In today’s world, life insurance professionals must to be ready to serve the needs of different client groups, each with its own requirements and buying experiences. A large opportunity exists for producers who can effectively deliver solutions to two very different end-consumer segments – the middle market and the mass affluent.
Life Insurance Markets
The life insurance business has significant untapped potential. Consumers need protection, whether it’s the young families of the middle market or the well-off older consumers of the mass affluent. Recent LIMRA research indicates that 22% of U.S. households have no life insurance and 44% say they need more1. Another LIMRA study states that 27% of households say they intend to buy life insurance in the next 12 months, while only 12% actually purchase life insurance in a given year2. These statistics show us insurance professionals that we must do a better job of articulating the problems life insurance is designed to solve for each consumer segment and deliver effective solutions to these problems in ways the different client segments want and understand.
Middle market consumers need simple, essential protection and – with more than 18 million households – represent a large group of prospects. In most cases, they are younger families, ages 25-45 with children, just starting out – meaning they’re not rich…yet3. They have basic protection needs such as income replacement, final expenses, and debt elimination. They want a simple, easy, time-saving, and affordable buying experience, so their loved ones are protected. Their most likely buying source is someone with whom they’re familiar, such as their local insurance agent or bank representative. They also may buy direct, given their technology fluency and needs understanding. The products that would appeal to this segment are term and whole life insurance.
The mass affluent market segment, approximately 22 million households, is at the opposite end of the needs spectrum compared to the middle market segment because it has considerable total assets that need protection4. These folks tend to be older – ages 50 to 75 – well-established empty nesters with complex planning needs, such as estate/legacy planning, business succession planning, and/or charitable giving5. They want a more investment-oriented relationship that gives them piece of mind that their portfolios and planning are integrated and optimized. They are most likely to purchase life insurance through financial planners, higher-end career life agents, life producer groups, or brokerage general agents (BGAs). Universal and variable life products would appeal to this segment.
How these solutions are delivered becomes very important if the life insurance professional is to capitalize on this opportunity and serve these different market segments. The life insurance professional must communicate the benefits of life insurance in terms prospects understand. To make this communication as effective as possible for middle market customers, it should be tied to major life events such as marriage, divorce, home purchase, having children, or the death of a loved one. The conversation should reinforce the fact that their families and values are protected, and the solution will grow and change with them.
For mass affluent clients, major life events include divorce or separation, job change, and having grandchildren. The message should be that their legacy will be intact and they’ll do right by their loved ones, business associates, or charitable organizations. If done correctly, this communication can compel those who would otherwise not act to obtain the protection they need. The key to this delivery is for life insurance professionals to further their training on life insurance sales topics, and continually refine their communication abilities to effectively convey the right solution.
Another key ingredient of client communication is to simplify the client’s decision-making process. In essence, the life insurance professional should demystify the purchase process by presenting the costs of purchase (a common objection) in terms clients understand and feel comfortable with.
The professional might say, for example, “What if I could show you a way you can protect your children’s future for $1.50 a day?”, or describe the results of inaction on their legacy by saying “Not implementing this strategy could result in your children receiving half of your property, instead of all you’ve worked hard to build.”
Finally, life insurance professionals need to help all customer segments understand the power of what they’ve purchased and the positive impact it can have on their lives. This means the clarity and simplicity of client account statements is paramount, and a focus on providing simpler summary pre-and post-sale materials that highlight the value of the purchase.
What This Means for the Life Insurance Professional
To be successful in the life insurance marketplace, insurance professionals need to identify the carriers that help them meet the needs of these two different market segments and make the solutions-delivery process simple and effective. For the middle market consumer, these will be the carriers that can remove complexity from the buying and selling process, incorporating things like simplified application completion, instant or simplified issue for policies under certain minimums, and integration with other insurance needs, such as home, auto, or an umbrella liability. These carriers also should provide simple and easily understandable marketing materials that convey the benefits of what the customer is buying without the confusing language and acronyms that pervade our industry.
For the mass affluent market, producers should look for the carriers that can provide advice and expertise on the “front-end” of a sales opportunity and streamline processing on the “back-end.” This means the carriers should have highly knowledgeable sales support staff and service personnel who are able to help producers understand and articulate the problems that life insurance can solve, and resolve issues or objections that arise through the sales process. The carriers will also need flexible products that can be used in multiple “high-end” sales situations and have additional features that may enhance a sales opportunity. Their case management should be frequent, timely, and transparent, using an overall attitude that demonstrates a focus on the partnership with the advisor and concern for the client’s understanding and peace of mind.
The time is now for insurance professionals and providers to focus on the importance of life insurance products because of the large opportunity that exists in the marketplace. The key will be for each group to play its role – investment professionals increasing their knowledge and understanding of life insurance as a solution to client needs, and companies creating and maintaining the framework for the delivery of these solutions.
Tom Duncan, JD, CLU, is a senior advanced sales consultant for Nationwide Financial Services. Mr. Duncan has been with the company since 2000, in positions of increasing responsibility in sales, marketing, and communications. Prior to joining Nationwide, he was a producer with a large wirehouse firm. His areas of specialty include distribution planning, annuities, IRAs, and estate planning.
1. Every Excuse in the Book: Can You Motivate Consumers to Buy Life Insurance?, LIMRA International, 2006.
2. Trillion Dollar Baby: The Sales Potential of the Underinsured Life Market, LIMRA International, 2006 Appendix A-6.
3. Statistical Abstracts of the U.S., 2006; The U.S. Life Buyer Study, LIMRA International, 2005.