organization of the world's largest life insurance and financial services associations.

Levenson, 53, took the grand ballroom stage at the 2018 LIMRA Annual Conference, his image projected on a towering screen behind him and delivered a warning: “If you don't like change, you'll like irrelevance even less.”

“The pace of change just keeps accelerating and is coming at our member companies from every angle,” he said in his return to New York. “It's coming from the technology side. The product side. The customer and demographics side. The distribution side.

“The pace of change is as great as it's ever been, and it's only getting faster.”

So now comes the hard part for one of the new leaders in the life space: figuring out practical solutions to assist member companies in managing that dynamic landscape.

This year, individual life sales fell 3% in the first quarter and 5% in the second, according to LIMRA. Ownership is at all-time lows. Margins continue to be compressed. And investment income remains squeezed by the prolonged low interest rate environment.

“Historically we have changed slower than other industries,” said Robert Kerzner, who served as the CEO of LIMRA for 14 years before retiring at the end of 2018, “and there's good cause for that. In the life insurance industry, when you take on a risk, you own it at that price forever.

“By the same token, we have been slower to move than others.”

To that end, Levenson has helped craft Compass 2025, a road map for the next five years. The strategic plan will support insurers as they navigate that change, focusing on the pillars of life insurance, retirement and workplace benefits.

“We have a responsibility to bring our research to life, which means looking at what are the practical things that we should be doing together that have their underpinnings based on our research,” Levenson said.

Compass 2025 was set to be revealed in late October at LIMRA's 2019 annual conference in Boston. And in his inaugural state of the industry address, he planned to encourage insurers to innovate. To evolve as the market and national demographics change. To leverage best practices from across the globe. And Levenson will urge them to start with the customer.

The cultural insights he gleaned in three years in Japan frames just how immersed businesses need to be to fully appreciate and comprehend their clients' expectations and motives. He was so fascinated by the experience, he wrote his doctoral dissertation on the common characteristics of American companies successfully operating in Japan.

“A lot of the work we do can be boiled down very simply to: Understand what the customer needs and provide it,” Levenson said. “It starts with the customer. Always. That should always be our North Star as an industry. My key message is 'Let's continue to be customer-centric.'”

Irrelevancy?

The new venture was hardly greeted with optimism in 1996.

Levenson was handed the challenge of building a new mutual fund business for The Hartford in a crowded market.

“At the time many people, frankly, laughed at The Hartford, thinking, 'How could you think the world possibly needed another mutual fund?'” said Kerzner, who was an executive vice president and head of the individual life division for the carrier until he took over LIMRA in 2004. “There were 4,000 or 5,000 mutual funds. The world didn't seem to need another one.”

But under Levenson, it became the fastest-growing fund family by 1999 among money managers overseeing more than $10 billion. It was still the fastest-growing in 2000.

“Dave is a very driven executive with a strong analytic capability,” Kerzner said. “He has built a couple of businesses very much from scratch.”

His background in insurance, retirement and wealth management symbolizes the holistic financial wellness approach insurers have embraced with customers.

“It's really hard to provide good products, good advice without doing that,” Levenson said.

As the industry changes, LIMRA and LOMA need to change with it. In Levenson, they saw the ability to lead that initiative, according to Brandon Carter, chairman and president of USAA Life Insurance Company and chair of the board of LL Global.

Levenson's strategic thinking, experience running product lines and insights into consumer behavior were differentiators.

“We felt Dave could visualize and provide clarity on how LL Global could continue to support growth in the life insurance and retirement industry for the future,” said Carter, who was on the search committee to hire Kerzner's replacement.

An actuary by trade, Levenson ran The Hartford's 401(k) division, the life subsidiary in Japan, its legacy holdings and was president of its wealth management group after launching the mutual fund business. He then served as a principal at Edward Jones for six years.

Kerzner described the Worcester, Massachusetts native as “friendly and warm.” He's also down to earth—one of five children raised on the salary of his high school math teacher father, Peter. 

Levenson told a photographer, “You can only do so much with this face. Just do the best you can.”

But he's serious about the challenges before him.

After all, his introduction as incoming CEO came at a LIMRA conference themed “Reclaiming Relevance.” 

“Unequivocally, the pace of change is what he has to navigate,” Kerzner said. “If it's a difficult time, carriers are changing the way they do business. Therefore LIMRA and LOMA must be dynamic and continuously change to meet the needs of the members.

“Life insurance is part of what financial service companies do today, but more and more they're becoming asset gatherers and retirement-focused rather than selling only life insurance and annuities.”

The threat is not really irrelevancy, Levenson says now, despite his own warning last fall. It's failing to realize the vast potential of an industry that has about $20 trillion of life insurance in force and last year paid out about $200 billion in claims.

More than 40% of Americans are uninsured, according to LIMRA. Nearly half are underinsured, with an average coverage gap of $200,000.

And the looming retirement crisis poses “profound implications at an industry level and an economy level,” Levenson said. “The opportunity for insurance products and retirement products has never been greater. Our industry has a wonderful opportunity to help so many people.”

New Solutions

Levenson began his new mission by listening.

He spent the first eight months of his tenure crossing the globe on “a listening tour.” He traveled to Canada, China, Hong Kong, Japan and across the U.S., meeting with 40 to 50 insurers. He huddled with CEOs, boards, C-suite executives and occasionally employees to hear their concerns and where they see opportunity.

“Our members feel the pace of change every day,” Levenson said. “These are industry struggles. Figuring out exactly what to do and what to prioritize is where it gets a little bit hard because there's so much coming at them.”

Such a landscape requires a dynamic LIMRA and LOMA. The nonprofit, member-owned associations aim to leverage their consumer research insights, professional development and collaboration capabilities, which include more than 100 study groups and committees and 30 annual conferences.

Devising Compass 2025 focused their thinking, leading to a new purpose statement: “Advancing the financial services industry by empowering our members with knowledge, insights, connections and solutions.”

LIMRA already offers solutions such as its Anti-Money Laundering training program, hiring and product assessment tools and its Customer Assurance Program, a customer research service.

Recently, members told the association that fraud in the form of cybersecurity and account takeover was becoming a big challenge.

So it brought together 25 companies to design a solution. The result is the new FraudShare program. Levenson describes it as “a neighborhood watch” that identifies known hackers.

“This is just our first chapter as far as support that we can provide,” he said. “We're going to get more sophisticated with the hackers because the hackers are going to get more sophisticated.”

As he looks into the future, Levenson sees great promise in wearables and genomics, as the race to reduce consumer tension points continues. 

In the meantime, one of the next items on the near-term agenda is forming consistent standards of operation to the worksite benefits arena to drive improved efficiency and customer support. Benefits are a burgeoning area, and the sharing economy is creating new challenges.

Almost half of gig workers say obtaining benefits is a challenge, according to LIMRA. Although 68% of those workers believe they should have life insurance, just 36% do.

Bullet Trains & Takeout

A recent trip to Asia taught Levenson another valuable cultural lesson.

He found himself on a train during a visit to China when LL Global's lead executive there asked him if he was hungry.

“Instead of going to the cafe in the back of the train, he went to his WeChat app and he ordered takeout that arrived and was delivered to our train and our seats,” Levenson said. “And when I had to leave, I got on the Shanghai Airport Express, which went 430 km an hour.”

Levenson's point? Solutions exist beyond the borders of the U.S. He plans to leverage global best practices to help members, especially those that may not have international reach.

“Our members can benefit by learning how Canadian companies work with capital standards, how South African companies think through product innovation, how Japanese insurers deal with service or how Chinese companies address mobile technology,” he said.

“You try to bring it back practically to all of our members in ways that they can use it.”

The three years—2006 to 2009—Levenson spent in Tokyo gave him a universal perspective. He also saw it through the eyes of his family, having brought his wife, Stefanie, and their three children: then a first-grader, preschooler and 8-month-old.

A smile lit up his face when he was asked if he spoke Japanese. “Sukoshi,” he responded. A little.

He worked on his Japanese with a sensei who visited his office every week for lessons while he ran The Hartford life unit. But the language was just the start of his education.

Every Japanese business meeting is fraught with its own set of nuanced formalities. They govern everything from where employees sit, the deference shown to superiors and even the formal ceremony of exchanging business cards. 

“It was a completely different world,” Levenson said. “It's a different demographic. A different language. Different work ethic. Different approach to gender.”

Levenson watched so many American companies enter the Japanese market with grand ambitions only to make hasty exits. Why? They didn't understand it.

The lesson became a key tenet of his doctoral dissertation for The School of International Corporate Strategy at Hitotsubashi University: The Seven Critical Success Factors for American Companies in Japan.

“One of the biggest challenges was [American companies] didn't listen or understand,” Levenson said. “They tried to manage the business from the perspective of the American home office and not from the needs of the customer.

“If you can understand the customer and you can understand the ecosystem to support the customer, then you know enough to run your business effectively.”

Now those lessons inform him as he tries to support growth for the entire life industry. There might not be a better choice for the role, according to his predecessor.

“He's the right person at the right time for this job,” Kerzner said.

Jeff Roberts is a senior associate editor. He can be reached at jeff.roberts@ambest.com