Solving the perennial problem of declining individual life insurance sales should start with looking introspectively at the role insurance companies play today and accepting that role’s optimum performance requirements.
Individual life insurance is a product that 44% of U.S. households say they need more of and that 27% say they intend to buy in the coming year, according to an early 2005 LIMRA survey. That should spark a firestorm of creative marketing and sales excitement. Yet, the 20-plus-year decline in the number of new policies sold continues.
So, what is the problem?
Prior to the advent of universal life insurance and the escalated focus it precipitated on comparative shopping and agent objectivity, life insurance products were linked through marketing to the companies that issued them, and were considered differentiated and sold with conviction by loyal career agency systems. All functions involved in product manufacturing, marketing, selling and servicing were controlled and vertically integrated within each company.
Much of that now has changed. Today, most insurers are predominately manufacturers of undifferentiated products. They pursue a mercurial share of mind of an ever-dwindling stable of independent distributors. Seemingly, they have resolved to a prevailing belief that price is the only available product differentiator.
But acceptance of a predominant manufacturing role and the independence of distributors should not be linked to an acceptance of undifferentiated products.
Instead, companies should redirect internal priorities around attributes that can differentiate manufacturers in any industry–e.g., innovation, manufacturing efficiency and delivery response time. They must view distributors as entrepreneurs who seek the means to differentiate and grow their own businesses within this underserved and purportedly undifferentiated marketplace.
If industry leaders still subscribe to the adage that “individual life insurance is sold, not bought,” then an agent’s conviction about a product is a key to the customer’s motivation to buy it. And, distributors and customers alike must first be interested in the product and motivated to sell or buy it, before price is even a factor.
Conviction results from differentiation, while ambivalence and even apathy result from similarity.
But again, the prevailing wisdom seems to be that individual life insurance is a mathematical product and that mathematics is absolute, incapable of varying perceptions. The product is viewed as a price-driven commodity similar to water or coffee that no amount of marketing can differentiate. (Of course, the phenomenal success of companies like Perrier and Starbucks belies such thinking.)
If insurance companies were to view part of their manufacturing role as supplier or OEM (Original Equipment Manufacturer)–i.e., builder of products used by others in the construction and branding of various proprietary offerings–they might unleash a torrent of invention. That could create new markets with new solutions–and help build the excitement needed to reverse current industry sales trends. After all, ownership and proprietary advantage inherently breed both commitment and conviction.
This is not to suggest that 2 or more centuries of life insurance thinking is somehow flawed and should be discarded. Rather, it proposes that no one has a final understanding of what agents will and will not sell, or what customers will and will not buy. In a welcoming and encouraging environment that allows creation and protection of proprietary advantage, new and differentiated ideas regarding market application, design features, supporting processes and other factors will emerge naturally.
Life insurance is a risk-assuming concept, and life insurance companies are purportedly in the risk-assuming business, although that seems to be confined to those actuarially defined risks that can be proven and mitigated mathematically. Yet companies rarely seem to take marketing or distribution risk today unless its success can be proven by the success of others first, which, of course, is when both the risk and the resulting opportunity for reward and differentiation evaporate.
Instead, companies should embrace marketing and distribution risk. They should evaluate this based on degree of conviction held by the distributor as to salability of a proposed design or offering. When conviction is strong, they should herald and exploit it, not allow it to be faulted and dismissed. This would change company relationships with distributors, creating loyal partnerships and an inventive environment that could benefit everyone and might change the course of an industry.
Bruce W. Gordon, CLU, is president of CrailHuntly, L.L.C., Leawood, Kansas. His e-mail address is Gord1234@earthlink.net.
This could benefit everyone, and it might change the course of an industry