Yesterday, I attended a press luncheon held jointly by LIMRA, ING and SelectQuote to bring the press up to date on where life insurance sales are, what new products are being developed to make life insurance more accessible to the public, and how life insurance sales need to be reconfigured to improve overall sales.
The first speaker was Bob Kerzner, the head of LIMRA, and probably the best guy to speak to if you want to get statistics on the life insurance industry. Seriously, if you care about industry figures and you don’t belong to LIMRA, then you are doing yourself a pretty serious disservice. Bob’s remarks noted how underinsured the American public is currently. One in three people have no life insurance whatsoever, life insurance ownership, while recovering, is still at a 50-year low, and the drop in life insurance sales has been across all economic strata.
Clearly the need for life insurance is there, Kerzner said, but there are multiple, interconnected reasons for not buying. People have competing financial priorities, they have a lack of knowledge on the products themselves (confusion between different life insurance offerings is both common and crippling to actual sales), and there is simple procrastination. Everybody dies, of course, but in america, where we seem to have developed a deep immortality complex, dying is something that will happen to your neighbor before it happens to you. So why bother (today)?
Butch Britton, CEO of ING and recent winner of the National Underwriter 2011 Industry Elite award for Market Innovation, added that what further impedes sales is the lack of access, given that the number of agents themselves is shrinking, and the new blood to replace the veterans is hard to come by and needs time to skill up. The agent interaction is crucial to sell a product that people never wake up think, “today I want to buy some life insurance,” Britton said. He’s got a point there.
The answer, Britton said, is education, a point echoed by Charan Singh, founder and CEO of SelectQuote, who perhaps put it best: “People have so little understanding today of the benefits of lfie insurance. They don’t understand what life insurance can do for them. If they don’t understand it, they will not buy it.”
Singh noted other challenges to selling life insurance, namely that unlike other insurance products (personal auto, homeowners), it is not a mandated buy. People still inherently distrust any insurance transaction, but especially a life insurance one because they cannot immediately appreciate what it is they’re buying. (SelectQuote is battling this by partnering with figures such as Suze Orman.) And, life insurance is just not an exciting product. Personally, I get deep satisfaction from knowing that I am adequately insured. But can I say I am really excited about it? No. Because to get that invested in my insured nature is to be a bit more ready to accept my own mortality, which itself has a natural ceiling in anyone with a well-defined survival instinct.
The opening comments, which were all both intelligent and informative, ended with an appeal to the press to help get the word out to the wider public that life insurers are open for business with a product people need. I instantly sympathized with them – to sell life insurance is a hard thing because you have to sell people on the concept of it. It is, ultimately, an abstraction and who can easily wrap their heads around that, even if buying something relatively simple and cheap, like term life?
But it was in the Q&A that followed that we started to get into more interesting elements of the problems with life sales. I started off by asking why the life industry insists on selling its products based on an intellectual appeal. Every time I hear from an insurer that people need to be educated on their products, I wonder, why educate them when you could just remove the need for education right off the bat? Why not offer incredibly simple gateway products that need no explanation, and get folks used to owning life insurance first before upselling them on products with bells and whistles?
Why not sell life insurance to the emotional need to provide for one’s family? This one I feel especially strong about, as my last blog post might suggest. But Thai advertising aside, this is a serious issue. P.T. Barnum once said that nobody ever went broke underestimating the intelligence of the American public, and yet the life insurance industry seems to figure that the public is a lot smarter than it really is. There is this persistent notion that if people just understood the inherent goodness of life insurance, then they would surely buy it. I think this is naive, almost to the point of reckless optimism. People understand the inherent health benefits of flossing, too. But how many actually do it? If folks could be trusted to do the smartest thing for themselves, there would not be a costly and deadly obesity epidemic in this country.
The veteran agents I speak to always talk of life insurance as a product of love, a point that Kerzner himself brought up. You don’t buy life insurance unless you love something. Fair enough. And to the industry’s credit, this is a point driven home by the LIFE foundation, whose Life Happens effort does a good job of conveying the real need for life insurance. Another really effective version of this message came from AXA Equitable, which ran this incredible video celebrating the 100th birthday of Theodore Krause, an agent whose love for the product runs deep.
So why, then is the first thing out of anybody’s mouth these days when talking about life insurance is the value it builds up over time, and its performance as an investment vehicle? I asked the group if it was really so wise to keep talking about life insurance as a kind of investment at a time when the SEC is still intent on regulating variable annuities (i.e., anything they can possibly identify as a security). I did not get a very convincing answer, mainly because faced with that logic, folks tend to retreat into talking about life insurance as widows and orphans coverage. The thing is, the industry cannot have its cake and eat it too on this point.
The life insurance industry is increasingly investment-driven. Annuity sales make up half of the industry’s total revenue, and even accident and health insurance outsells life insurance, so we might as well start calling the industry the “annuities, health and life” industry, if we are to be honest about its priorities. And the extent to which I find industry executives willing to tout the investment strengths of life insurance itself only supports the notion that life is less about widows and orphans than it ever has been.
But is this necessarily a bad thing? I don’t think so, but it does reveal an industry that has some deeply conflicted priorities. You’ve got veterans on one side who often remark that the industry today is not the industry they joined 30 or 40 years ago. You’ve got young professionals who don’t see life sales as a good job option, considering the low commissions and high workload, but who see annuities as a more compelling way to go. You’ve got companies that have, until very recently, embraced the independent agent model to the point where carriers essentially became factories that manufactured insurance products, dependent on third parties with no loyalty to anything save their own practice to actually sell said products.
Is it any wonder, then, that the industry should have fallen out of step with the public it seeks to insure? Is it so crazy to think that if the life industry wants to get people back into the habit of buying life insurance, it should decide if life insurance is really the business it wants to be in? Is educating the public on the features of a product really more important than educating people on the risks those people could be protecting themselves from?
Personally, my answer is “no” to all three questions, but I am confident there are folks out there with plenty of experience who might say otherwise, and I would love to hear from them. After all, an industry facing a 50-year low in sales is an industry at a crossroads, no matter how much money it’s making. Because of the industry accepts this trough in sales as acceptable, then it may very well doom itself many more years of the same. And who wants that?