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.
“But one LTC carrier might offer a 30% or 40% spousal discount, while another might offer one in the 10% to 20% range.” Those price breaks may be appealing, he says, but the real question for boomers is, “What is the insurance going to cost, and will I get what I need?”
That–the net price–is what the advisor should look at and talk about, says Lentin.
Mark Rosen, president of Underwriters Brokerage Service, Pittsburg, Pa., and secretary of the National Association of Independent Life Brokerage Agencies, agrees. “The producer needs to look at the quality of the products and the price and value,” he says. So do customers.
Both parties need to focus on the bottom line, he adds.
However, from a marketing and advertising perspective, Rosen says discounts do have value–as attention-getters. “They provide some sizzle. They don’t close the sale, but they do help the broker get in the door.”
Once the boomer is in the door, the professional broker can then educate the client about the product and create appropriate expectations about coverage and price, Stern continues. This customizes the process and keeps insurance from being sold strictly as a commodity, just for the price and the discount, he says. “This will happen if there is willingness in the client to understand,” he adds.
Mentally, the discount is a nice thing for the boomer to hear about, observes Carlson, the Seattle agent. So, he does talk about it with boomers. “I say that you can attain this discount and that one, and over time, you might also qualify for (such and such).”
In fact, he says, many customers today expect discounts. Some even ask for them.
Michael Kaster, a consulting actuary with Watson Wyatt, Berwyn, Pa., equates that expectation with general business trends. For instance, some jewelry stores offer big prices and big discounts, while others just offer discount pricing across the board. It’s the same in insurance, he says. Some providers offer big prices and big discounts, and others factor discounts into the pricing from the get-go.
Discounting is typically a volume game, he continues. “From the insurer’s perspective, you think you’ll garner more desirable business that way, or more volume to cover fixed costs.”
But this assumes the consumer wants the discount and will feel better having it, Kaster cautions. Unfortunately, it’s not always clear whether boomers will go for the discount or choose an advisor to help, he says. Hence, a very informed, self-directed consumer might shop around and get the desired coverage at a discount. But in a lot of cases, he says, insurance is sold, not bought, and the advisor is the one who makes it happen, applying discounts and programs as applicable.
From an actuarial perspective, the discounts follow evaluation of risks, such as smoking versus non-smoking, Kaster says. The actuary looks at the risk and expense and strives to create pricing that is equitable, from a risk perspective, to a class of insureds. They really don’t consider this to be a discount, but rather a strategic approach to risk, he says.
But this approach to pricing doesn’t necessarily help sell products to consumers, Kaster allows. So marketers come in and say, “Can we package this pricing as a discount?”
The discounts tend to have more pull among younger clients, those in their 20s and 30s, observes Carlson. They tend to see insurance as a requirement, he explains, and so price is very important.
By contrast, “boomers understand that insurance is a way to protect what they’ve got. They also like the idea of insurance, of having someone to watch out for them and take care of things if something goes wrong. As a result, boomers tend to be more interested in quality of coverage and getting the best protection they can. “They are very interested in protecting their assets and their ability to work and offsetting any large catastrophic loss that may occur,” he says.
Advisors generally want to help customers get the best deal they can, sums up Waller. They want their customers to feel well-treated. Applying discounts can help with this in the context of the advice process, he says. Furthermore, those discounts sometimes help free up dollars the customer can then use to take care of other needs identified by the advisor.
A final thought, says Waller, is that clients do talk, and reputation goes a long way. “So keep ethics on the top shelf…Help clients get the best deal they can get, and use the discounts to get enough insurance to cover what they need.”