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Life Health > Life Insurance

Life insurance: The essential guide

By David Port

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Like many of his colleagues in the insurance and financial services businesses, Scott Harris, CLTC, was thrilled to put 2008 behind him. For life insurance sales in particular, “last year was brutal,” says Harris, a financial planner for the Carta Group in Syracuse, N.Y.

While life insurance sales are showing anecdotal signs of rebounding here in 2009 — Harris, for one, says his life insurance business has picked up in the last six months — it may be a while before the slump ends industry-wide, given how precipitous the downturn has been. Neither permanent nor term products have been spared.

“I think you’ll be hard-pressed to see an increase in life insurance sales by the end of 2009,” says Elaine Tumicki, vice president of life insurance product research for LIMRA International, a Connecticut-based organization that tracks the market for life insurance products.

It’s a deep hole that those products must climb out of. While the drop-off for whole life and term life products was relatively modest in the first quarter of 2009 relative to the first quarter of 2008, at 5 percent and 4 percent respectively, according to Tumicki, quarterly sales of variable life and universal life were down 61 percent and 33 percent, respectively. It all added up to a 26 percent decline in new premiums, the largest quarterly drop since 1943, she says.

The challenge for advisors who make a living on life insurance is to avoid another bad year — to survive until the economy and the market for life insurance turn around. Doing so demands sales savvy, creative marketing strategies and an unwavering commitment to fulfilling mounting suitability and compliance responsibilities.

Sales tactics to stay buoyant
At least for the short term, life insurance sellers would be wise to focus their energies on products that today are resonating most with older consumers: term, whole life and to a lesser extent, universal life. Variable universal life is a tough sell these days, especially to seniors, says William E. Kauffman, Jr., CLU, ChFC, LLIF, director of marketing for life and annuities at Senior Market Sales in Omaha, Neb. “People are gun-shy about where they put their money. They want to know they are protected from downside risk.”

One way to bolster sales is by emphasizing to clients the attributes of life insurance products that cater to that safety-first mindset. Whole life and universal life products with no-lapse guarantees out to age 100 or 125 are resonating most with skittish clients “because they take the investment component out of the mix,” according to Harris. “The goal is to use life insurance as the protective component of the financial plan.”

The advisor network Kauffman’s firm works with is having the most success selling single-premium whole life plans. “In tough economic times,” he explains, “this is the type of product that, as an advisor, really comes to your service. It becomes a tool to use with all different kinds of clients, from the very affluent on down.”

With clients for whom wealth transfer is a top priority (and who have adequate liquidity and are in good health), Kauffman recommends positioning single-premium whole life as an “annuity alternative.” Instead of using a deferred annuity as a wealth-transfer vehicle, which can leave heirs on the hook for capital gains taxes, they purchase a single-premium whole life policy “to get tax-deferral of growth [within the contract] and tax-free transfer at death,” he explains.

Diversifying into new life products is one way to overcome slack demand for more traditional products. For example, growth opportunities could await advisors who develop expertise in products that combine permanent life insurance with long term care protection. About half of the people purchasing these so-called combination products in 2008 were 65 and older, according to the American Association for Long-Term Care Insurance. “Asset-based long-term care insurance protection is becoming an increasingly popular way for individuals to protect against the risk,” explains Jesse Slome, AALTCI’s executive director. “Many individuals find this coverage attractive because if they don’t use their long-term care protection, their beneficiaries still benefit from the life insurance coverage.”

For clients who don’t need or can’t afford permanent life insurance, term life policies are a more affordable alternative. While the rising cost of term insurance of late can be perceived as a deterrent to sales, advisors can also use the prospect of additional price hikes to gain traction with clients. If a client believes prices for term insurance may keep rising, he or she may be more inclined to purchase a policy now, and to lock in a longer term, instead of waiting and risking further price increases.

A greater emphasis on high-touch interaction with clients can also bolster sales. Lately the talk in insurance sales and marketing circles has been about “really focusing on the relational sale versus the transactional sale,” says Scott Stathis, managing director of Kehrer-LIMRA, the bank brokerage research and consulting subsidiary of LIMRA. With the Madoff scheme still fresh on their minds, clients want to do business with advisors they trust. And that trust is fostered by discussions that go much deeper than mere exchanges of information to complete an insurance application.

Marketing still matters
During tough times, marketing yourself and your practice might seem like an expendable, low-priority activity. But the fact is, marketing as a means of finding new clients and retaining existing ones becomes even more crucial in a down economy. What’s more, there are effective ways for advisors to market themselves and their life insurance expertise without breaking the bank. Here’s a look at a few:

1| Redouble marketing efforts within professional centers of influence, including elder law attorneys, accountants and estate planning attorneys. Now is the time to leverage relationships with specialists in other areas. For example, opportunity knocks for life insurance producers to reconnect with the estate planning attorneys with whom they have relationships, and to offer to analyze and review their clients’ existing life insurance programs to see if they need updating. “That’s where we’ve been focusing our marketing efforts,” says Harris. A trustee’s fiduciary responsibility can mean opportunity for a life insurance producer, since older policies held by life insurance trusts are often ripe for updating and/or outright replacement, he adds. “Normally I’m not a big advocate for replacement, but in just the last three or four months I’ve been involved in replacing three or four trust-owned [life insurance] contracts.”

2| Market to the clients you already have, rather than trolling for prospects and trying to build new relationships from the ground up. Work on the ones with whom you already have built trust and rapport. “We’re telling advisors to focus on the clients they have,” explains Kauffman. “Those folks need help, too, especially if they are interested in passing wealth to their heirs or to charity. Advisors are smart to go back and review the [life insurance] programs their clients have in place, to be sure everything still is positioned as it should be.”

Chances are, at least a few of your life insurance clients own outdated, even obsolete, policies, says Harris. “I think an advisor who hasn’t revisited a client’s life insurance plan in the last five, six or seven years needs to look at that plan to be sure it is going to be able to support itself going forward.”

3| Targeted, topical seminars can still be a worthwhile investment. Seniors will turn out to get free, on-target advice on a hot-button issue such as dealing with the estate tax, as long as that advice isn’t couched in salesmanship and hidden agendas. “If you have a unique perspective on an issue that can benefit people, I think there’s still a need for advisors to provide that kind of a service,” Kauffman says.

4| Sharing your expertise with the public via such media vehicles as a blog, newspaper column or company newsletter (print or e-mail) can attract new clients. It won’t cost much, notes Kauffman, but you have to be willing to make the effort to produce timely, engaging, informative and well-written content.

A willingness to try new tactics and go the extra mile could be what ultimately reinvigorates your life insurance sales and helps bury memories of 2008.

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