Affluent Clients Fret More And Do Less About Life Insurance, Hartford Finds

By

Although many affluent Americans feel less secure financially than they did last year, they are also less likely to have adequate life insurance protection, a new survey by Hartford Financial Services Group Inc. finds.

About 53% of respondents classified as “emerging affluent” (those with annual household incomes of $100,000 or more) said they are worried about their financial security. Yet the number of respondents saying their current life insurance was adequate slipped to 61%, from nearly 70% last year.

The survey results, based on an Internet poll of affluent Americans, suggest that many higher-income Americans do not carry adequate income protection for their families, says Michael Kalen, senior vice president and director of the Hartfords individual life division.

Hartford’s survey found 70% of respondents had less than $500,000 in life insurance coverage in 2004, up from 65% last year. Meanwhile, the number carrying less than $100,000 in coverage rose to 14%, from 11% last year.

Yet nearly 4 of 5 said income replacement was the main reason they carried life insurance in the first place.

Other financial security trends revealed by the survey:

? Fewer people were reviewing their life insurance needs as often as they thought they should about 64%, down from 68% last year.

? 43% said they did not fully understand their life insurance policies, up slightly from 41% last year. They cited unclear language, the use of technical terms and complexity as the main reasons for the confusion.

? 51% said the recent bear market did not alter their personal investment strategy. On the other hand, 25% said they now invest more conservatively vs. 11% who are more aggressive.

One of the main conclusions of the survey for agents and for the industry in general is that higher-income people want simpler, easier to understand life insurance policies, Kalen says.

Hartford has seen a big surge in life insurance applications since it began marketing a short version of its policy application three years ago, he says. The number of applications rose from 10,745 in 2002 to 13,099 in 2003, a 22% increase. The upsurge continued into the first quarter of this year, rising 53% to 4,165 applications, from 2,725 in the first quarter of 2003, Kalen reports.

“More people are thinking about life insurance, but a lot feel the process is confusing,” he says. “Representatives and insurance companies have to make the process easier and more understandable.”

Another lesson from the survey is that financial advisors need to press affluent clients to evaluate their insurance needs frequently, Kalen suggests.

“They should be sitting down at least once a year to review coverage in the context of their overall financial plan,” he says.


Reproduced from National Underwriter Edition, June 25, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.