The Psychology of the Life Insurance Buyer

Producers can sell a lot more life insurance if they advise clients on their life insurance needs. In some cases, they can double the face amount of policies they sell compared to producers who do not provide a needs analysis.

That’s a key takeaway from head-turning new data from LIMRA. It’s also a telling glimpse into the mind of the life insurance buyers, giving advisors a heads-up on what works with clients and what doesn’t. The figures also show that producers who recommend specific amounts of insurance to clients can sell more than 60 percent more coverage than those who don’t. “These are among the most star-tling findings in the study,” says Todd Silverhart,
corporate vice president and director of markets research at LIMRA.

The numbers suggest that advisors could gain a sales advantage by providing a needs analysis as well as making purchase amount recommendations, he says.

Sales Potential

Seeing the sales potential, in terms of dollars, helps drive the point home. The study found that buyers receiving needs analyses rewarded their agents’ efforts with life insurance purchases averaging $423,000 in face amount—nearly twice the $215,000 average for buyers receiving no analysis.

And buyers receiving a recommendation to buy a specific face amount like-wise rewarded their agents’ efforts with an average purchase of $427,000. That’s 64 percent more than the $260,000 average for buyers who received no recommendation.

In short, buyers who get the advisor’s personal attention—via needs analyses and recommendations—are “more likely to buy, and to buy bigger policies,” Silverhart says.

Advisors who focus on building relationships with clients agree. Ed Hinerman, owner at Hinerman Group, Salida, Colo., puts it this way: “It’s rare to make a sale without having personal contact with the client.  That’s the way relationships are built. It’s a trust thing, and sales are all about relationships and trust.”

LIMRA conducted the study earlier this year, sampling views of 3,000 adults about their life insurance shopping experiences, including their experiences with advisors. The shoppers included both buyers and non-buyers from all age groups and income categories.

The data include a number of other important findings for producers. One of them underscores how critical it can be to have face-to-face meetings with clients.

The Face-to-Face Advantage

Among all shoppers, 37 percent said they had participated in a face-to-face meeting their sales rep or financial advisor. The eye-popper is that fully 73 percent of those people bought life insurance.

What’s more, the advisors’ efforts to reach out to people via phone and mail seem to have had
nearly as strong a correlation with insurance purchases.

For example, 30 percent of all shoppers said they had talked with their rep or advisor on the phone, and 65 percent of those people bought life insurance. Likewise, 30 percent of all shoppers said they had received information in the mail from the rep or advisor, and 63 percent of those people made a life insurance purchase.

Much has been written about the potential for mass life insurance sales via online outlets. The new data suggest this is not as widespread as some would believe.

The researchers found that only 24 percent of all shoppers reported having received life insurance information from an online source—and only 50 percent of those shoppers ended up buying life insurance, a significantly lower percentage than buyers who had a face-to-face with an advisor.

Moreover, when LIMRA asked shoppers to name their most helpful shop-ping activity, 63 percent mentioned all those personal contacts with the advisor—the face-to-face meetings, phone conversations and mailed information. Only 15 percent named “information received from online.”

“All of this reinforces the importance of advisors having a personal relation-ship with the customer,” says Silverhart.

The Relationship Advantage

Further reinforcement comes from yet another key finding. This came when the researchers asked shoppers whether they had a previous relationship with the advisor or a referral to the advisor. (A previous relationship was defined as the advisor being the shopper’s primary financial advisor or someone from whom the shopper had purchased financial products in
the past.)

Over 70 percent of all shoppers who had met face-to-face with their advisors said they did have a previous relationship with, or a referral to, the advisor—and over 70 percent of those shoppers did buy life insurance.

On the other hand, sales were “less likely” if the prospect was a stranger and had no previous relationship, says Silverhart.

Life insurance shoppers apparently also like the way that their advisors educated them about life insurance. More than 80 percent of those who met with a rep said the reps were knowledgeable, provided good information about the policy and described what the policy would do. “We consider that to be a very good percent-age,” says Silverhart.

What’s more, 75 percent said the rep with whom they met was someone they could trust, and 70 percent thought the reps had their best interests in mind. Altogether, the shoppers were “very positive” about their advisors most of the time, Silverhart concludes.

Wake-up Calls

Although that is very good news for producers, the LIMRA findings had some wake-up calls for them, too.

One realization concerns the failure of producers to follow up with the client. “Thirty-five percent of prospects who met with a sales rep thought the rep should have contacted them again,” says Silverhart. They were still deciding about whether, and what, to buy but the advisor never got back to them, he explains.

In addition, 28 percent complained the sales rep did not take into consideration what the shopper could afford; 28 percent said the rep tried to pressure them into buying; and 27 percent said the rep concentrated on selling to just one person (in cases where both spouses were in the meeting, for instance).

Another finding has to do with the touchy area of asking for referrals. Sales  reps are sometimes
reluctant to ask for a referral because they think it may be viewed negatively by the client, having a negative impact on closing the sale, says the LIMRA study.

Yet the data show that satisfied customers are often glad to help, Silver-hart says. In fact, 22 percent of shoppers who met with an advisor said they were asked for referrals and that they complied by providing one or more. Also worth noting is that 81 percent of these shoppers did buy life insurance.

But 28 percent of those who met with an advisor said they were not asked for a referral but would have provided one if they had been asked. That’s a “sizeable proportion” of buyers who would give referrals, Silverhart says. Not insignificantly, 78 percent of these buyers did purchase
life insurance and 32 percent rated their rep as “someone I could trust.”

In view of the findings on referrals, Silverhart concludes that not requesting a referral is
“leaving money on the table.” Not asking for referrals also makes sales growth more difficult than it needs to be. “The reason most producers fail is that they run out of people to whom they can sell,” he observes.

And because asking for a referral is a basic way to grow the prospect list, not asking can hobble an advisor’s opportunity. The advisors who don’t ask are missing out on a ready source of leads, he says. LIMRA’s suggestion: “Obtain referrals because prospects are more likely to buy if they
meet with a sales rep or financial advisor based on a referral.”

Struggle And Opportunity

Another part of the study provides insight into life insurance issues with which consumers struggle most. Here, the researchers found that consumers have several areas of difficulty. The top three are: determining if they are getting their money’s worth; under-standing the policy
details; and deter-mining how much life insurance to buy.

The order of importance was about the same in all age groups and all income levels. Even those earning more than $100,000 a year named these three as their top areas of difficulty.

But a greater percentage of younger people—Generation Y (ages 18 to 29) and Generation X (30 to 45)—said they encountered this difficulty than did the older people— boomers (46-64) and the Silent Generation (65 and up).

For instance, 60 percent of Gen X and Gen Y shoppers said they have “a lot or some” difficulty in determining if they are getting their money’s worth. By comparison, only 48 percent of boomers and 51 percent of Silents reported the same problem.

As for understanding policy details, 61 percent of Gen Xers and 63 percent of Gen Yers reported being seriously challenged here, but only 45 percent of boomers and 46 percent of Silents reported the same. Silverhart thinks these findings point to sales opportunities for advisors— “the opportunity for them to help the younger generations understand.” That understanding will, in turn, help with decision-making and eventually sales, he predicts, pointing in particular to Gen X.

A common perception exists that Gen X buyers don’t need life insurance, he says. But Gen X is already in the target age range for life insurance sales, he continues, noting that the industry puts the sweet spot for life purchase at ages 25 to 45. That is the time in life when people typically get married, have children, buy homes, and experience career progression—all
common triggers for life insurance sales.

For that reason, “we think Gen X is going to be—and is already—a prime market for advisors,” Silverhart says. The LIMRA data show that this generation is already turning to advisors for help with life insurance, he adds, so “advisors who don’t pursue this are losing an opportunity.”

Al Gray, who works with insurance reps in his role as financial services manager at Underwriters Marketing Services, Mt. Laurel, N.J., agrees. In fact, Gen X represents “a great opportunity for advisors, probably more so than ever.”

Gen Xers are trying to build an estate at a time in life when they have major family responsibilities and, in today’s world, when the economy is uncertain, he explains. “Life insurance creates an estate for them if they die too early, and that will help create stability for the family.”

However, because most advisors sell to people whose age is 10 years either side of their own age, Gray says some agents may not take advantage of the Gen X opportunities.

The average age of advisors with whom Gray works is 57 to 58, Gray explains, so it is unlikely that these advisors will sell deep into the major part of the Gen-X market, he says. (Note: LIMRA uses a slightly younger aver-age age—52 for independent agents and 47 for affiliated agents—so the Gen-X opportunities may be slightly greater in certain markets.)

Another challenge Gray sees is that fewer people are available to sell life insurance today because of the nation-wide decline in number of existing advisors and new recruits. Unless the older advisors develop mentor relationships with younger advisors, or bring their sons and daughters into their agencies, Gray doesn’t believe this situation will change soon.

Worksite sales of life insurance will help some Gen Xers purchase life insurance over that provided by the employer, he allows. But worksite advisors get very little one-on-one time to meet individually with employees, he says, so that doesn’t create much opportunity for

When it comes to life insurance advice and sales, the advisor’s having a relationship with the customer makes a big difference, Gray stresses. To obtain the appropriate type and amount of insurance, “people need to talk to some-one who will sit down with them and review their situation, someone who knows insurance well and whom they trust. It takes more than a
five-minute meeting to do that.”

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning.


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