New York Life Case Study

In the early 1980s, New York Life (NYL) made the decision to eliminate its record keeping function with regard to defined contribution plans, and instead focus on providing low-cost services. The company also targeted smaller companies instead of the largest companies in the market as the result of changes made at the same time. NYL was able to capture and maintain a market share which was satisfactory at the time, and which continued throughout much of the 1980s. However, recent changes in the pension plan market have caused the company to reconsider its marketing and product positioning strategy.

Insurance companies such as New York Life, Metropolitan and others offer pension plan management to their customers as well as other more traditional insurance plans. Pension plans, which include defined benefit and defined contribution plans, have changed during recent years, with more Americans now enrolled in defined contribution plans than in defined benefit plans. Both of these alternatives offer pension benefits, but with the defined contribution plan, the employee makes the decision regarding the specific investment vehicle, and generally uses pretax dollars for the contribution.

With defined contribution plans, benefits managers at companies make the decision as to which provider they will select to offer investment vehicles to their employees; the employees then select the specific instruments. In this way, the investment por

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insurance companies, New York life is also one of the largest, and one of the most successful, at least according to some industry measures. The company offers most of the investment vehicles which its competitors offer, and it has built a reputation based on value and quality. It has a broad customer base, and good relationships with the benefits managers at its customers. These are important factors not only because of the goodwill that it engenders, but because companies are likely to continue to do business with those organizations with whom they have had a successful relationship in the past. NYL uses a dedicated sales force to sell its Guaranteed Investment Contracts (GICs) which were an integral part of the pension market. The company has a small (seven percent) share of this market with a customer base of approximately 1,000. The company's return on equity has exceeded 15 percent, and until recently, NYL did not consider changing its strategy to be more aggressive. Within the market, NYL has a high (greater than 66 percent) level of familiarity among potential customers among companies with less than $10 million in assets, and a moderate (greater than 50 percent) level of familiarity among companies with assets betw

Category: Economics - N