As its customer base recalibrated risk tolerance in the wake of the recession, US life insurer Northwestern Mutual ramped up its marketing of permanent life products.
The results have been spectacular: Northwestern Mutual – which has used ‘The Quiet Company’ as its slogan for a long time – announced that between January and July this year the number of new permanent life policies purchased increased more than 23% over the same time period in 2009.
In addition, Northwestern Mutual is up more than 14% for total insurance product sales compared with the same stage in 2009.
Over and above the increase in permanent life insurance sales, the number of policies has increased 10% for individual disability income insurance (DI) and nearly 37% for individual long-term care insurance (LTC), year-to-date over 2009. In fact, 2010 has been a record year for LTC in terms of both number of policies purchased and overall protection at Northwestern Mutual.
Northwestern vice-president for life products Dave Simbro told LII the company’s recent success was a matter of a solid, steady performance emerging during difficult economic times.
“We take a lot of pride in the combination of our financial strength and the long term value of our products,” Simbro said.
“In a time when the overall economy is weak, our value proposition really comes to the forefront.
“It is not that we are really doing anything new, it is more that consumers are looking for fundamental, consistent products that perform over time.”
Simbro said that much of the insurer’s recent success stems from what he described as a fundamental recalibration of risk tolerance.
“We think there is a ‘new normal’ with regard to risk, and our conservative approach is really well suited to that risk environment,” he said.
“The key lies in the connection between what we are really good at delivering and our unique distribution system.”
Sales force excellence
That exclusive distribution system – a 50-state sales force with more than 7,000 financial representatives in 350 offices scattered throughout the country – is repeatedly described by outside observers as one of the finest sales fleets in any business sector in the nation.
“That connection is so important to us,” Simbro stressed.
“Our financial representatives have a relationship-based practice grounded in information gathering and needs assessment. A typical life client has a relationship with Northwestern for over 40 years, so they are able to truly experience our long term value.”
More conservative approach
Northwestern Mutual’s eye-opening sales figures underscore the findings of the insurer’s Financial Realities: Changing Timeframes study, which showed that Americans have embraced a distinctly more conservative approach to their financial planning, priorities and product preferences.
The study, released in June, indicated that 75% of people with financial goals have widened the time horizons in which they aim to accomplish them.
Additionally, nearly three out of four Americans favour financial strategies that are lower-risk, stable and steady versus those that carry higher risk in the pursuit of aggressive growth.
When respondents were asked about how various assets have held their value over time, permanent life insurance emerged as the far and away leader in terms of satisfaction levels – registering 60% greater satisfaction than investments.
Given the strong market demand and relevance of permanent life insurance in the current environment, Northwestern Mutual announced a new campaign called ‘A Foundation For Life’ that highlights the flexibility, stability and consistency of their product.
The campaign breaks from the traditional, lifestyle-driven creative that dominates the life insurance space, and Northwestern’s attributes are brought to life in two new TV spots and a Facebook ‘Life Stories’ application.
“We have taken a more aggressive stance in our advertising this year,” Simbro said.
“This is to differentiate the company in the marketplace and to help the customer appreciate the connection between what we offer and what they are looking for and what they need, in terms they can understand.
“The Quiet Company is speaking a bit louder these days.”
As the economic downturn rolls into its third year, middle-class consumers are showing a growing interest in managing financial risk through the use of permanent life insurance products.
Northwestern Mutual has always done well in marketing permanent life to the middle class, though; its average permanent life customer is 35 years old, Simbro said.
Northwestern Mutual is perhaps the strongest player in a permanent life insurance market reinvigorated by the economic downturn.
The August survey by financial advisory firm First Command Financial Services for its consumer Behaviors Index found 39% of middle-class Americans own some form of permanent life insurance coverage. Among those who do not own a permanent life policy, one-in-four say they are likely to purchase this type of coverage in the future.
“After years of following the popular pitch to ‘buy term and invest the difference,’ consumers are now seeing how a market downturn can threaten a seemingly sound financial strategy,” said First Command CEO Scott Spiker.
“These numbers support findings by others in the industry who note that Americans are turning to permanent life coverage as a time-tested tool for managing long-term risk.”
Whole life most popular
The most popular permanent insurance product is whole life, which is owned by 26% of middle-class families.
Other permanent life products held by survey respondents include universal life and variable life, which are owned by 10% and 4%, respectively.
“The options that permanent life insurance provides by accumulating assets while always providing financial security with a death benefit work so well for us in a long-term planning scenario,” Simbro said.
“When we look at our product suite, it is the most flexible product we have.”