As American consumers struggle with income levels at 15-year lows (2011 U.S. Census), they seem reticent to purchase life insurance. But what many of them fail to realize is that insurance benefits are often the sole income for loved ones after a family member dies.
In fact, after losing a loved one, many beneficiaries say they wish they had purchased additional life insurance coverage to maintain their standard of living, according to a recent study (2011 Genworth LifeJacketStudy, 7 Key Insights to Help Close the Coverage Gap).
Unfortunately, almost half of “Main Street Americans” (those with household incomes between $50,000 and $250,000) do not have life insurance, according to the study. And those with insurance only have coverage for 3.6 years of income. This leaves their families woefully unprepared. This huge challenge presents two vital questions for producers:
- How can we seize this opportunity to help consumers better understand their insurance needs?
- How do we communicate with them about real-world solutions to the financial concerns faced by the uninsured or underinsured?
After researching this topic for much of 2010 and 2011, we have devised four steps that producers can begin taking today to have productive conversations with these consumers:
1. Dusting off the Old, Bringing them in the New
Check in With Them on a Regular Basis
One-third of consumers secured their policies more than a decade ago, signifying a large population whose insurance needs have dramatically changed since they last purchased coverage. Fortunately for producers, policyholders seem open to regular conversations.
Unfortunately, producers are not following through. Almost half (46%) of those surveyed for the study indicate an interest in discussing life insurance needs with their financial advisors on an annual, semi-annual or quarterly basis. However, 26% of consumers say they could not recall ever having reviewed their life insurance coverage with their advisor. This presents a tremendous opportunity to increase sales simply by meeting with clients on a consistent basis to discuss existing policies and ensure they are aligned with current needs.
2. More Than a Passing Moment
Use short-term events to start long-term planning
Most producers know that consumers are more likely to seek out insurance when a milestone event occurs. A recent report from LIMRA (“Trillion Dollar Baby Growing Up,” 2011) finds that almost half of consumers are more inclined to shop for life insurance following a moment such as marriage, the birth of a child, divorce or the death of a loved one. But a prevailing misconception is these are one-time, fleeting-moment sales opportunities that simply provide consumers with immediate relief. Not so.
The Genworth LifeJacket Study reveals a significant gap between when these “trigger” events occur and when consumers purchase insurance. The accompanying chart shows that the average consumer will wait 15 months after buying a new home to purchase life insurance, and six months after changing jobs or starting a new job.
Producers should not view milestone life events as infrequent sales opportunities, but rather as promising benchmarks that can be used to initiate more productive discussions with clients. Instead of rushing to sell the consumer more coverage, smart producers are using the lag after the life milestone to have strategic talks with clients about long-term needs and to offer them high-value products.
3. Talkin’ ‘Bout My Generation
Conduct the right needs analysis
Producers need to study their audiences and how they prefer their information. Nearly two-thirds (66%) of consumers age 55 and over show a greater interest in detailed product comparisons, but only half want to see an online calculator. Alternatively, two-thirds of those 35 and younger exhibit a preference for online calculators, and less than half want to view detailed product comparisons.
Insurance professionals must keep in mind that Main Street Americans are not a homogenous group. Producers can maximize their chances by targeting specific generational preferences. There are critical differences in the ways consumers want data. For example, while a large minority (39%) of younger Americans prefer insurance brochures, only 17% of older consumers do.
When dealing with different generations, producers should be mindful that older clients may prefer a consultative approach focused more on benefits than costs, while younger consumers favor brief information centered on the bottom line.
4. A Journey, Not a Destination
Build a client’s financial security in small, incremental steps
The primary reasons consumers delay buying insurance are because they have other financial priorities and because they think they can’t afford it (LIMRA, “Trillion Dollar Baby Growing Up,” 2011). In fact, half of consumers who are likely to buy insurance coverage this year are stalling because they don’t know what to buy, how much to buy or are afraid of making the wrong decision (LIMRA, “Trillion Dollar Baby Growing Up,” 2011).
While purchasing insurance to cover all of their family’s long-term financial needs may not be realistic for many households today, producers can build relationships with reluctant consumers by approaching transactions as a journey instead of a destination. They should help clients understand that some coverage is better than none.
Producers can work with clients to set a short-term goal of having at least enough insurance now to ensure family members will be able to cover present financial obligations. They can then incrementally upgrade as policyholders’ needs evolve and their incomes increase to ensure they gradually find financial security.
Just as many consumers are struggling today, the life insurance business is also sluggish. Total individual new annualized premium rose just 4% in the first half of 2011, according to LIMRA’s 2011 U.S. Individual Life Insurance Sales report. Term life insurance premium dipped 8%.
But pockets of promise do exist. Insurance professionals can seize this opportunity to help consumers better understand their insurance needs—and provide real solutions to the financial challenges faced by those Main Street Americans who are either uninsured or underinsured. Not only do we owe it to these 70% of U.S. households to help them secure what they value most in life, but we also have the chance to help your customers while growing your business.
Anthony Vossenberg is senior vice president, Life and Annuities, for Genworth Financial, Richmond, Va.