WASHINGTON– Life settlement advisors can improve sales substantially by placing more emphasis on the customer’s “behavioral decision” than on financial issues, according to a life insurance industry consultant.
“The advisor needs to provide counsel, needs to guide the customer and literally hold their hands through the process,” said A. James DeHayes, chairman of the DeHayes Consulting Group in Roseville, Calif.
“This is very, very important,” DeHayes said.
He made his comments in a recent appearance at the 6th Annual Life Settlements Conference sponsored by Fasano Associates, and held at its offices in Washington, D.C.
“There is a big difference between the financial decision and the behavioral decision in a life settlements transaction,” he said.
“The behavioral decision requires much more handholding than what I have observed anyone in the life settlement industry…do,” DeHayes said.
It is very logical for someone to approach the end of life and have something unfulfilled that the cash in a life settlement would make possible, he said, but “I don’t see a lot of that being covered in the material that we talk about; instead we talk about pure, raw numbers.
“A little more focus on behavioral elements, what goes on in the life of individuals, a little more counseling, is absolutely a must.”
Specifically, he said, “I can see that what you can offer can make a big difference to individuals who are on the fence of how much life insurance that they should buy.” But he also said that, because advisors focus heavily on the financial side of the product, they are missing “the great behavioral pieces.”
“I hope that that can change,” he said.
DeHayes, who says he is consultant to approximately half of the 200 life insurance companies in the United States., argued that customers “cannot be aware” of what the life settlement advisor has to offer for the estimated 9 million policies “that go by the wayside every year,” i.e. lapse.
Even the policies that are surrendered are not getting the favorable treatment that advisors have to offer, he said.
That indicates that “intermediaries are not accessing these people; perhaps they are not capable of accessing these people and perhaps we are failing to share what good news we have,” he said.
With the decline of life insurance sales, DeHayes said, “I would think that the [life insurance] industry would be embracing you because the one thing you offer above all else is, ‘buy this policy, and if things don’t work out, you will be able to get your money back, plus some.’”
“That definitely exists in a straight out purchase of a life insurance product unless the agent has modified his compensation or else there is no compensation,” DeHayes said.
“The front-end cost of distribution absorbs the potential that could be there in the financial transaction for an early refund; you make that possible.”
Moreover, he said, “I can see people considering what you have to offer and buying much more life insurance than what they normally would because they know that the life insurance they buy is an exceptional purchase.”
“It is good property,” he said.
In the 1960s and 1970s, he recalled, a term called “good property life insurance” was used as a teaching mechanism. Many salespeople would rather sell something that was tangible rather than the intangible, as financial services assets were perceived to be, so teaching about “good property” emerged as a way to help people visualize and personalize the value in financial products, he explained.
“And ‘good property’ is absolutely the case in the U.S. with life insurance.
“There are several hundred companies that offer high quality life insurance in the U.S., and the market is robust and competitive,” he continued. Yet, the U.S. market is in decline, due to many reasons, he said.
In other comments, DeHayes said life settlement advisors with whom he talks are “very optimistic.”
They are in favor of further regulation, and they want more attention to be given to the press “because the press doesn’t have it right,” he allowed.
They also want a higher level of education for consumers and intermediaries, and they are concerned about some of the mistakes that were made in the past and some of the negativity that is out there.
Still, DeHayes said, settlement advisors see the industry as perhaps hitting the bottom, and they believe the valuations are more close to accurate than before.