Research by LIMRA highlights that although the online channel is drawing a far larger audience of potential life insurance buyers in the US than ever before, it has significant failings when it comes to securing sales. Charles Davis examines this phenomenon which confirms yet again that life insurance is sold, not bought.
When Americans get serious about life insurance purchasing, they buy. The problem is that very few American consumers are all that serious about purchasing life products.
Recent research from financial services organisation LIMRA reveals a fundamental dilemma for insurers: although consumers have more channels to shop for life insurance than ever, this might be serving to diffuse the central message that shopping for life insurance does the consumer little good if they never make the final commitment and buy.
LIMRA’s most recent study, based on a survey of 6,666 households that seriously shopped for life insurance, found that twice as many households shopped for life insur- ance in 2011 as in 2003 (22% versus 11%).
Unfortunately, far fewer households that shopped actually bought life insurance in 2011 than bought in 2003 (54% versus 70%). LIMRA says the increase in the modern-day equivalent of life insurance window-shopping might be a symptom of the ocean of information consumers can obtain online.
All of that information also seems to be burying the most essential piece of the puzzle: the sales proposition. The 2011 LIMRA Life Insurance Buyer/Non-buyer study also found that only 39% of US households recall having an opportunity to buy life insurance in the past two years.
Online opportunities may also explain why fewer households bought after shopping. Shoppers who shopped only online were considerably less likely to buy (36% bought) than were shoppers meeting face to face with sales representatives (74%), or even those dealing directly with insurance companies or sales representatives without meeting with them face to face (67%).
LIMRA sees a silver lining, however, as the research also identified an opportunity most insurers have not targeted to date.
“This phenomenon is especially true for single people – a growing segment of the population because of a decline in marriages and an increase in divorce during the past few decades,” notes Cheryl Retzloff, senior research director, LIMRA Markets research, in the report.
“Only 26% of single people recall having an opportunity to buy life insurance [compared to 74% of married people].
Retzloff continues: “We also found that those singles who did recall having an opportunity to buy life insurance are almost as likely to buy life insurance as married households [51% versus 58%]. Companies could grow their life business by more aggressively pursuing this untapped market.”
The LIMRA research shows tremendous potential for life products designed for the singles market. In an earlier study, LIMRA uncovered another growing market: single mothers. Having children is a key reason people start shopping for life insurance, and the study found single mothers have unmet life insurance needs.
Specifically, one third of single mothers who are the primary wage earners had no life insurance coverage at all. And even single mothers with life insurance coverage are underinsured: Two thirds felt that their families could not cover everyday living expenses for much more than a few months should they die.
The key differentiator between those who buy life insurance and those who do not, irrespective of age, income, and marital status, is whether they have children under age 18 in the household. Almost 50% of buyers have children in the household, compared with 38% of non-buyers.
The research shows that not only does having or adopting a child trigger households to shop for life insurance, it motivates them to buy: 73% of households that shopped for life insurance because of births or adoptions actually bought policies.
The study also shows that plenty of potential remains among the non-buyers for sales. Non-buyers comprise two segments: the 70% who are still deciding whether they will purchase and the 30% who have already decided not to buy.
Only 14% of non-buyers decided they did not need life insurance and would definitely not buy, highlighting the importance of following up with prospects who had investi- gated or inquired about life insurance. About a quarter of each generational group and middle- and high-income households’ res-ponded that the key reason for not buying was because they were still shopping.
Opportunity to reach out
“There are clearly opportunities for insurers to reach out to underserved segments of the population, like single people, who are in need of life insurance,” Retzloff stresses.
“In addition, insurers and producers need to be cognisant that some life insurance shoppers — especially those under age 46 who have dependent children in the household — may be slow to make a decision and may need someone to help them make the final decision to move forward and buy.”
Previous LIMRA research suggests that by merely offering a plethora of insurance product information online, insurers are paying too little attention to the real driver of sales: face-to-face interaction.
In prior LIMRA studies found that over 50% of consumers prefer buying life insurance face-to-face. LIMRA’s new study found that life insurance shoppers who meet with sales reps are the most likely to buy. In fact, if there was any face-to-face contact during the shopping process, more than seven in 10 bought.
Also of note is that online insurance shopping combined with a meeting with a sales representative can make a big difference.
While just over a third of life insurance shoppers who use only the internet while shopping actually buy, those who started shopping online and then met a representative were one and a half times more likely to buy than those who only shopped online.
But many consumers will not initiate the process of meeting a representative. One quarter of life insurance shoppers consider life insurance because sales representative or financial advisers initiate contact or suggest a need for life insurance. In addition, 1 in 10 shoppers is prompted to consider life in-surance because it is offered at work.
The study provides ample evidence of the fact that all the online information in the world won’t suffice in the absence of good, old-fashioned shoe-leather sales efforts.