All things being equal, take the discount. That’s an established business guideline across the country. It’s also the mantra of shoppers everywhere. After all, why pay more for something when you don’t have to?
But do boomers follow that precept in their insurance selection process?
The question arises because insurance products and services are teeming with discounts: spousal discounts in long term care insurance, non-smoker discounts in life insurance, “super-preferred” rates (or discounts) in term life, list-bill discounts in small group plans, implicit discounts in voluntary insurance programs and discounts in various services offered with insurance. In the property-casualty arena, there are auto insurance discounts for safety features, auto/homeowners package discounts and many more.
There are discount brokers and online shopping services, too, points out Eric Waller, a consultant with Retirement Solutions Group, a unit of Planco/Hartford, Wayne, Pa. These appeal to do-it-yourself buyers who do their own research and make their own purchase decisions, he says.
How can advisors work effectively with boomers in this discount-filled atmosphere?
First, remember that many people still want the advice of a financial professional, says Waller. For them, quality of advice is of great value.
He cites the example of one man who, upon learning he could purchase coverage cheaper over the Internet, allowed that it would be “crazy” not to take something that costs less. Still, the man decided against it, Waller says, because “he wanted the value the advisor brings to the table.”
That is a significant point, contends Waller. People cannot keep up with the changes in taxes, products, Medicare and other areas that affect insurance, he says, so they’re willing to spend a bit more to gain the guidance of a professional advisor.
For boomers, discounts have “more of a mental value than an actual dollar value,” observes David Carlson, president of Carlson Insurance Inc., a Seattle, Wash.-based multi-line agency handling both p-c and life insurance. “Most will say, ‘Here are my particulars, now what does it cost?’ Even the ‘shoppers’ will say, ‘That discount sounds great, but what’s the bottom line?’”
It’s not that boomers want to pay “leaps and bounds more” for insurance than other people do, Carlson stresses. But they have more of a big-picture perspective than do younger clients in their 20s and 30s, plus sufficient life experience to be skeptical of promises. “They don’t say, ‘Oh, hey, wow, look at all these discounts,’” he explains. Instead, they want to know what they’re getting. “They don’t want to worry about saving $10-$20 if that means losing what I can do for them.”
The boomers’ perspective is what enables Carlson to move the discussion away from price and towards solutions that fit the customer’s own need. But it’s still the discount that opens the door, he says.
For most boomers, advice comes first, says Dennis Lentin, principal of DL Consultants, Boynton Beach, Fla.
Buying insurance is not a one-size-fits-all kind of thing, he explains. “The best advisors do the needs analysis first, before ever discussing products and discounts.
“The big question is, what does the client need? What is the comfort level? Is the client underinsured? If so, is that because the person wants the cheapest option? If it’s LTC insurance, what is the family history, etc.?”
When it comes time to recommend products to fit the need, if 2 products are the same, the advisor can use the discount as a tool to help the boomer decide, Lentin suggests. But, he cautions, if the price on which the discount is based is higher for Product A than for Product B, the discount is meaningless. Again, he says, here is where the advisor provides the necessary information and guidance.
Advisors can offer various arrangements that provide the effect of discounts, if not a direct discount, points out Waller. These include: fee-only or commission services; loaded and no/low load products; break-points and letters of intent; and banded insurance rates. “Provide disclosure on this and the responsibilities the advisor has so the customer knows what’s available,” he suggests.
Insurance carriers offer discounts to get the kind of business they want, notes Lentin. For instance, LTC carriers may offer spousal discounts to put more married couples on the books, he says.