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Conning: Life Insurers Prepared for Optional Federal Charter Will Enjoy Competitive Advantage

Insurers prepared for what Conning calls a likely single-licensure, single regulatory system, in terms of distribution, geographic focus, and other issues, will gain a significant advantage in the event of federal regulation of some portion of the life insurance industry, according to the research firm.

A new Conning Research Study, "State Differences in Life Insurance Marketing: Considerations of a Federal Level Playing Field," finds that state-based life insurance distribution strategies may no longer be effective in the future, owing to the impact of a recession and the potential promulgation of a single regulatory system for some portion of the life insurance market, in the event that an optional federal charter (OFC) law will be passed.

"In our review of state level performance factors and metrics in the life industry, we confirmed that larger insurers have been thinking at a state level in making and managing big distribution bets," says Greg Smith, analyst at Conning Research & Consulting. "Over the past decade, large insurers have focused on explosive growth states, but as state experience changes due to the recession, insurer geographic distribution strategies may need to change. For instance, the prospect of single licensure would allow more flexibility in distribution focus."

The study analyzes current state level performance and strategies as insurers prepare for the possibility that some portion of the life insurance market will operate under a single, uniform regulatory system in the future, according to a Conning source. It also identifies significant performance differences among states, along with the underlying drivers of this performance. Further, the study presents methodologies for identifying under-realized market potential at the state, county and metro levels.

"State level focus has made sense in the past, due to the high barriers to entry at each state market," comments Stephan Christiansen, director of research at Conning. "That said, those insurers who are prepared for the likely single-licensure, single regulatory system, in terms of distribution, geographic focus, and other issues, will gain a significant advantage. So, rather than committing to and investing throughout a specific set of states, we may well see some insurers shift to a metro level distribution strategy as a result of falling barriers."

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio

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