Sales of life insurance, and specifically individual life insurance, are not where the industry would like them to be. LIMRA nailed the problem last year, when it has announced individual life ownership had fallen to a 50-year low, and III 2010 industry fact book showed that life insurance sector had fallen behind health and disability insurance in terms of overall revenue, making it the smallest segment of the life and health industry. (The largest, of course, went to annuities, which accounts for nearly half of the industry’s revenue. health insurance accounts for another quarter, and life insurance comes in just under that.)
Life numbers are starting to recover, it would seem, but still growth is slow, and sales are difficult to make. For many in the industry, the problem is one of educating the consumer as to what life insurance really can do for them, why it’s a heck of a bargain, and how under-insured most Americans really are. It is a sensible strategy, since life insurance remains, even for an insurance product, a relatively unknown thing. Folks know what life insurance is, but many assume that the group coverage they might get from work is adequate. They typically have no clue how much coverage they really need, nor do they have a sense to go out to find life insurance. This is a product that for many people, they wait for it to come to them in the form of a sit-down with their local agent or financial advisor.
Clearly this approach isn’t working enough, and there are other factors at work, also. Just one might be the way in which life insurance commissions work – it’s a lot easier and more lucrative for many agents to sell annuities than life insurance, and so they go where the business is. Makes sense. But there is something else at play here that is more troubling, and it is something that the industry has complete control of. I’m talking about pricing transparency.