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Walmart just moved your cheese

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A few months ago, I wrote about how CostCo, in partnership with Aetna, had entered the health insurance market, allowing consumers to pick up policies along with their pallets of frozen waffles. I asked, could life insurance be far behind?

And now we have an answer. Walmart and MetLife just announced they’ve launched a pilot life insurance program at 200 stores in Georgia and South Carolina. Customers can choose between two coverage options — $10,000 or $25,000 — with prices varying by age. An 18- to 44-year-old can purchase a one-year $10,000 policy for $69. Older people pay more, with a one-year $25,000 policy for a 60- to 65-year-old priced at $429.

Consumers buy the insurance by picking up a prepaid card and then calling MetLife’s toll-free number to answer health questions posed by a life agent. If the customer qualifies for coverage, the policy is activated. If coverage is denied, the card can be returned to Walmart for a full refund.

Manish Bhatt, MetLife’s senior vice president of consumer direct business, told the Atlanta Journal-Constitution, “We believe more people want to buy insurance and be on sound financial footing, but they run into so many barriers. Some don’t want to talk to agents. Some find it confusing. By simplifying it and putting it in Walmart, it will make it easy for people to get started.”

Simple doesn’t mean sound, though. For one, median U.S. household income in 2011 was $50,054, and funeral costs alone average between $10,000 and $20,000. For most people, a $25,000 life insurance payout isn’t going to come close to filling the financial gap a breadwinner’s death would leave over the long run.

The price isn’t spectacular either. Playing around with MetLife’s online quote tool, I was able to get the lowest amount of coverage offered — $100,000 — over the shortest amount of time available — 10 years — for $10 a month, or $1,200 total over the life of the policy. If a Walmart customer chose the bare minimum coverage of $10,000 and purchased it for $69 a year for 10 years, he would pay $690 over that period — a little more than half the price of my hypothetical term policy for one-tenth the amount of coverage.

Finally, with policies only lasting one year, customers will have to be vigilant about renewing coverage annually, without any reminder prompts from a personal agent. (However, a spokesperson for MetLife says it will reach out to customers prior to policy expiration to explore options for coverage.) What’s more, there’s no guarantee they’ll be able to renew should their health status change over time.

But here’s the thing: a lot of people won’t care about any of that. MetLife and Walmart are betting — I think, correctly — that many people will settle for something over nothing, especially if it means they don’t have to listen to an agent and fill out a bunch of paperwork. Even more will likely use it as a stop-gap measure — picking up a quick-and-easy policy at Walmart to hold them over until they have the money, time or patience to actually meet with an agent. Which would probably be fine … if people ever actually ended up with the abundance of money, time and patience they like to think they’ll have in the future.

MetLife isn’t saying how many policies it has sold through the program so far, but agents should be worried regardless. Two major companies are making the bet that consumers will pay more for less, just to avoid meeting with an agent. Even if this particular program doesn’t work out for them, it doesn’t say much about the current life insurance distribution method and its reputation among consumers.

On the plus side, I don’t think it’s too late for agents to change that reputation. But that’s not going to be the case for long.

For more from Corey Dahl, see:

3 election lessons for the life industry

Are you knocking on the wrong doors?

Time to get gloomy


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