Making wealth protection easier

With over seven million customers in the US, ING’s US insurance arm has been experiencing a surge in growth in recent years. Spearheading this expansion is Catherine Smith – a business leader who has headed up a variety of departments within the company before being elevated to CEO in 2006. FST caught up with her to get a better insight into the company’s focus.

FST. Last year ING realigned its business structure to better meet the retirement needs of Americans. Can you start by explaining a little about the new structure and how it is allowing your business to thrive?
CS. The purpose of the restructuring was to become even more responsive to the needs of our customers. Before, we were structured around our products and distributors rather than our consumers. We focused on products that were brought to market through employers or sold to individuals through intermediaries. We recognized that it would be more efficient and effective for us to design products and respond to our customers based on the solutions that they need rather than on how we sell them. So we now have a wealth management and protection structure. In Wealth Management, we leverage asset accumulation, planning for retirement and payout solutions to help ensure that people have the income they need during retirement.

On the other side of the house, I am responsible for all of the insurance products – or as I like to think of them, wealth protection products. For example, when someone has a life-changing event such as a birth, death or marriage, people often realize that need more protection for their family should they die or become disabled. As people get older and their wealth rises, these products are used as part of more sophisticated estate planning processes, to facilitate the transfer of that wealth. In other words, through insurance products, they’re protecting that wealth.

ING’s wealth management and insurance focus provides a solution-oriented combination that is aligned with what ING’s brand is all about: making it easier for our customers by being very customer-centric, understanding their needs and providing solutions that are in-line with those needs.

FST. Does this mean that you have moved away from having products aimed for different distribution channels?
CS. The product portfolio is evolving as we’ve concentrated more on the customer. For example, on the wealth management side of the house our annuity and a retirement plan product areas have many synergies because they’re both about wealth accumulation and management. So we’re looking for opportunities to leverage our expertise in those areas, to develop products that are more customer-friendly and geared toward the needs to the aging baby boomers, as well as the next generation, whose retirement will fall almost entirely on their shoulders.

As far as Insurance distribution goes, we work with a very broad array of distribution channels. We primarily distribute through independent representatives and advisers who have an opportunity to select from our broad product shelf. With the breadth of expertise at ING, we can offer them choice from a set of products designed to meet the needs of our customers. We’re really focused on how we can make it easier for our distribution partners to work with us, and how we can make it easier for them to serve their clients. Furthermore, we are designing competitive, customer-centric products. At the end of the day, solutions that fit the needs of the end consumer are going to serve everyone well.

FST. Today, two big issues in the insurance sector are that people are underinsured and the rise of flexible voluntary benefits. Why are these issues such key challenges for the industry, and how are you tackling them?
CS. These are two of the core issues for the insurance side of the house for sure. We’ve looked at the research, as well as doing some of our own, and there’s no question that many households in the middle-income level are either not insured or underinsured in terms of life insurance.

Everyone has to have property insurance on an automobile, but life insurance is a voluntary product – and as such it can be hard for people to know what sort of product they need and how much insurance is right. Therefore, looking at the market, you see that if individuals do carry life insurance it is often for such a small amount that if the breadwinner in the family died it would not be enough to pay off the mortgage on the house or even maintain household expenses. So we feel it’s important to educate consumers and help them understand what it takes to have a basic core amount of life insurance. We’ve launched a very successful life insurance growth initiative to address this need, particularly aimed at the middle market. We are not only distributing this through traditional life insurance agents, but through new channels like the internet and banks to get to this underserved customer base. We’re finding extraordinarily good acceptance, too. For instance, we wrote less than 7,000 term life insurance applications in the term insurance market in 2005. In 2007, this figure was around 89,000, and it will continue to grow rapidly in 2008. This is good for consumers and an important growth opportunity for ING.

You mentioned voluntary benefits. This is another important avenue for reaching the underinsured. Traditionally, employers provided a large portion of a consumer’s life insurance, health insurance, sometimes disability insurance, and other additions to their pay. Over the last dozen years or so, the health insurance component of that insurance base has grown more expensive for employers. So employers have stopped subsidizing quite so generously, and more and more of the burden has gone to the employee. In some cases, particularly with smaller companies, they’ve actually decided not to offer certain benefits at all. We find that employers want to do right by their employees but they don’t necessarily want to be funding all of these additional benefits. ING is helping by offering voluntary benefits into the mix – this is a market with a growth rate of about 10 percent.
So we see another tremendous opportunity to approach that middle-income individual who may or may not realize that they are underinsured. This is particularly true with disability insurance, which is often overlooked, but can be critical in terms of protecting a family’s income.

FST. Do people need to be educated in the options they are being offered by their employers?
CS. Absolutely – education is critical. Some of these products can be complex and difficult to understand, especially if someone hasn’t been exposed to them before, so we feel that education is critical. What product is right for each person? How much protection is needed? ING representatives have a lot of this face-to-face contact with our customers. Over time, we believe that online information will continue to grow and be an additional way that people educate themselves. But for now, that one-to-one contact in person or over the phone is a critical way to help customers really understand insurance products.

FST. What role does the industry have in really helping Americans build the right level of protection for themselves?
At ING we believe part of our responsibility is to ensure our products are transparent and our customers well informed. Therefore, we approach this issue on multiple levels and are engaged on various nationwide efforts to establish good policy and communication.

We participate in a number of different forums to advise Congress and regulators on how to make it easier for individuals to save more and have a diverse array of protection products. We work closely with our customers and distributors to ensure that they all understand the benefits and features of the associated product, and we try to ensure customers and distributors know what product is suitable in what situation. We ask our distribution partners to make sure that the consumer is educated. And, we try to make it easier for them by providing clear, easy-to-read material to use with their clients. We also do interviews with the media and participate in many different forums in order to get the word out, about unmet insurance needs.

FST. ING has grown significantly in the US through some rapid merger activities. Have there been any problems with smoothing out legacy systems and how does it affect you customer-facing activities?
CS. Our big acquisitions all occurred at the end of 2000. At that time we did a large, three-way merger which required significant integration activity. While we did inherit legacy systems and had many integration challenges, we have tried to keep all customer facing applications simple and easy to use.

Each business area has required a slightly different approach during our integration. In some places we have gone to one system for all new business while running ”walled off” legacy applications for our older blocks of business. In others we have simply upgraded to one new platform. In each case we have evaluated the costs, benefits and timelines to find the most effective way to meet customer needs and run an efficient operation

Frankly, the bottom line is that good technology is table stakes in our competitive industry. As a result, we continue to invest heavily in technology in order to make it easier for our customers and distributors to do business.

FST. You stepped up to the role of CEO last year. What have you learned in that time and what is on your plate for 2008?
CS. It’s been great and a thrilling opportunity for me. However, before I stepped into the role I had the opportunity to sit in many of the seats around the table. I had a stint as COO, with responsibility for operations and IT, I’ve run a distribution force, and have been CFO. Having had all those experiences make this job feel like a much more of a natural step than it might have been if I’d had a narrow set of experiences before stepping up.

It’s especially exciting at the moment because ING is very focused on accelerating our growth profitably. Frankly, the life insurance market is not the fastest growing segment of financial services – but there are so many underinsured groups and other opportunities that I believe we can out perform the market. I think it is very exciting for a company like ING to step forward with customer-orientated solutions that are easier for our customers to understand. This focus on the customer, on the underinsured and underserved niches will drive our growth in the future. It gives us an opportunity to build on all of the good value we’ve created in the last few years as we brought the ING companies together and now move even more rapidly in a growth mode to be a top US wealth management and protection company.

About Catherine Smith
Catherine Smith serves as CEO of the ING's US Insurance business. She's responsible for the Life Insurance, Group Insurance (Employee Benefits), and Group Reinsurance business. These business lines serve the asset protection needs of more than seven million Americans through individual and group policies. Smith also spearheads the ING six sigma initiative in the region.