Sellling life insurance has always been a relatively slow process. The average life insurance agent does not sell even one policy a week. There’s lots of prospecting, missed appointments, presentations, etc. that occur to obtain the typical month’s three or four sales. That life insurance is sold, not bought, is a most common refrain. And, seemingly, nearly everyone seems to accept that, because of human nature, it will remain this way forever.
Surveys also typically reveal that households are significantly under-insured. Market researchers often report that approximately one-third of families intend to buy from a life insurance agent during the next 12 months, but seldom do more than five percent of households buy a policy in any given year. Apparently, five out of six consumers, again, because of human nature, just never get around to meeting with an agent, and even of those that do only some could be considered appropriately insured.
Human nature, however, is seldom accepted as an insurmountable obstacle in other arenas. What if there were ways to motivate individuals–in particular, parents–to make it be in their own best interest to actively address their life insurance needs? What if family breadwinners had a real impetus to be buyers of life insurance?
For example, what if the amount of life insurance a breadwinner has could be used as a proxy for the value of a potential award his/her family would receive in a wrongful death lawsuit? Or, what if dependent exemptions on tax returns were conditional on having some “appropriate” level of coverage? Or what if a young couple were required to present a certificate showing some “appropriate” level of coverage before they could take their first baby home from the hospital?
Although these ideas may seem ridiculously-impractical or radical (such are the labels typically applied to any novel idea, even those ideas that eventually become accepted for their wisdom), principles of economics and ethics can be shown to support these proposals. Might it not be a good time for the life insurance industry to do so as well? In fact, while there is no expectancy that these ideas would be implemented any time soon, wouldn’t having public discussions about such ideas be useful?
A Modest Proposal’s Logic
One can only rightly ask another to do that which he or she would have done on his or her own. In a wrongful death lawsuit, the claim for damages, aside from punitive factors, is largely tied to the financial loss suffered by the survivors–the deceased’s future paychecks need to be replaced. This calculation is similar to the needs assessment that agents perform for their clients. Premature death, though, is much more likely to occur in a multitude of other ways (heart attack, brain tumor, etc.) than by someone else’s negligence. Consequently, claiming that one’s family is entitled to $3 million from a negligent party ought to mean, and thereby require,that one had been insured for $3 million so as to appropriately protect against all of the 999 other possible ways of dying prematurely.
Every paid wrongful death claim comes from someone else. For courts to order such awards is analogous to society specifying that everyone act with commensurate risk management prudence (e.g., engage in risk reducing practices and insure appropriately when risk reduction isn’t possible). Wrongful death cases are not supposed to be a winning lottery ticket for the bereaved. Nor is the basic wrongful death claim supposed to be a harsh punishment for the negligent party (punitive claims are a different matter); wrongful death claims are suppose to be compensation. And what better proxy to use for compensation than the value the deceased individual placed on his or her own life? After all, heart attacks and brain tumors are more prevalent causes of premature deaths than wrongful accidents. Don’t we as a society want those bereaved families to be as well taken care of as we want those who survive their breadwinner’s wrongful accidental death?