Most agents and advisors make their first sales in the middle market. Many then move on, but those first anxious visits around the kitchen table or in small, cluttered offices are part of their foundation.
Lower life and health commissions have re-focused agents elsewhere, but the middle market is still there, bigger than ever. As the affluent, senior, and large-group sectors become saturated, advisors are showing more interest in coming home to the middle market.
(Related: 5 Long-Term Care Hybrid Perspectives)
Advisors may have to re-think how they approach this behemoth demographic. Older-style, generic approaches (like mailers keyed to ZIP code or income level) are giving way to high-tech, micro-segmented, education-centered marketing.
“Consumers are used to being able to ask questions and get education before having to engage anything,” says Eric Palmer, chief marketing officer at Brokers Alliance, a life and annuity wholesaler in Fountain Hills, Arizona. “They've got access to a lot of information online.”
Middle Market: Huge Potential Rewards
The vast “middle” market (broadly defined by the authors of a 2014 LIMRA/Epsilon middle market study as about 50 million households with $35,000 to $100,000 in annual income) is on record as under-insured and keen for financial advice.
Most of these households are accessible through social media. The younger families will inherit trillions in the next few years. The older families already know the value of insurance and retirement planning.
Average producer commissions on the life insurance shortfall alone (estimated at $1 trillion dollars face value by the authors of the LIMRA/Epsilon study) could run in the billions.
Investment dollars, annuity deposits, health, disability and critical illness premiums (not to mention business, auto and home coverage) are not far behind. Many households even admit they don’t buy or invest because they just haven’t taken the time!
Tapping the Middle Market: New Ultra-Focused Approaches Needed
Sixty-eight percent of the insurers surveyed for the LIMRA/Epsilon study said the middle market is the first priority.
Seventy-three percent said it will be their focus in the future.
One hundred percent said that they haven’t found a reliable way to penetrate it.
While there are pockets of success (including the workplace and senior markets), most companies still don’t see consistent middle-market profits.
The November 2016 Society of Actuaries report “Middle Market Life Insurance: Findings From Industry Thought Leaders” shows that executives think:
Traditional sales practices “don’t work anymore” or are “too expensive” in this market.
Middle-market households don’t have enough disposable income.
Many middle-market buyers “don’t understand” insurance or planning needs.
Millennial and other buyers expect a virtual “D2C” (direct to consumer) Amazon-style experiences.
DIY internet platforms lack the sense of urgency or “call to action” often needed to close sales, especially of life insurance.
Online portals don’t improve complex product sales (but create instead that old agent nightmare “analysis paralysis.”)
This low penetration stems more from an “engagement gap” than the market itself. Broad brush, legacy-style marketing (think advertising lowest price, multi-state generic “need creation” mailers, “close-heavy” traditional sales scripting, not going beyond age group or income level in any strategy) may no longer be enough.
(Related: 5 Long-Term Care Hybrid Perspectives)
The middle market is “very segmented,” says Michael J. Moody in his Rough Notes blog, but the authors of the LIMRA/Epsilon study note, “Less than half of the companies surveyed had a segmentation approach for the middle market.”
Segmenting, or sub-dividing, broad mid-market categories helps the advisor address target-segment concerns, and make the best use of resources. There are many ways to divide up this enormous market.
“Micro-Segmenting” the Middle Market
The authors of the LIMRA/Epsilon middle-market study divide this huge demographic into five distinct purchasing profiles, and suggest tailored sales strategies for each. Each niche has different needs and pain points.
Agents and advisors have known this for years. Many have found profitable niche middle-market segments.
They may not follow the exact LIMRA/Epsilon template, but idea is the same: pursue a specific sub-group by addressing its unique needs.
Eric Palmer says Brokers Alliance has micro-segmented the middle market for 35 years.
“Our strategy is multi-generational,” he says, “We take each generation in three segments. We've got your millennial, your X, your baby boomer. Then we break it down within those segments — you know, married versus single — because the approach, the script, the reason, the need, those things all change.”
The Brokers Alliance agents educate on potential needs, and offer solutions, unique to each segment, often emphasizing single-policy solutions over multiple plans.
“We're finding now that providing value is much more beneficial, and are wrapping that value with education,” Palmer says. “So, as an example, teaching somebody just how much they're going to need in a living benefit and a death benefit, and a potential supplement to their income stream. Educating them about the choices they have, and then showing them what the insurance products can do for them, at a fraction of the cost of buying all these policies separately.
“So, really, educating them about the need, and then using the hybrid type products to show them the cost savings. And providing more value, and so we find that that person, once you go through that process of education, will take a Phoenix life living benefit term, or Transamerica living term, that’s 30% higher premium over that Banner term insurance product that's strictly focused on death benefits.”
Agents can stay top-of-mind as advisors, Palmer says, by addressing multiple needs with value in mind.
Middle-Market Buyers: Open to Add-Ons and Workplace Sales
Job-site sales, and casualty agencies, show consistent profit, with add-on and up-sell opportunities. Busy families and professionals are accessible — and receptive, according to the Society of Actuaries report.
Mark Mazza, an Aflac district sales coordinator in Southern California, agrees with the SOA assessment.
“We cross all demographics,” he said by email, adding that boomer and Gen X families favor asset protection, while millennials look to protect income.
Aflac has successfully targeted the middle market for 35 years, with high value, specific-solution products.
The workplace setting (and, since 1990, a creative brand) keep the company visible to busy families.
“Everyone identifies with the duck, young or old,” Mazza says.
Orville Lucus, who owns a large American Family Insurance property and casualty agency in affluent St. George, Utah, also divides the market by generation. “My middle market is actually the senior market,” Lucus says.
After middle-income households’ basic homeowners and auto needs are met, he suggests add-on Medicare products. Honing his message to this very specific niche helped Lucus drop less-profitable ancillary lines, maximizing his return on investment.
Next week, see: Reaching the Middle Market, Part 1: More About How to Actually Do It
--- Read Capturing The Millennial Middle Market With Smart Analytics on ThinkAdvisor.