Prudential's Falzon Calls for Regulators to Care About Product Access

Robert Falzon. Credit: Prudential

What You Need to Know

Prudential Financial’s Rob Falzon said Americans face a $12 trillion life insurance gap.
Americans also face a $135 trillion retirement savings gap.
Falzon worries that regulatory constraints are pushing life insurers to sell to high-net-worth clients, not to rush to close the gaps.

The second-in-command at a U.S. financial services company with $1.4 trillion in assets says regulators have to do more to help life insurers protect ordinary people.

Rob Falzon, vice chair of Prudential Financial, speaking Wednesday at KPMG’s 35th Annual Insurance Industry Conference in Orlando, Florida, talked about the devastating gaps in life insurance and retirement savings facing Americans.

Regulators are right to have concerns about protecting policyholders’ rights and keeping insurers solvent, but “they need to expand the lens of what consumer protection means,” Falzon said.

If insurers can earn a profit only by selling complicated, expensive, very safe products to the rich, “you’re only solving half the problem,” Falzon said. “Products have to be available on the market.”

What It Means

Falzon sees regulators’ moves pushing insurers to focus on high-net-worth customers and to do less than they should to support moderate-income American workers.

The Conference

KPMG is one of the Big 4 accounting firms.

Speakers at its insurance conference sessions talked about subjects such as artificial intelligence; what insurers are spending to implement the new Long-Duration Targeted Improvement benefits obligation reporting rules (in some cases, more than $100 million); and mergers and acquisitions (which, for now, mostly aren’t happening).

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Speakers also talked about the U.S. Securities and Exchange Commission’s new executive bonus clawback rules. In some cases, under the new SEC rules, insurers that restate their earnings may have to get part of up to three years worth of bonuses back from their executives.

Sessions were streamed live on the web.

Falzon’s Session

Falzon appeared at the start of the conference during a general session.

He pointed out that, after adjusting for unusual factors, growth in both life insurance premiums and annuity sales has been flat over the past decade.

Life insurers are growing about only half as fast as the economy as a whole, and they accounted for just 0.5% of S&P 500 market capitalization in 2022, down from 1.8% in 2008.

Life insurers produced about 60% of their earnings-per-share growth by buying back their stock, rather than by increasing earnings, and the actual number of life insurance policies sold in 2022 was the lowest in 50 years, Falzon said.

“We’re selling a small number of policies with higher notional amounts, to an increasingly high-net-worth clientele, and increasingly complex products to meet the needs of that clientele,” he added.