Few things in life are certain but with September being Life Insurance Awareness Month I am reminded of how often we use the term “death and taxes”. It’s a quote that dates back over 300 years! Life insurance answers the basic question of “How will my family manage financially without me”?
Life insurance is not a simple product – it’s a topic many families avoid talking about. If your family depends on you financially, you probably need life insurance. But how much do you need and what kind should you buy?
According to a 2014 Study from Life Happens (a non-profit organization dedicated to helping insurance consumers) and LIMRA, “80% of Americans say that life insurance is something most people need”. However, only 44% own an individually purchased policy. I think it’s clear this statistic shows that too many people are simply relying on the group life insurance they have at work instead of owning their own protection.
There are two basic types of life insurance – term and permanent life insurance. Term insurance is the simplest form of life insurance and generally offers the highest insurance protection for the lowest initial cost. Whole life is the most common type of permanent insurance which builds cash value. Other types include Universal, Indexed and Variable Life.
LIMRA reports that “four in ten life insurance shoppers are prompted to start shopping for life insurance by life events – getting married or divorced, having or adopting a child, buying a home, or experiencing the death of a relative or close friend”. An important part of buying life insurance is determining how much life insurance you actually need. Despite the myths, there is no good rule of thumb to tell you that statistic. The good news is that there are plenty of resources including online tools and calculators designed to help you. However, they are no substitute for the advice you’ll receive by meeting with a qualified licensed insurance professional.
Is Life Insurance Still Relevant?
PricewaterhouseCoopers (PwC) reveals in their 2014 Top Insurance Industry Issues Annual Report , “In 1950, there were approximately 23 million life policies in the US, covering a population of 156 million. In 2010, there were approximately 29 million policies covering a population of 311 million – more than a 35% drop in market share in 60 years”.
They further indicate there are a number of socio-demographic, behavioral economic, competitive and technology changes that explain why this has happened including:
- Changing demography
- Increasingly complex products
- Individual decision-making takes the place of institutional decision-making
- Growth of Intermediated distribution
- Increasingly unfavorable distribution economics
- New and changing customer preferences and expectations
Despite the looming dark clouds, the industry will be able to redesign its business model and reinvent itself, PwC states. They report the most prescient insurers are already changing and focusing on ways to become more attractive to consumers.
Knowing your customer – An imperative for growth
Despite the gap between the need for life insurance protection and softening consumer demand, significant opportunities exist both in the US and globally. Successful insurers need to focus on customers’ holistic needs and extend their traditional markets. They will need to build consumer research capabilities in advanced analytics for better targeting and predictions along with closed-loop consumer feedback processes to better understand their preferences. Insurers also need to embrace new technologies to create a compelling multichannel experience – this will strengthen consumer trust and relationships, and could make life insurance more appealing to customers.
It’s critical for both agents and insurers to accomplish this. Many people procrastinate when it comes to buying life insurance, let alone knowing what type and how much to purchase. Agents who educate, listen and develop trust with clients are the most desired by consumers.
Yes, September is Life Insurance Awareness Month – remember to spread the word!