Taipei Times: People have said that you were selected to take your post because of your success in launching variable annuities in Japan. Is that true?
Lee Wood: [Laughs] It is just a rumor. That was not the only thing I worked on in Japan ... Really the ING philosophy is what we call integrated financial services and we wanted to provide customers products and services they find attractive and meet their needs. So we're not looking to push one product design. The variable annuity happens to be a good product that is sold very well through different channels.
ING is a leading variable annuity company in the US and we have over US$35 billion worth of assets there. The sales turnover of variable annuity products for ING Japan in 2002 exceeded US$1 billion. But really what brought me here wasn't specifically the variable annuities but the ability to better interface within the ING group, to bring the best ideas and the best practices from all over the world whatever they are.
TT: What are variable annuities? Do you or other life insurers have this kind of product on offer in Taiwan?
Wood: In general in an annuity, basically a company promises to provide a regular income payout over either a certain period or even for the rest of a person's life. It basically guarantees that you will not outlive your planned savings. In fact, there are two phases to variable annuities -- one is the accumulation phase and the other is the payout phase.
Variable annuities are for long-term investors. The biggest advantage the newer variable annuities offers is that they offer a minimum guaranteed death benefit during the accumulation phase. In other words, life insurers will guarantee investors their principle will not be lost. So it's a nice promise to customers, to say they can invest where they like and have no risk losing their principle.
There are many kinds of annuities already in the market, but most are of the fixed type. There are no variable annuities with a minimum guaranteed death benefit feature.
Currently no insurers offer that kind of product in Taiwan. But I expect there are several companies looking at variable annuities in this marketplace and certainly we are not the only one. I think it may be a product of the future. But managing this type of investment risk is actually very complicated and difficult. Indeed, we are not sure we will attempt to launch it here until we can be certain to properly manage the product. I would not expect it anytime soon. It might be too risky for a company to undertake.
TT: Creativity is a very important factor in any competitive market. What's your view about the attitude of regulators here towards innovative products?
Wood: Yes, insurers need to always be thinking of how to produce better products that meet customer needs. And that is why I think we need to be a leader in new product development. Obviously, that puts a lot of stress on regulators to keep up with the pace of innovation. While I think that has been a challenge, let's be clear that the pace of product innovation has been relatively fast compared to say the US, where things evolved over a longer period of time.
Indeed, I think you see here an attempt to leap to best-in-class products very quickly. I think they are allowing innovation and we look forward to working with them through the life insurance industry to make sure we find ways to make sure innovation continues to allow world class products to be developed here.
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