Albert Einstein, arguably the greatest mind of the 20th century, advised that, “Everything should be made as simple as possible, but not simpler.”
Simplicity is a relative concept, especially when embraced by a thinker of Einsteins stature. Yet he would undoubtedly approve of the trend in todays life insurance industry to make selling life insurance as simple as possible, but not simpler than necessary.
Life insurers are increasingly harnessing technology, applying new marketing skills, and learning lessons from competitors and partners in the broker-dealer industry to better streamline the life insurance sales and application processes. Insurers are also rethinking underwriting and new business procedures.
New initiatives in these areas have not eliminated the need for underwriting–a move that might be considered an oversimplificationbut rather have sharpened and enhanced the underwriting process to allow insurers to more quickly and more accurately assess potential risks.
Through simplification, life insurers are expanding the market for their products, reaching consumers previously thought unreachable while making financial professionals more efficient. Life insurers who have proved the most successful at simplifying their life insurance sales systems have seen healthy increases in both the number of applications they receive and the policies they issue.
The driving motivation behind simplification for many insurers is the need to reach new markets. According to LIMRA International, the number of new life insurance policies sold each year has declined by more than 40% since 1983. Life insurance premiums have increased slightly, from $9.8 billion in 1997 to $11.15 billion in 2001. And yet, 35% of the heads of U.S. households say they need more life insurance, LIMRA reported in 2001.
Many of those households whose life insurance needs have gone wanting are in the “Emerging Affluent” market. This market is often defined as people who have annual household incomes of $100,000 or more, younger children, and basic life insurance needs such as income protection or business continuation. Overwhelmingly, these households are more concerned with accumulating assets than protecting assets.
Several insurers have launched simplification programs to tap into those markets where consumers life insurance needs are generally less complex and the policies required to fulfill those needs are typically smaller. That means financial professionals must be able to reach more clients and write more policies while spending less time on administrative and underwriting duties.
Simplified life insurance sales processes are making these wishes come true. With new advances in tele-underwriting processes, producers can actually focus more time on determining their clients life insurance needs, rather than performing tedious administrative tasks. The best designed simplified sales processes start with an analysis of the clients financial goals, family obligations, and business needs, as well as the ability of the clients family to sustain their current lifestyle should the breadwinner die prematurely.