Key Highlights
This report has a long list of interesting facts to share:

Evolution of the Insurance Business

This first section of the report discusses the background of the insurance industry, including the need for insurance products, problems faced and how they have been dealt with, and the structure of the industry as a whole:

• There are 74 million baby boomers
• Two-thirds of consumers now expect to retire at age 65 or later. Another one-fifth expects to retire between the ages of 60 and 64. Only 13% of consumers expect to retire before the age of 60
  
• In recent years there has been more focus on wealth management services
• There are four components of wealth management; aggregation & financial tax planning, risk management, estate planning & charitable giving, and private banking
  
• Many gaps exist between consumers' need for various insurance products and their propensity to have such, creating potential for sales growth
  
• The top ten insurance companies control over half of total insurance assets
  
• Seven of the top ten insurance companies are mutual companies; whereas over 90% of all insurance companies are stock owned companies
  
• There are over 1.43 million insurance industry employees; there are almost 837,000 insurance agents, brokers, and service employees
  
• However, the number of insurance agents, brokers, & service employees has been steadily increasing
  

Six Key Types of Insurance

This chapter provides background information on the six components of risk management. This includes specific product types within each area:

• 45 million people do not have health insurance; in other words 14% of the population is without health insurance
  
• Texas leads the nation in uninsured individuals, with 24.6%
  
• Only 60% of businesses offer health insurance to their employees; but 90% of health care policies are purchased through employers
  
• 20% of Americans under age 65 are not eligible for employer health insurance programs; and 13% of those who apply for health care policies are turned down
  
• 26% of retirement funds go towards health care costs
  
• Health care insurance generates $10.3 billion in net income annually
  
• Americans between 35 and 65 face a 30% risk of suffering a disability that lasts more than 90 days
  
• 48% of all mortgage foreclosures result from disabilities
  
• 1.6 million Americans are permanently disabled, and will never be able to return to work
  
• 51% of disability insurance owners do not know what losses their benefits would cover
  
• 73% of disability insurance is sold in groups
  
• Only 35% of disability claims are actually approved
  
• 20% of the US population will be older than 65 by the year 2030
  
• One out of six consumers will require long-term care within their lifetime
  
• There are 100 companies selling long-term care insurance
  
• Only 6% of consumers own long-term care insurance, 70% of which are women
  
• 48% of Americans over 65 will spend time in a nursing home in their lifetime; 23% of all 65 year olds will spend a year or more in a nursing home
  
• There are 22 million households involved in the care of a person aged 50 or older
  
• The average cost of long-term care services is $72,240, 58% of consumers are paying those costs out-of-pocket
  
• 80% of long-term care policies are sold to individuals
  
• 85% of parents of disabled children seek financial advice from their doctors
  
• Seven of the top ten most costly catastrophes were hurricanes and tropical storms
  
• There are three product alternatives to cover long-term care costs (Medicaid, long-term care insurance, and self-insurance)
  
• 48% of consumers fear that they will outlive their savings
  
• 70% of Americans between 33-61 have saved less than $10,000
  
• Annuity sales have reached $152 billion; annuity assets are $1.17 trillion
  
• 80% of new annuity investments are in variable annuities
  
• Annuity firms that launched their products before 1990 control 85% of the market (61 firms out of 119)
  
• Annuity premiums ($140 billion) are more than whole life, universal life, variable life, term life, and long-term care premiums added together ($103 billion)
  
• 71% of adults agree that life insurance is the basis for a sound financial plan
  
• 69% of consumers own some type of life insurance; 56% of life insurance in force is individual life insurance
  
• There is nearly $17 trillion of life insurance in force.
  
• The top 25 life insurance companies account for $6.9 trillion of individual life insurance in force
  
• The top 25 life insurance companies account for $6.6 trillion of group life insurance in force
  
• 76% of consumers buy life insurance face-to-face
  
• 55% of personal lines of insurance are sold through captive agents
  
• Life insurance companies’ assets have grown significantly over the past 20 years; the industry now controls nearly $4 trillion in assets
  
• 73% of insurance companies’ general account assets are invested in bonds
  
• 78% of insurance companies’ separate account assets are invested in stocks
  
• 11% of life insurance companies operating in the US are foreign owned
  

Markets & Distribution Channels

This chapter provides an overview of the markets & distribution channels for all insurance products. It also addresses the history of insurance sales, as well as insurance agents:

• Four shifts have taken place; spun off agencies, proprietary product sales requirements, expanding products, new distribution channels
  
• Most insurance professionals now exist in one of three models, including the captive agents model, independent model, and producer group model
  
• Insurance agents now offer a wide variety of financial planning services, with almost all offering insurance planning services and individual retirement accounts
  
• By 2010, 60% of life insurance agents are expected to hold NASDAQ securities licenses
  
• Insurance sales are spreading across a wider range of sellers, ultimately decreasing full time agents and increasing part-time insurance agents
  
• Six emerging distribution markets include retail banks; full-service brokers; discount brokers & online financial advisors; independent advisors; other financial advisors; upscale competitors
  
• Bank insurance sales are now close to $75 billion annually, which is nearly triple 1999 sales
  
• Banks make up 12% of total annuity sales; specifically banks sell 38% of fixed annuities, and 10% of variable annuity sales
  
• 69% of brokers are licensed to sell insurance
  
• Only 38% of online insurance web sites allow customers to buy insurance online
  
• 22% of independent reps have previous experience in insurance sales
  
• Only one in ten CPAs offers insurance services, nearly half plan to do so in the future
  
• 61% of high net worth investors claim they will not buy insurance from private banks, as they believe banks are not capable in this area
  

Future Predictions for the Insurance Business

This chapter offers Tiburon’s insights as to the future of insurance products. There are three areas of predictions concerning the insurance industry, including product, market, and industry structure predictions. The product predictions cover product areas that will likely boom in the future, as well as products that are declining and their potential impacts across the industry. The market predictions section reviews trends in insurance sales forces, and channels entering and leaving the industry. The industry structure predictions reveal forecasts of industry wide corporate structures as well as regulations:

• Number of insured households will increase to 305 million by 2012
  
• The number of insurance industry policies will increase to 219 billion by 2012
  
• Insurance in force is on the rise, projected to increase to $78 billion by 2012
  
• Insurance industry premiums have been growing, increasing to $52 billion by 2012
  
• Insurance industry first year premiums have been growing and are going to continue to do so, reaching $10 billion by 2012
  
• Insurance industry revenues are going to continue to grow reaching $84 billion by 2012
  
• There are six key product predictions, from products commoditizing & a growing focus on cost management, to the decline in the reinsurance market. Other predictions include baby boomers pending retirement & other factors driving demand for various products, the impact of increasing consumer needs, the lack of a wholesaling model in insurance, and disaster impacts on property & casualty companies
  
• More than two-thirds of insurance industry revenues are generated from de facto commodity products
  
• 33% of insurance executives believe distribution channel productivity is the most important issue in insurance
  
• Insurance investment assets make up 33% of the US institutional assets
  
• 40% of the assets of the world’s top 100 asset managers are managed by insurance companies
  
• Health savings accounts are expected to reach 15 million by 2010
  
• Average nursing home cost is expected to reach $120,000 by 2012
  
• The number of elderly consumers is expected to reach nearly 36 million by 2012
  
• 98% of financial institutions plan to sell term life insurance
  
• Life insurance agents who hold NASD securities licenses are expected to reach 55% by 2012
  
• 54% of brokers plan to sell or increase their sales of insurance products
  
• 44% of independent advisors plan to sell or increase their sales of insurance products
  
• 75% of Chinese population is not insured
  
• 60% of senior insurance executives believe that there will be an increase in mergers & acquisitions activity
  
  

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Tiburon Strategic Advisors