The life insurance products carriers are offering have beenmeeting the needs of the retirement community, but of greaterconcern to the industry is the younger generation, according toRachel Alt-Simmons, senior analyst at TowerGroup.

"You have this next wave of millenials rolling through, andtheir saving and spending behaviors are very different," saysAlt-Simmons. "The retiring generation traditionally has been ageneration of savers. The new generation is a generation ofspenders."

The issue will be how insurers can get that younger generationto invest in long-term products and developing those lifetimerelationships, she points out. Some recent pension reforms havehelped, particularly with participants having to opt out ratherthan opt in for their 401(k) plans, but Alt-Simmons indicates shehas been shocked at some of the plan participation rates she hasviewed. "Why would you not want to put in a little bit of moneywhen you see how it can grow over time?" she asks. "Younger peopleneed to get over the live-for-the-moment mentality and think aboutthe future. How the product companies help them with that is thereal challenge. You have cultural issues you are trying to addresswith financial products, and getting those things aligned may bechallenging."

Insurance companies need to take a hard look at how theyinteract with their customers so they aren't left behind, continuesAlt-Simmons. "Asset managers and banks are infringing on theinsurance companies' turf with some of their retirement products,"she says. "The companies that are going to come out winning arethose with a wide variety of ways to interact."

At the same time, insurers need to examine their internaloperations, advises Alt-Simmons, to provide the tools IT needs todo its job. For example, prior to joining TowerGroup, she workedfor 10 years with a major insurance carrier, and as she developedher team, she looked for young people out of college. "You'd givethem a task, and they'd do it a million times faster and a milliontimes better, and then they would ask, 'What's next?'" shesays.

Some of the things the younger workers wanted as a team were toset up a discussion board and a team blog, she reports. "They wouldask, 'Why not put the information in a place where we all can getat it? Why are we repeating tasks when this information can all becentralized?'" she says. "There is a lot of demand for networkingoptions because people can do it at home, so why can't they shareand collaborate at work?"

Alt-Simmons believes these issues become important whenexamining the number of people in the insurance industry on theverge of retirement. "There is a lot of knowledge captured therethat could be lost," she says. "We need more collaborativeknowledge-management techniques and tools to let people collaborateand communicate in innovative ways."

In addition, banks and the large asset managers have investedmore in consumer information than insurers, remarks Alt-Simmons.This has allowed them to predict more of what consumers want and tooffer products in a flexible and nimble fashion. "One of the mostdifficult things to do is to launch a new product," she says. "Themore complex the products get, the faster your systems have to be.If you are running legacy systems that are 20 to 30 years old, youmay be bolting on pieces to get it to work. And the product lifecycle is down, in some cases, to under a year. It used to be fiveyears."

Annuities have not captured a big piece of the retirement pie,she relates, but now there is a huge group of people around theworld retiring, and everyone is after that money. "I think thepeople who will come out on top first have to offer products thatare meaningful to people and provide value," she says. "Second,they are going to have to be easy to do business with, and that'sgoing to require an upgrade in technology."

The U.S. market is fairly mature, while in Europe and AsiaPacific, there has been a lot of reform, and those markets arestarting to open up. "You are seeing big players from Europe andthe U.S. trying to tackle those markets with new products," shesays.