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Life Sales In A Down Economy

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The recession-related decline in life insurance sales is disturbing, but not necessarily impossible to counteract, say insurance and financial advisors.

According to LIMRA International, Windsor, Conn, total life premiums were off 26% for first quarter 2009 compared to the same period a year ago. Total face amount and total policies sold were down, too, by 8% in each category.

Life insurance agents can develop strategies that work in this climate, advisors tell NU.

“People may not be buying permanent life insurance right now because they don’t believe they can afford it,” concedes Jennifer A. Borislow, president of Borislow Insurance Agency Inc., Methuen, Mass., and secretary of the Million Dollar Round Table, Park Ridge, Ill.

But agents can definitely sell enormous amounts of term insurance in this market, she says. “Then, as the economy improves, they can convert (some or all of) it to permanent.”

In fact, she says, some firms are actually selling more life insurance right now, not less. These cases typically are being written on small business owners and heads of schools–people who want to use the life insurance to replace depressed assets in the portfolio, she says.

Rob Gawthorp agrees on both points. A life insurance agent and marketing director with Custom Plan Financial Advisors, Vancouver, B.C., he says people are definitely are watching their money more closely. But in his own practice, life sales have been “the same or better than last year, and they weren’t down in the first quarter.”

Customers who panicked in the last six months are looking at places where they can cut back, notes Karen Lee, president of Karen Lee and Associates LLC, Atlanta. For instance, they are getting rid of as many luxury expenses as possible, with the idea that they can always add them back later.

Advisors should therefore be positioning life insurance as a necessity, says Lee. Help the client see that “if you can’t afford the premium, then you can’t afford the risk that it’s protecting against,” she suggests.

Unfortunately, Lee adds, “the people who can’t afford life insurance the most are the very ones who need it the most.”

Borislow points out that even some companies are hesitating on life insurance purchases. As a cost-saving measure, some smaller firms of 15 to 100 employees are eliminating group life insurance altogether, she says.

But that opens up opportunities for advisors, she continues. They can sell worksite universal life and disability insurance at these firms, she says, noting that her own agency has actually seen such sales increase in the past year.

“As employers eliminate these benefits, the employees want to replace them,” Borislow explains.

Her agency is making a point of talking about this with existing clients. But, she stresses that “life insurance is a relationship business. We set it (the life insurance review) up this way; it’s part of keeping the client’s protection updated.”

Guy E. Baker, co-founder and a managing director of BMI Consulting, Irvine, Calif., says agents need to remember that “people buy life insurance because people love someone or something.”

That is the case in any economic environment, says Baker, who is first vice president of MDRT.

With that in mind, he says agents should avoid turning the life insurance sale into an investment sale. For instance, don’t talk about how the customer can build up wealth in a policy and then pull it out tax-free, he says. “The government won’t take long to stop that, and it opens the door to legislative interference,” Baker says.

Also, he advises, if the sale is solely for the tax benefit, “you will lose your skills in needs-based selling.”

Tax-based selling doesn’t work in markets like today’s, he says.

Here are some other strategies:

Help clients visualize the need. The main point to make with the client, Lee says, is that “you do need this insurance.”

Help customers imagine how difficult things would be for their loved ones if the client were to die prematurely, she suggests. “Ask them to visualize what they would do, how they would handle things.”

That message does resonate with clients, she contends–even her own mid- to upper-income clients with advanced education.

Understand and educate. Agents need to understand a product before they sell it, Baker stresses. They also need to show the customer how life insurance works, he adds. “This is a belly-to-belly sale.”

Respond to changing client needs and preferences. Some clients call when their 10-year level term policy is about to end, points out Gawthorp. He says he addresses the inquiry but also uses the discussion as an opening to look at possible changes.

People do change their minds about life insurance, he notes. “Some want to keep it (the term insurance), so we might do a new level term policy plus put in some permanent insurance too.”

Often, he says, he also sells a critical illness insurance rider on the life policy, if it fits the need.

Sell level, convertible term life insurance. Lee and Borislow both recommend selling level term policies that can be converted into permanent insurance later on, when times are better.

“That’s what I am doing,” Lee says.

Though she prefers clients to have permanent insurance, she says “permanent is more expensive than term, and right now, many people want what’s most affordable.”

In general, Lee recommends 10-year convertible level term plans for people who intend to go into a permanent policy later on, and 30-year LTs for those who only want term. If the 10-year level term client is still healthy at the end of the term, she adds, “we can go to any carrier we want and buy a new (permanent) policy, without having to convert.”

Replace worksite supplemental term with individual term. A “big surprise,” Lee says, is that many of the mass affluent only have group life insurance from work plus supplemental life also purchased at work.

“I’m blown away by that,” she says.

Her response? She points out how “we can replace the supplemental life with term, and sometimes at half the price.” That gets their attention, she says.

Look for and support flexible products. Baker says he would like to see more life policies that policyowners can convert to insurance for critical illness, disability income or guaranteed income. They could convert part or all of the life policy death benefit, before the person dies, he says, adding “it would be something like a senior settlement,” but inside the insurance contract.

That would not be too complex for agents to sell, Baker maintains. In most cases, he says, “complexity is in the mind of the advisor.”

Look at the big picture. People need life insurance in good times and bad, says Gawthorp, the Vancouver agent. The advisor’s job is to uncover the need and open up the life insurance conversation.

One way he does this is by addressing the mortgage term insurance need first. He compares a traditional level term policy to a decreasing mortgage term policy. “That opens up conversation about what else I can do for them, for their whole financial plan.”

Gawthorp says he goes through their whole plan, examining exposures such as living too long, dying too soon and being disabled or unable to work.

“Many people don’t have a clue about what they need or what they should be doing, and they are shell-shocked at what’s been happening in the economy” he continues. “They are looking for help.

“So they need a comprehensive financial plan that includes a look at life insurance.”

What about working with clients who can afford life insurance but who are hesitating anyway, due to the uncertainty in the economy?

Urge them to buy, “because it’s a good deal,” says Lee.