When it comes to buying life
insurance, Americans’ preferences are shifting increasingly away
from the traditional broker/agent channel in favour of indirect
channels, particularly the internet.
This is one of the notable
findings of The 2011 Insurance Barometer Study conducted
by the Life and Health Insurance Foundation for Education (LIFE)
and financial services organisation LIMRA.
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The first study in a proposed
annual series, it is intended to increase understanding about
consumer attitudes and behaviours.
LIMRA found that while 64% of
consumers still prefer to buy life insurance products on a
face-to-face basis with insurance brokers and agents, this was down
from 80% of consumers who favoured this method in 1996.
“The internet has
fundamentally changed consumers’ buying practices over the past 15
years,” commented LIFE president and CEO Marvin H
Feldman.
It comes as no surprise that
younger consumers expressed the most interest in purchasing life
insurance through the internet. Among consumers aged between 25 and
44 polled for the study, 31% said they would prefer to buy direct,
with three in four citing the internet as their preferred means of
direct buying.
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By GlobalDataOther indirect channels cited
are mail and telephone.
The internet’s importance to
the life industry goes significantly beyond just being one of a
number of direct sales channels. Significantly, in their study
LIMRA and LIFE found that the internet now plays a role in eight
out of 10 life insurance purchases. Specifically, when respondents
were asked how they would use the internet if they were buying life
insurance, 59% said they would use it to conduct research, but
ultimately buy from an insurance agent.
Twenty-one% said they would
research and complete the purchase online. Among 25 to
44-year-olds, nine in 10 said they would use the internet in some
fashion during the buying process.
During the buying process,
what consumers seek is certainly not all price-related. Indeed,
when respondents were asked about factors that are important to
them when buying life insurance, getting the best price ranked
fourth out of six factors, with only 14% saying it was most
important to them.
Ranking the highest was
understanding what they are buying (36% of respondents) followed by
obtaining the proper amount of coverage (22%).
Being certain about what they
are buying is particularly important to women, with 39% saying it
is the most important factor compared to 32% of men. Men (17%)
placed greater importance than women on getting the best price
(11%).
A necessity for
most
Also highlighted by the study was the large minority of
consumers with no life insurance. Based on responses from those
polled, 37% owned no life insurance of any form, a similar level to
other research conducted by LIMRA in 2010.
However, a far lower 14% of
respondents said they believed life insurance is not a
necessity.
On the issue of costs, the
study found that when it comes to buying more life insurance,
misperception of the cost plays a key role. This is despite the
cost of basic term life insurance having fallen by about 50% over
the past 10 years.
Of insured people who said
their coverage was inadequate, 85% said cost has prevented them
from buying more, followed by 76% who cited other financial
priorities and 55% who said they didn’t know how much or what type
to buy.
When probing the reasons for
buying life insurance, the study revealed that by a sizable margin,
the top reason cited by respondents was to cover burial and other
final expenses (89%) followed by replacing the income of a wage
earner (65%).
Also significant is that 62%
of respondents of all income levels, not just the wealthy, saw life
insurance as a way to transfer wealth or leave an
inheritance.
As LIMRA CEO Robert Kerzner observed in a concluding
comment: “The psychology of a life insurance purchase is very
complex, and the results of this new study bear that
out.”
