2011 Life Insurance Market Study: Blue Skies Ahead?

The verdict is in: Life insurance agents have rediscovered their sales touch here in 2011 and, along with it, a cautious sense of optimism.

Indeed, according to findings from Agent’s Sales Journal’s 2011 Life Insurance Market Study, business for life insurance agents during the last 12 months has started to rebound and looks bright for the remainder of 2011.

This new sense of optimism, along with the sales upswing that fostered it, are among the noteworthy big-picture trends documented by this year’s study findings, which are based on responses from close to 300 agents in the health sector.

In the past 12 months, 38 percent of respondents said their life insurance sales increased either somewhat (31 percent) or substantially (7 percent), compared to a combined 34 percent in ASJ’s 2010 survey. Meanwhile, just 17 percent indicated a decline in sales, compared to 25 percent a year ago. In 2011, 45 percent of respondents said sales in the last 12 months held steady, up from 41 percent in the previous survey.

“My life sales have remained pretty constant over the past 12 months,” said one respondent, echoing the comments of others. “I have been focusing on term conversions to permanent policies.”

However, some agents say the recent economic downturn continues to impact consumers, and thus, life insurance sales. “People just don’t have the money to buy it,” said one respondent. Another observes: “Finding that money for premium is a big issue” for consumers.

High sales hopes

Despite the lingering economic chill, findings from this year’s study show life insurance agents have a rosy sales outlook for the next 12 months. A combined 76 percent of respondents see their new life insurance sales increasing either somewhat (58 percent) or substantially (18 percent), while 22 percent see sales holding. Just 2 percent, meanwhile, expect sales to decrease.

“2011 sales are trending upward so far,” observed one survey respondent.

The brighter outlook isn’t lost on some of the life industry’s leading voices, who attribute the upswing in production and morale to several factors, macroeconomic and otherwise. “I think there’s legitimate reason for cautious optimism,” said Bob Baranoff, director of the research division at LIMRA International, a Connecticut-based organization that tracks life insurance markets. Figures compiled by LIMRA indicate an eight-percent rise in annual new life insurance premium in the first quarter of 2011 relative to the same period in 2010, on the heels of a four-percent gain in 2010, Baranoff notes.

The chief factor in determining how life insurance agents are faring in the wake of the economic downturn is overall approach, said Marvin H. Feldman, president and CEO of the LIFE Foundation, a life insurance industry group that promotes consumer education. “In general, those agents who chose to avoid talking to clients about difficult subjects [during the recent recession] had trouble, and those who did address the difficult issues had tremendous production years because they were proactive.”

The product mix

Traditional products continue to drive sales for life insurance agents. The vast majority of respondents — 95 percent — offer term life, while 77 percent offer universal life, 70 percent offer whole life, 40 percent offer survivorship life, 40 percent offer single-premium whole life and 36 percent offer variable universal life.

As expected, term is not only the most widely offered product, it’s the most sold. Fifty-three percent of respondents named term as the life insurance product they sell most, followed by whole life (16 percent), then universal life (14 percent). However, noted Baranoff, predictions of the demise of universal life and whole life have thus far gone unfulfilled. In fact, he said, whole life and UL are the two fastest-growing life insurance products. Likewise, Feldman said he’s recently seen “a tremendous sales surge in whole life products, and in sales of universal life products, especially with no-lapse guarantees.”

Feldman attributes the continued resonance of UL and whole life products not only to their inherent safety and security, but also to insurance companies “rethinking, redesigning and repricing their products.”

 That’s been a boon to agents as well as their clients, he said. “When you have confidence in the industryand the products you’re representing, it makes the job of selling these products much easier.”
“I have been proposed more universal life than term insurance,” one respondent offered.

“I’m doing more term conversions on old term business, since my client base is getting into their late 50s and early 60s,” said another.

The prospecting challenge

Still, life insurance isn’t a product that sells itself. Asked to name the biggest obstacles to selling life insurance, 56 percent of respondents named client procrastination as the most common impediment, followed by prospecting/finding new clients (38 percent), then clients not recognizing the need for life insurance (36 percent).

“Procrastination hasn’t changed in the 44 years I’ve been in the business,” observed Feldman. “Overcoming it comes down to having the ability and the resources to help motivate clients to make a decision. It’s making sure clients and prospects are aware not just of what life insurance products are, but what life insurance products do.”

It all starts with lead generation. Forty percent of respondents identified referrals from current clients as their most valuable lead resource; another 36 percent identified their existing book of business as their go-to lead resource.

What’s surprising in this day and age is that not a single respondent named their own website, nor an Internet quote engine or social media, as a key lead-generation tool.

Compliance requirements, according to Feldman, have been the main deterrent to a broader embrace of Internet-based prospecting strategies among agents. “But that’s changing,” he said. “I think you’re going to find the Internet used more and more, not so much for closing a purchase as for cultivating prospects.”
LIMRA’s Baranoff concurred: “I agree there’s opportunity there to use social media to help generate leads, especially in the middle market.”

A different mindset

Social media tools could prove especially useful in prospecting efforts aimed at younger buyers, a segment that today is largely overlooked by many agents. Asked to identify the age group they write most for, 42 percent of respondents named people in their 40s, 32 percent said clients in their 50s and just 13 percent said 30-something clients. A different mindset about life insurance among members of Generation X is perhaps the biggest reason agents don’t devote more time to that segment, said Feldman. “They’re waiting longer to find a significant other and to have families, so they don’t perceive life insurance as a need today.” What’s more, he said, “from a profitability standpoint, it’s very difficult to work in that middle market.”

The most effective way to reach Gen X prospects, suggested Baranoff, “is to go through their parents.”
Regardless of the age groups they target, agents could always use a helping hand with sales. Asked what insurers can do to help them sell, 54 percent of respondents identified leads, while 36 percent said a simpler application process and 31 percent said less invasive underwriting. Both Feldman and Baranoff see insurers making strides in the latter two areas. “Most companies,” said Feldman, “are already looking at ways to make these processes more simple, with things like electronic applications. That’s good, because the more complicated it is, the less likely the agent is to use it.”

Yet another reason for life insurance agents to be optimistic for the rest of 2011 and beyond. 

David Port is a Denver-based freelance writer. He owns and operates his own writing and editing business, Southpaw Print/Net Communications.

A snapshot of the sales force

The life insurance agents participating in this year’s ASJ market study are nothing if not experienced. Overall, respondents have an average of 18 years in the life insurance market. The largest share of respondents (19 percent) have been selling life insurance for more than three decades. Another 23 percent have 21 to 30 years in the business, while just 28 percent have been around for less than a decade.

From what kinds of products do they derive their income? The highest percentage — 26 percent — named annuities as their primary source of commission income, followed by life insurance at 22 percent. That’s a significant change from last year’s study, when life insurance was the top moneymaker for 29 percent of agents and annuities represented the No. 1 source of commission income for just 15 percent of respondents.

Just how much life insurance business did respondents write in the last 12 months? Overall, 82 percent said their annualized first-year life insurance premium during that span was $100,000 or less, while 18 percent estimated theirs to be in excess of $100,000. Meanwhile, about one-third (31 percent) of respondents said their total annual commission income during the last 12 months was less than $50,000, while 29 percent put that figure at less than $100,000 but at least $50,000; 14 percent reported commission income of $200,000 or greater.

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