International life insurance and financial services associations LIMRA and LOMA held their Latin American and North American conferences in Washington DC last month. At the Latin American conference, a wide range of topics were discussed such as Solvency II, microinsurance, branding, technology, the illegal sale of offshore policies and the challenge of the aging population, among others.
LIMRA and LOMA's merger became effective January 1, 2008, and they operate under the joint parent company LL Global. BNamericas interviewed Robert A Kerzner, president and CEO of LIMRA, LOMA and LL Global, to find out how the merger has turned out so far and also to discuss the challenge that Latin America faces in increasing its low insurance penetration and growing its microinsurance industry.
BNamericas: It has been almost three years since LIMRA and LOMA merged. How has the merger turned out so far for the associations and members?
Kerzner: I have to say that this one really outpaced anything we thought possible. During due diligence, we actually created a list of over 100 synergies. So from day one we really concentrated on indentifying what [those synergies] could be. And then we said, ok, how can we make most of those happen? Because we know that many mergers fail and we didn't want this one to.
According to our estimations we've saved US$6mn in redundant costs because of the merger, so members really benefited. I would also like to say that our timing couldn't have been better because it was just before the [economic] downturn occurred.
BNamericas: So there have been no negative effects from the merger considering that both LIMRA and LOMA are large organizations that had different internal cultures?
Kerzner: If you ask any of the members and if you ask the employees, they will all tell you that it all really worked. In an employee study we did last year, the LOMA people were extremely happy about the outcome of the merger. And in fact, the entire management team received very good marks. So I think that part of the success is that everybody got a chance to grow and we managed to agree on shared values.
If you look at the realities we saw before the merger, LIMRA dealt a lot with very senior executives, but we also had an eye towards the field and LOMA was clearly more centered on operations and on the back room, but they both educated. For example, recently LOMA has had tremendous success teaching courses [thanks to LIMRA's know-how], but before the merger they never offered a course as they only provided education through books.
So in fact, I do believe the merger has been a win-win for both organizations - even in terms of the cultures, which is always very difficult in a merger process.
BNamericas: What are the most significant benefits that your members in Latin America have seen from the merger?
Kerzner: There are some examples from Latin America that I think are particularly important. We've been able to have many more people who speak Spanish in the [Latin American] countries get the messages across to our members, and frankly [before the merger] we were each struggling with the translation of some of our material. We've been able to take and dramatically change the whole process by looking at what LIMRA did right and what LOMRA did right, then deciding on what the best practices were.
BNamericas: Even if you merged, you still have the two brands. Do you plan to continue using the two brands in the long term?
Kerzner: As long as I'm the CEO there will be two brands. I believed that from the first day and I've made a pledge to the employees. I believe there should be two brands and I believe that there's significant value in the reputation of both brands. And frankly I see many companies today that take names that have great value and just destroy the brand, and I simply don't believe that makes sense.
BNamericas: As for the services that LIMRA and LOMA offer their members, are there significant differences in terms of the needs that your members in North America and Europe have compared to your members in Latin America and the Caribbean?
Kerzner: Much of the training is the same and the needs are similar, and the difference is more about the timing. So some of the training that we're doing in Latin America today we may have done a few years ago in the US, for example.
We believe that many countries can learn the best practices from the countries that are ahead of them [in terms of insurance development] and also what practices to avoid. We think we can help to predict what will happen in markets based on what has occurred in the past elsewhere.
BNamericas: The economic prospects for most Latin American countries look very good today, but despite this do you believe that increasing the region's low insurance penetration will be a very long process?
Kerzner: Regrettably I believe these things always take longer than we want them to. You have some fundamental issues getting people to understand how risk products, like life and disability insurance, must fit into their planning and how they have to protect themselves from these unexpected things; especially for those who don't have a lot of discretion to put money aside early on when they have it to prepare for an untimely death of a family member.
It's a change in mindset and these things do not generally happen overnight. Having said that, I certainly think that in many Latin American countries, where the middle class is beginning to grow and there are more who are doing better [financially speaking], you'll see a quicker change in that group. So the opportunities for companies to grow in Latin America are still quite good and better than in many other parts of the world. I think you'll see steady growth, but I think it will take time to get that message to the masses.
BNamericas: What should insurance companies and regulators do to facilitate the process of insurance penetration in the region?
Kerzner: I think a lot of things have to happen. First and foremost, we have to educate consumers, and this is not easy because there are many competing priorities. There has to be a well orchestrated and consistent message from companies, regulators - and even church leaders - to focus on protecting against risks and saving for long-term emergencies, and that's not easy.
The second thing I think we have to do is to develop producers (brokers) so they become more productive and more of them succeed and spend their entire career working with those who need protection. There's still an issue that too many come, don't stay very long, and move on.
Thirdly, the life insurance industry needs to develop more types of distribution. In more mature markets there are a variety of ways that risk products are sold and made available to the public.
Finally, the government's role is to provide strong incentives, which give people a good economic reason [to purchase the insurance], but also says that socially this is important. In mature countries, the biggest gains in sales of life insurance or retirement products were linked to the government providing some enhancement to encourage people to buy life insurance or save for retirement.
BNamericas: How do you see the progress of microinsurance so far in Latin America and what do you expect to see on this front in the future?
Kerzner: Latin America has really been a leader in microinsurance and it's one of the areas that many other regions could learn from. The potential market for microinsurance in developing economies is estimated between 1.5bn-3bn policies worldwide. Currently it covers about 135mn people worldwide, but that's only about 5% of the potential market. In many countries, annual growth rates in this segment are 10% or higher. In some Latin American countries this is a significant, if not the largest segment of the population. But many of them are still in poverty, so this is a business where volume is crucial and where small premiums and low coverage really is the heart of it.
Certainly companies in Colombia, Bolivia, Peru and Brazil have started microinsurance operations. It hasn't been easy for the industry because microinsurance is something that we don't have a lot of knowledge about. But I think that those who are investing, those who are learning, will really be able over the next decade to take advantage of this opportunity and will be the ones who possess the knowledge that others will be sorry they didn't make the effort to learn.
BNamericas: What do you think insurance companies and regulators can do to further promote microinsurance in the region?
Kerzner: I think companies should make an investment to learn more about what they could be doing. And I think regulators must do some things to help support and encourage investments from companies. We've been approaching some international charities and universities, trying to obtain dollars from them to invest in research so that we can learn more [about microinsurance] and pass that knowledge on to our members.
About Robert A Kerzner
Before joining LIMRA in 2004, Kerzner was executive VP and head of the individual life division of US-based Hartford Life. During his 30-year career at Hartford, Kerzner led the company into affiliated distribution with the acquisition of Woodbury Financial Services, a national broker-dealer organization with more than 1,800 independent representatives. He served as president of Woodbury following the acquisition.
Kerzner is a graduate of Central Connecticut State University.
About the company
LIMRA and LOMA have over 1,200 members in more than 70 countries to which they provide research, training and development, consulting, assessment, compliance and other benefits and services.