Tell us how you came to appreciate just how uncertain life is.
In the world of employee benefits or health care, considering the evolving demographics of the population as the Baby Boomers retire, it’s the fact that the basic needs people have in life stay the same. The elements of making sure that people have the financial resources at hand when untoward events happen is as great as it ever was.
One of the great advantages of living now is that we live longer. One of the great disadvantages of living now is that we live longer and are more exposed to adverse financial events because of it. That sometimes lulls people into a sense of false security that bad things won’t happen. But they can come out of the blue.
I myself was in the hospital when I was in my 20s for almost a year and a half. I had a condition that they were never able to fully diagnose but it involved having seizures and a bunch of other things. I lost about 80 pounds and had several surgeries.
When I came to work for Aflac, one of the things that interested me was knowing that even if you’re young and healthy things can happen. At the time I was working for the federal government, which has very, very good employee benefits, and it wasn’t nearly enough for what I ended up having to pay out of pocket. I had to pay someone for meals. I had to pay someone to drive me around. That’s not the kind of thing your major medical company pays for.
At that time I came very close to dying, to the point that I had to seriously think about it. And there I was, with no life insurance about to stick my parents with a bill, potentially, because I was young and single and never thought of it. What keeps me up night is that because health care has come a long way, because the environment is changing, because there is such an influx of younger workers, that people will lose sight of the fact that life is precarious. And that a little bit of money today can help people protect a whole lot of heartache in the future.
Longevity risk is often noted in context of retirement planning. People are living longer, and are fitter in old age and are richer than ever before. That throws some notions of life insurance on their head.
One of the key features of the modern environment in terms of people making these decisions is that people feel very out of balance. The way to deal with the combination of what can happen today and the concern with outliving your benefits is a balanced approach in benefits. If you’re looking at life insurance, the classic view of “get something cheap now and invest money to make up the difference,” and to not buy whole life insurance, is very short-sighted. A lot of people now are turning to whole life insurance because returns from other financial vehicles are so poor. In terms of longevity risk, if you’re looking at the spectrum of things, one of the great things that whole life insurance does is it takes the average person and provides them with a number of financial instruments all in one: something you can borrow against, something that accrues value over time, something that ultimately will pay off no matter what. That is something that is for the long-term. There are other instruments out there that are available to people for long-term financial planning, but a lot of them aren’t available to the average person where they work, and life insurance is. Voluntary life insurance can be available even in small accounts where the employer isn’t paying for anything.
It comes down to a concern not only about where your money is today, but where it is going in the future? People live a long time after retirement and the money you invest when you’re younger is worth that much more when you are older.
A lot of people under 40 are either uninsured or are underinsured and don’t seem to get the need to properly protect themselves. What gives?
I think there is some concern for people of a certain age, they grew up at a time when the value of the stock market fell tremendously and a number of high-profile companies have gone away or been seriously restructured. A lot of people question whether they should spend money on that; will those companies still be around? One of the main things for life insurance, particularly if you want to make a long-term investment, is that you want to make sure you invest with somebody who is on sound footing, not Joe’s Life Insurance Company, where he keeps his money in the front left pocket of his suit.
Lots of people just don’t understand how life insurance works for them and what their needs are. Very often, a short conversation can at least get people to see how this is different than, say, putting money in the bank. It’s kind of the same dichotomy we have now between people who exercise and diet all the time and having a nationwide obesity epidemic. You’ve got the people who understand financial planning better than ever, and those who don’t. My concern is how do you get to the average person so they just know about it? The key feature for life insurance is letting people to know it’s available. We have had a couple of instances in the last five years where all we did with our producers was to put up a placard or a sticker on the back of their computers that said “Ask me about life insurance,” and doing that increased life sales by 20 or 25%. People will buy it if they are asked and if they know it’s available.
Recently we did another thing called “Do you want life with that?” It was one of these things where if you just let people know it’s available, most people have it in the back of their minds – especially if they have families or have gotten to an age where they have dealt with any of the realities of life – probably know they need it, and they have it coming at them from so many different angles. At the worksite, where it can come out of your paycheck before anything else does, and you know you’re doing the right thing and it is less expensive than you could buy without having to take a medical exam, a lot of times, people will avail themselves to it to at least get a basic level of coverage.
For people who are single, you still are going to be sticking a family member with an expense if something happens to you. Not having children or a spouse doesn’t mean somebody is not going to get stuck with your expenses. But I think a lot of it is that people just need to be presented with the opportunity to get it in a way that makes financial sense for everything they are doing in their lives.
A key item is to make it – particularly for voluntary insurance – as clean and as simple as possible so people can see what need the product addresses and how it addresses it. For a voluntary worksite sale, you’re not going to go through two hours of analyzing someone’s assets. Typically, you’re looking at their income and what would happen to their loved ones if the income was gone because of their death. Then if you can get into longer terms, say a 20-or 30-year term insurance product, because people want to get through the time until they have their kids raised, then you can explain it from there. But last year, we offered a policy that people could buy for their children or grandchildren.
What should professionals do to drive awareness of life insurance as something worth investing in?
I don’t know what this industry was called before it was called life insurance, but a simple amount of reflection indicates that it insures something other than life. A key thing is to get back to the idea that led to that name change. You and your loved ones have got to live, and the purpose of this insurance is for you to live with peace of mind, for your loved ones to live on with peace of mind, and to have financial security if anything happens to you. The average young person may be in some denial about their health, but they know the world is a violent place, even more than older generations did. The reality is that life insurance is part of a balanced way of making reasonable provisions for the future.
A lot of people regret the choices they make on benefit provisions. We’ve seen evidence in our own workforce studies that a lot of times people regret the decisions they make about benefits, that they should have put more thought into them rather than leave things as they were. We should encourage people not to make the mistake of making a decision in the past and never re-visiting it. The world changes, people’s needs change and a key part of life insurance is to adapt to people’s changing circumstances.