Simplify to survive, Hartford analyst says

To survive the credit crunch and regain consumer confidence, insurers must strip away the fancy features from their products, said Quincy Krosby, chief investment strategist at The Hartford (Conn.) Financial Services Group Inc. “Bring down the bells and whistles, and deliver the products so [consumers] can be the beneficiaries of your forward thinking but without the risk,” she said at the Windsor, Conn.-based LIMRA International annual conference in Hollywood, Fla. Customers, already highly suspicious of the complicated instruments that pulled the economy into the mire are going to be equally skeptical of elaborate insurance products — and those carriers that continue building elaborate products will become casualties, Ms. Krosby said. Her outlook for the economy and the industry was bleak. Consolidation definitely lies ahead for insurers. Meanwhile, another stimulus package in the next presidential regime is likely, and the unemployment rate — currently at 6.1% — should jump to 8% or 9%, Ms. Krosby said. Before Wall Street’s major institutions blew up and the credit markets froze, pre-retirees’ primary worries were that they would simply run out of money if they lived to 95, she said. But now they’re afraid they’ll run out of money at 70 if they retire at 65. To save itself, the insurance industry needs to create the right types of products, but those products must be simple and safe to appeal to consumers, Ms. Krosby said. Product features that have boosted sales in the last five years aren’t going to work anymore, she added. Clients are risk-averse and scared of complexity, because complex instruments are what got the financial sector in trouble in the first place. Consumers “are not asking for too much; all they want is enough money to lead a decent life when they finish working,” Ms. Krosby said. “When you have an insurance company that believes it can create fancier, more esoteric products than Wall Street itself, you have an insurance company that is going to go under,” she warned.