There’s a War On
There is definitely a battle for consumers’ attention in this marketplace. A commenter on our site took issue with LIMRA President Bob Kerzner’s use of the term “war” to secure the insurance industry’s position in the marketplace. He made the comment in an interview with Linda Koco before he spoke at LIMRA’s annual conference on Monday.
Maybe it is never a great time to use a war analogy. Some might add, “especially these days,” but there has always been one going on somewhere. The United States has been in a state of perpetual war since 2001 and some would say earlier, but that we just weren’t completely aware of it.
Regardless of the word, there is no doubt that this is a struggle. On this site and in our monthly magazine, we have often sounded the warning that American families are heading to a very difficult future and that the insurance industry has some answers. It is a battle for attention amid all the financial news and commentators that talk about everything but the benefit of insurance products. When they are discussed, it’s usually to warn people away.
People have fewer resources and are under-informed about the risks they face. They might be one of the lucky few saving or investing for the future. But even they have little idea how much of an impact that typical expenses, such as assisted living, can have on a nest egg.
But why are fewer people saving? Our commenter blamed easy money in mutual funds and reliance on entitlements. Mutual funds and equities are a healthy part of a portfolio. Few advisors would say otherwise. Insurance and annuities are also good parts of a plan. Sure, a gut-wrenching market plunge can scare people into annuities, but Kerzner’s point is that the insurance industry needs to do a better job of informing people before the next worldwide financial crisis.
As for the commenter’s point that people were counting on “freeloading using other people’s money (entitlements),” I was a tad amazed. The largest entitlements in the federal budget are Social Security (24 percent) and Medicare, Medicaid and CHIP (22 percent), according to the Center on Budgets and Policy Priorities. People paid into Social Security and Medicare. They might collect more than they paid in, but they might not. Just like insurance. So that is not freeloading. Could it be the military? That’s 19 percent, including salaries, medical benefits and programs, along with hardware. Probably not.
The commenter probably meant what used to be known as welfare. Safety net programs, including tax credits, school meals, housing and heating assistance, would be 12 percent altogether. People in these programs endure bureaucratic hassle and benefit sunsets for their assistance. These aren’t people living large and laughing all the way to “retirement.”
The problem is that Americans are living paycheck to paycheck and four out of five will be in poverty at some point in their lives. More children are living in poverty today than at any point in 20 years. How do these people prepare for their future?
Insurance products are known for offering the leverage of protection. Pennies today equal dollars later. We’ve all heard that. A little simplistic, yes, but that’s the idea. And everybody needs to at least be aware of that.
It might not be war, but it is life and death.