Nearly one-third of individual life insurance policyholders in the U.S. believe their advisors have abandoned them. And approximately 25% of U.S. policyholders intend to purchase a new policy from a company other than their current insurance carrier within the next 2 years.
These are among the key findings of a new study from NewLink Group, Toronto, Ont. The report, carried out on behalf of ReMark Americas, an Atlanta, Ga.-based firm specializing in policyholder marketing, draws on national phone surveys of approximately 2,000 consumers in Canada and the U.S. done from the fall of 2003 through the spring of 2004.
“The typical agent has far too large of a customer base to service it properly,” says Michael Levison, CEO of ReMark Americas. “They focus on the top 10% to 20% of their clientele and spend the rest of their time chasing new business. Its an endemic problem.”
The result, he adds, is a significant number of “orphans”customers who have lost touch with their agents/brokers or financial advisors. The ReMark study pegged the real orphan numbers at 36% of personal life policyholders in Canada and 29% in the U.S. These figures are higher than those most companies acknowledge (typically 5% to 10%), according to NewLink Group Senior Vice President and Director Byren Innes.
The disparity, he says, can be attributed to the insurance companies narrower definition of orphans: clients who dont have an agent actively assigned to them. When surveying respondents, NewLink left the term open-ended.
Of clients who purchased from a life agent/broker, 41% (Canada) and 39% (U.S.) considered themselves orphans, according to the report. These rates compare with 18% (Canada) and 22% (U.S.) of those who purchased from a financial planner or advisor.
Financial advisors, notes Innes, tend to have more frequent contact with clients than do life agents, given the advisors need to manage retirement plans and portfolios more actively. That increased communication should contribute to declining orphan rates because of an ongoing shift in buying preferences.
During the next few years, 81% and 58% of customers, respectively, will consider buying from life agents/brokers and financial planners/advisors, according to the report. These rates contrast with 88% of customers who purchased 10 years ago using a life agent/broker, and 35% who bought within the past 5 years using a financial planner/advisor.