For life insurance companies, it's 'do or die.'

By Thomas R. Schori, Ph.D., and Michael L. Garee, Principals,  Millennium Marketing Research, 808 E. Ironwood, Normal, IL 61761-5239. Tel. 309-532-8466 -

For some years now knowledgeable observers (ourselves included) have been predicting that the number of viable life insurance companies will precipitately decline over the next few decades. It appears, however, that the insurance industry has been largely ignoring these predictions. Still, there remains ample evidence that the predictions are nonetheless right on the mark! Let’s consider some of the hard evidence.

Here is what the 1998 Statistical Abstract of the United States reveals about life insurance companies:

From this table, we see that there were just under 2,000 domestic life insurance companies in 1980. That number increased to about 2,350 in 1988, and then steadily declined to just under 1,700 companies in 1996¾the last year data were available.

Clearly, the number of domestic life insurers is on a steady downward trend. But how far will it go? And how soon? To answer those questions, we’ll make a linear projection of that trend line out through 2015, just over a decade and a half into the future. That projection is graphically depicted below, along with the corresponding 1980-1996 data which was reported in the Statistical Abstract.

Looking at the linear projection of the current trend, we see a truly precipitous drop. Assuming that the trend will continue, we project that by 2015 there will be somewhat fewer than 500 life companies still in existence, from a high of more than 2,300 companies less than 30 years earlier. That is, we estimate that 4 of 5 insurers that were in existence in 1983 won’t exist in 2015. If that seem scary, it should be.

What this means is simple. To be a player in 2015, life insurers must do something NOW! Not tomorrow or the next day, but NOW. In one word, we can say with certainty just what they must do, and that is GROW!

Executives in many life companies are rationalizing why they’re not growing, or why they’re actually declining. "We’re in a ‘mature’ industry," they say, "and that’s why we’re not growing." Everyone knows that growth isn’t probable in a mature industry, they add. But guess what, if another 1,200 life companies are to disappear over the course of the next decade, some insurers will pick up the business. Over the next few years, three types of life insurers will evolve:

• Those that "make things happen." These companies will grow, taking business away from their weaker competitors, either by attracting their competitors’ customers or simply by acquiring the competitors themselves. (Having seen the fate of those associated with "acquired" companies, we can assure you that it is far, far better to be an acquirer than an acquiree!)

• Those that "watch what happens." As these companies watch with trepidation, they’ll see their businesses steadily decline. And with this decline will go the hopes and dreams of those flesh-and-blood people whose careers are interwoven with those businesses. Some may survive to the year 2015, but unless something drastic occurs within the industry, the number will continue to decline, until they, too, are no more.

• Those that "wonder what happened." These are the companies that are soon to be gone. They aren’t paying attention to what’s happening.

How does a company make things happen? To be successful, a business must creatively adapt to the environment in which it operates. To do so requires a constant monitoring of the environment for changes which constitute both opportunities and threats.

What constitutes a threat for one life insurer can constitute an opportunity for another. For example, the current decline in the number of life insurance companies comprises a genuine opportunity for a company (even a small one) to begin acquiring new customers simply by acquiring existing (and moribund) companies! That is, it’s an excellent time to become and acquirer instead of an acquiree.

Want to know what customers truly want and need? The best, easiest way to accomplish that is merely to ask them! (What a novel thought, huh?) Once that is known, then the next course of action for a company to take is to provide customers exactly what they said they want and need.

Want to know how a company goes about identifying exactly what customers want and need? We’ve developed a procedure which allows us to do just that. We term it our Optimal Brand Positioning Model. With it, we can identify exactly (not almost, not about, but exactly) that upon which one must focus in word and deed to greatly grow share. Not only that, we can determine exactly how much share such focus is likely to produce. And, we’ve fully described this procedure in the scientific literature, which required that other scientists scrutinize the process in minute detail as regards its contribution to the scientific literature before it was ever accepted for publication.

We don’t pretend to claim that we’re the only people who can identify that which your customers and prospective customers truly need and want. You can do it yourself. Or you can do it with the help of some other research vendor. To the best of our knowledge, however, absolutely no one can do that which we can do, i.e., identify exactly that upon which one must focus to greatly grow. And because we don’t want to wake up some morning and "wonder what happened," as will be the case for many life insurers, we constantly scan the environment for that which constitutes opportunities and threats to us. When we see opportunities of which we can take advantage or threats that can hurt us, we act now, not later. That is, we want to make sure that we remain a company that "makes things happen"!

So, what is your company going to do? Make things happen and thrive? Watch what happens and witness your company’s life blood slowly ebb way? Or, merely wonder what happened and dream of what use to be, but which surely is no more? The future is closer than you may think.