AMEX Life Merger Rounds Out GE Capital's Strategy

By Jim Connolly

When AMEX Life Assurance Co., a long-term care provider, merges into its parent, General Electric Capital Assurance Co., on June 30, GE Capital is expecting that the merger will round out its "three-pronged strategy" of consumer wealth protection, which includes life insurance, annuity and long-term care products.

AMEX Life became a subsidiary of GE Capital Assurance in October 1995 following its acquisition by GE Capital Services. It will become the long term care division of GE Capital after the merger.

The third prong, LTC, offers plenty of opportunity, with only a 5 percent to 10 percent market penetration and the potential of reaching 85 percent to 90 percent of a target market of those in the 58-84 age bracket, said Richard Packard, senior vice president, sales & marketing with GE Capital Assurance.

Long-term care is a competitive field and an expensive product to bring to the consumer, but still open territory, he said. The potential is there, said Mr. Packard, who anticipated minimum annual growth in new sales of 15 percent.

The field, according to Mr. Packard, counts approximately 120-130 insurers, although he estimated that 80 percent of the business is concentrated in the top 10 carriers.

And at this point, it is not a sale that is fitted for direct marketing but needs to be explained to a consumer, he said, and the agent is still "the most effective way" to reach consumers with this product.

But he added that because of the national health care debate consumers are more aware of LTC as evidenced by a drop in the time of an average agent interview with a prospect to 1.5 hours from 2.5 hours.

Still, LTC requires an extra effort by an agent to explain the value of the product, he said. "The product can seem too expensive unless consumers understand the value of it to them."

For example, he said that a recent target group of 65-70 year-olds expressed the sentiment that LTC was too expensive. Upon closer examination, Mr. Packard recounted, many perceived the product as too expensive because they had shopped or purchased it for their parents who were in their 80s.

When the merger of AMEX Life becomes effective, Mr. Packard said a new program will be initiated to provide financial planners with LTC specialists. A planner will be able to refer the LTC business to the specialist and the commission will be split, he explained.

The planner can either continue the arrangement or resume the LTC planning portion once more expertise is attained, he added.

A future arrangement with Life of Virginia, GE Capital's latest acquisition is also possible, Mr. Packard said.

Of AMEX Life's other businesses, Mr. Packard said accidental death insurance will remain "a large, active book" but the long-term disability and COLI businesses will no longer be marketed and will be allowed to run off.

For high-quality article reprints and e-prints, contact Reprint Management Services at 717-399-1900, ext. 166 or email kdewan@reprintbuyer.com.