Educating Consumers: The Key to Turning the Tide

Marvin Feldman, CLU, ChFC, RFC, is president and CEO of the LIFE Foundation. Feldman started his career as an agent with New York Life in 1967, immediately after graduating from Ohio State University. He is also president of the Feldman Financial Group in Clearwater, Fla. Feldman is a 37-year Million Dollar Round Table member and was the 2002 president of the MDRT. He has been a member of the elite Top of the Table for 29 years, serving on its board and as the Top of the Table chairman. He was honored as the Circle of Life recipient in 2004 by the MDRT Foundation in recognition of his community and industry leadership.

Nowadays, when I’m asked to address the state of our industry, my reply is that I’m fine with that request. Then I explain that “fine” actually means frightened, insecure, neurotic and exhausted. While the comment elicits a laugh, it actually has truth to it.

What we know is that the proportion of U.S. adults with life insurance protection has declined to an all-time 50-year low. According to LIMRA, 95 million Americans currently have no life insurance, and of those that do, only 4 in 10 own individual policies. Because of the high unemployment rate, the percentage of adults with group life insurance has declined for the first time since group insurance was introduced. In addition, fewer adults are purchasing life insurance to supplement their group coverage. The result of all this is that the industry issued 1 million fewer life insurance policies in 2010 than in 2004.

Of equal concern, this drop in life insurance ownership is being perceived on Capitol Hill as a lack of caring about the middle market. It’s giving Congress ammunition in its battle with our industry over proposed taxes and regulation, including taxing the inside buildup of cash-value policies. We need to support NAIFA and AALU in these battles, or our industry as we know it will become quite different. For their part, insurance companies feel that their biggest problem, besides government regulation, is consumers’ lack of trust and confidence in our industry.

Study results lend insight

To get a better understanding of the reasons behind these trends and to gauge consumers’ attitudes and behaviors toward insurance planning, LIMRA and the LIFE Foundation joined forces and completed our inaugural tracking survey, Insurance Barometer Study, in February. The results were sobering.

The survey showed that consumers’ top five financial concerns were money for a comfortable retirement, paying for medical expenses, paying for long-term care services, supporting themselves if disabled and unable to work, and paying monthly bills. Risks that life insurance can address, such as leaving dependents in a difficult financial situation due to a premature death or burdening others with one’s funeral and final expenses, ranked 6th and 10th, respectively.

The data also revealed that although people have favorable attitudes toward life insurance — 86% felt that most people need it — almost one-third of those surveyed felt they did not personally need life insurance.
The main reason given by those who don’t own life insurance is that they feel it is too expensive. Considering that life insurance rates are at or near record lows, this suggests that people are either using cost as an excuse or not buying because they haven’t really checked the costs, which may mean that they haven’t been called on by an agent. Additional reasons given for not owning life insurance include: having other financial priorities (76%), not knowing what type to buy (55%) and not having gotten around to it (45%).

The survey also showed that while face-to-face is still the preferred method of buying life insurance, a significant percentage of the population prefers other methods. Among people ages 25 to 44, 23% are more inclined to purchase life insurance on the Internet, as opposed to 17% of the general population. And interestingly, the survey found that 22% of high-income individuals preferred purchasing life insurance on the Internet, a surprisingly high number. Before we toll the death knell for agent-assisted purchases, keep in mind that most of those who use the Internet to buy their life insurance talk with an agent by phone during the purchasing process.

Educational tools can help

So, what is the bottom line? In the past year, only 6% of adults purchased some form of life insurance. An even more disappointing number is that 44% of Americans do not feel insurance agents are trustworthy. We need to change both of these numbers, and we need to do it through education.

That is — and always has been — the mission of the LIFE Foundation: to educate consumers about what life insurance does and the importance of using professional agents and advisors in the planning process. (And let’s not forget, members of Congress are consumers, too. They have the need for life insurance, and they are making decisions about the future of our industry.)

Selling life insurance is not a transactional process; it’s an educational and emotional one. You are trying to indemnify a family or business for a loss, and so there is always an emotional element to address. That’s what LIFE does, and does well. For example, LIFE’s realLIFEstories feature moving personal stories of how families and businesses were saved from financial and emotional ruin because there was life insurance in place. These stories drive home the point of why life insurance is needed — not just what it is.

LIFE’s website (www.lifehappens.org) features a whole host of free tools and resources, with many concentrated in the turnkey marketing kits that we develop for the major campaigns, including Life Insurance Awareness Month in September and Insure Your Love in January/February.

In addition, LIFE has excellent print pieces, including the best-selling “Because He Loved Me” one-pager. With just 45 words — and never mentioning the words life insurance — this “poem” drives home the point that you buy life insurance because you love someone and want them to be okay financially if something were to happen to you. This is the perfect piece to send out before an appointment. You can also use it when you deliver the policy to remind your clients of why they bought the coverage. This is just one example of myriad resources from the LIFE Foundation you can use to reverse these trends.

All this talk about resources is fine and well, but we all know the old saw: life insurance is sold, not bought. It’s an old saw for a reason — because it’s true. Make the calls. Use the resources. And let’s all help solve this problem of uninsured Americans.

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