7 Ways Advisors Can Close Life Insurance Gap: Genworth

Consumers appear to be waiting for 'bad weather' to pass

A study released Thursday by Genworth Financial found that almost half of Americans with household incomes between $50,000 and $250,000 do not have life insurance. Those who do own life insurance only have enough to cover 3.6 years of income for their family members.

The 2011 LifeJacket study was completed with the help of Dr. Gregory Fairchild, associate professor at the University of Virginia, Darden School of Business.

“The financial well-being of the average American household has been challenged in recent years,” Fairchild wrote in the report. “With a seemingly constant tide of negative, perplexing or unpredictable economic news, clearly some families are retreating, deciding to wait things out and let the spell of ‘bad weather’ pass.”

“While the industry has done an excellent job of offering products that meet the consumer needs, we now have the deep insight needed to bridge the coverage gap and bring consumers to the table,” Anthony Vossenberg, senior vice president of life and annuities at Genworth, said in a press release.

The report identified seven ways advisors can close the life insurance coverage gap:

1. New Thinking on “Trigger” Events. Genworth found that the time between a “trigger event” like a job change, marriage or new baby, and the actual purchase of insurance varies widely. Furthermore, gender affects how quickly a person is likely to purchase insurance. The report notes that “timing is everything in life and in life insurance.” Reviewing major changes in your clients’ lives can initiate a conversation about how their needs may have changed.

2. Just One Hour a Year. More than 60% of respondents with life insurance said they wanted to meet with their advisors at least once a year, but just 38% are actually doing so. Those who receive an annual check-up reported having more trust in their advisor. Still, clients want meetings to be short. Over three-quarters said they want meetings to be an hour or less.

3. Stuck in the Past. One-third of respondents purchased their insurance over 10 years ago, meaning many of them have policies that no longer fit their needs. Among those who are looking to amend that, 30% say they fear high costs and 27% think the process will be too complicated.

4. Old Rules of Thumb Are Dead. Your clients are individuals with individual needs. Old industry metrics, like seven times a client’s income, don’t necessarily fit. Consumers don’t see their insurance needs as “a multiple of X,” the report found, and are looking for a personalized view of their life insurance needs.

5. The Need for Needs Analysis. Although clients are looking for personalized service, the report found they are “highly receptive” to online calculators that help them understand their specific needs. Eighty-eight percent said an online calculator would be helpful during the insurance purchase process. Still, 77% say they’ve never used one.

Overall, a needs analysis is important. Genworth points to LIMRA research that found 73% of clients how meet with their advisors about their insurance needs purchased a policy, while just 49% of those who had shopped without doing a needs analysis ultimately made a purchase.

The age of a client will affect how useful they see online tools. Two-thirds of those who are under 35 want to see a life insurance calculator, compared with 51% of those 55 or older. Older clients were more likely to want to see detailed product comparisons (66% versus 49% of those under 35). Company brochures were the least impressive informational tool.

6. Life Insurance Is a Journey, Not a Transaction. Despite the significant costs associated with losing a breadwinner in a family, the costs associated with purchasing a life insurance policy can be too much of a burden for some families to justify. Advisors need to help clients see that it’s not an “all or nothing” purchase; having some life insurance, even if it won’t cover everything, is better than having none at all. A minimum goal, the report suggests, is to procure enough coverage to get a client’s family members to a “financially neutral” position upon the client’s death. Over time, advisors can work to move family members to a “financially positive” position.

7. Beneficiaries: The Real-Life Insurance Experts. Genworth found that on average, individuals who have had occasion to rely on life insurance benefits felt that they would have needed more than twice the amount they received to feel they were in a financially positive position.

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