Friday, March 29, 2024

Marketing DI Toward Both Ends Of The Age Spectrum

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Millennials outnumber Baby Boomers in the United States by more than eight million and represent more than a quarter of the American population. We also must turn some of our attention to the Gen Z demographic who are just in recent years entering the workforce. We are now faced with an intriguing dichotomy. Our greatest sources of prospective clientele now fall upon the youth and those nearing retirement–opposite ends of the spectrum. As an industry, specifically in the life and disability insurance markets, we must cater to both of those demographics if our businesses are to prosper. But how do we focus on groupings of persons who seem to be so different, including their values, ideologies and lifestyles? As insurance purveyors, we must wear different hats at different times. We must be flexible and embrace sometimes contradictory marketing methodologies.

Baby Boomers represent the politically and socially radical past of this country, but they have over time moved into a new era in life. They have well-established family dynamics, including grown-up children and grandchildren. They have become more conservative over the years, and while many of your older clients may have embraced much of today’s incredible technologies, marketing preferences generally remain antiquated among matured audiences. They remain preferential to print advertising and get their news outside of social media platforms, and they respond better to direct-contact marketing and face-to-face sales techniques than other demographics. A Boomer is a true salesperson’s prospect. They are self-aware of their age, their limitations and their need for financial protection insurances. Their way of thinking is more analytical and deliberate but can also be very stubborn.

As Americans are living longer and working longer than ever before, millions of Boomers are continuing to hold employment well into their sixties and seventies. There is a true fear of retirement as Boomers ponder their own savings accumulations. Many have failed to sufficiently save for retirement and cannot rely on social security or other government-sponsored benefits to provide for them and their spouses as they age.

Persons of older age need to insure their incomes for as long as they can as much as their younger counterparts do. And as a workforce nears the matured end of the spectrum, disability insurance becomes imperative.

Unlike in past decades, the U.S. disability market does seem to be taking the aging of a substantial section of the workforce into account, liberalizing participation limits and age restrictions like never before. Traditional DI carriers are frequently providing monthly disability benefits to age 67 and sometimes to age 70. Some traditional disability companies are issuing new income protection policies to men and women over the age of 60 which was uncommon 10 years ago. These are great strides the industry has made to keep up with contemporary economics and current demand. But it is not enough.

Since the onset of the COVID era, the carriers offering benefits to near-retirement clients are keeping their distance from the deep end of the risk pool. Their participation limits and benefit levels remain timid for older age income earners. They also maintain strict occupation class restrictions on aged clientele, especially those with any sort of adverse health history.

Specialty DI markets like Lloyd’s of London offer more comprehensive financial planning for persons nearing retirement. Those markets have the unique ability to provide long and short-term “own occupation” disability benefits to clients in their sixties and even seventies. Plans are also flexible enough to cater to those with health concerns.

For the aging workforce of the U.S., financial planning can go hand in hand with retirement planning. Prudent advisors will coach their clients into sufficient income protection no matter where they fall on the age spectrum. Retirement planning for Baby Boomers as well as Millennials begins and ends with income protection.

Americans deeply fear outliving their money in retirement. Yet, these concerns don’t always lead to subsequent real-life accountability since most people of working age aren’t making substantial progress toward increasing personal savings. The detrimental cycle continues. We worry about having enough retirement income and savings to live out our “golden years” in comfort, but we hardly take the steps necessary to achieve sufficient capital accumulation for use later in life.

Social Security is hardly the answer. The funds are relatively miniscule to those with average to affluent lifestyles, and with many Boomers having reached historical retirement age, projections show that the outtake of benefits may soon outgrow the intake of taxes. Social Security reservoirs are dwindling. Saving must take place proactively before retirement, while a person is still a producer and an earner.

401(k), IRA and similar plans are attractive to consumers and another step in the right direction. Those with access to employer-sponsored retirement savings programs are gaining more understanding and more trust in placing higher levels of income into retirement accounts, and with more employers matching or adding contributions, these accounts have become among the strongest wealth savings vehicles available to employed Americans.

However, considering recent volatility, we can’t completely count on market performance of retirement accounts or other personal investments. More importantly, we can’t guarantee that regular payments will continue to sufficiently build those coveted retirement funds. What would your client do if he/she were to suffer an illness or injury that resulted in long-term disablement? What would eventually happen to your client’s income? Who would continue making contributions to your client’s retirement savings? If your client became disabled, eventually he/she would no longer be able to work nor receive an income. Any total debilitation would result in your client struggling to financially survive today as well as into traditional retirement years.

Disability income insurance is one of the greatest retirement planning tools. Without the protection of a comprehensive disability insurance package, clients of any age stand to lose their ability to effectively accumulate wealth and savings for use in the later years of life. Over the last several decades, life expectancy has increased in the United States, creating a greater need for proper savings safeguards like disability insurance, not only for retiring Boomers, but for those with a long career ahead.

Millennials as well as the fledgling Gen Z are a completely different breed from the Boomer generation when it comes to successful disability insurance marketing. They generally believe they are physically impervious to accidents and sickness. Furthermore, they were born with smartphones in their hands and computers at their fingertips. They are impatient and think they know everything, or at the very least they think they can do everything better than previous generations. And they are probably correct. They can certainly obtain information faster than ever before, and they are intelligent; more young Americans have college educations than ever before. But most importantly, Millennials understand how to use and leverage technology better than their forefathers which makes them adept in employing social media and other electronic resources to communicate, find their news, do their shopping and research and purchase their insurance policies. They have grown-up with social media, and they trust and rely on electronic forms of commerce and communication.

So, there is the dilemma. We are faced with completely different demographics of prospective clients, all of which are well worth the trouble of going after. Are your current marketing strategies going to afford you the opportunity of targeting both the young and those nearing retirement? You must adapt. Remain a true insurance salesperson, but do so on multiple levels, in multiple mediums to multiple audiences.

That is the reality. We must continue to diversify our marketing and sales techniques to reach all available markets. Like most other financial industries, the future of this business will inevitably be primarily focused on technology, ease, speed and efficiency of policy issuance and delivery.

Millennials and Gen Z certainly represent the present and future of the U.S. economy, and they have changed the way much of the world conducts business. To achieve success in this industry, we must embrace and indulge in the preferences of both the young and the old. These continue to be intriguing and challenging times from an advisor’s perspective, but the future holds endless opportunities if you are respectful to diverse marketplaces, are able to learn new tricks and are willing to adapt.

Positioning Life Insurance For A Multigenerational Client Base: Why The Same Song Won’t Resonate With Younger Clients

Music has the power to entertain us, unite us and move us. Music can also give brokers some interesting insights about selling to different generations. From disco to rock n’ roll to the latest TikTok, music illustrates how different messages and delivery styles appeal to different generations—an important observation for today’s brokers who interact with members of the Baby Boomer, Gen X, and Millennial generations. Understanding what each generation looks for in a purchase experience and the context of their generation can help you better understand and connect with current and future clients.

What’s Best for Baby Boomers

  • Age Range: Late Fifties to Late Seventies

Who They Are: Perhaps more than any other group, those in their late fifties to late seventies are finding that the current economic climate is shifting their financial perspectives and priorities. Baby Boomer clients whose savings have been compromised by a challenging market environment might be interested in a life insurance policy as a way to diversify their financial portfolio.

How They Think/Behave: With the average 64 to 75 year-old American 94 percent wealthier than the average 35 year-old, Baby Boomers might view life insurance as a way to pass on generational wealth. When dealing with Baby Boomer clients, it’s important to highlight that life insurance can be one of the most financially stable ways to guarantee their life’s work carries over to future generations. Generational wealth can be an inheritance but the payout of a life insurance policy can protect loved ones and their dependents from a sudden loss of income and financial recovery. A policy can also safeguard from uncertainty and bolster an inheritance as traditional assets like real estate and stocks decrease in value.

What You Can Do: In an age of dwindling assets and bank collapses, older Americans might find comfort in the time-honored expectation of purchasing a life insurance policy, especially one backed by a company with a positive reputation and a long history of financial stability. Reliability is a key component of building relationships with clients that might span generations. When speaking with Baby Boomer clients, you will often find a strong appreciation for the sense of stability and security a life insurance policy offers.

What Gen X Expects

  • Age Range: Late Forties to Early Fifties

Who They Are: Gen X is sometimes referred to as the “sandwich generation,” meaning many members find themselves in the difficult position of caring for their teenage children and aging parents at the same time. Unpaid caregivers are subject to emotional and financial stress. In addition to providing their children and aging parents with food, clothing and shelter, some might leave their jobs or pursue part-time work to care for elderly loved ones. Unsurprisingly, a 2023 study found 56 percent of family caregivers say caregiving is a financial burden. Gen Xers looking for a way to afford both college tuition and elder care might view a life insurance policy as a secure financial investment that removes some of the stress of providing in this dual capacity.

How They Think/Behave: Caring for loved ones in two very different stages of life has made members of Gen X flexible, a quality that informs their attitudes towards finances. For example, an Ameriprise survey found nine out of 10 Gen Xers anticipate a nontraditional retirement during which they remain partially engaged in the workforce for social and intellectual stimulation.

What You Can Do: You’ll want to consider this vision of retirement when advising Gen X clients on life insurance. You’ll also want to connect them with an array of policy options so they can select the one that suits their unique situation. Though they may have more financial experience than their Millennial counterparts, Gen X clients might need your help in identifying where life insurance fits into their overall plan. A survey found 42 percent of Gen Xers said the most important thing they needed financially was help creating a roadmap. Gen Xers are likely to appreciate a broker who offers a blend of traditional guidance and digitally enabled convenience as they explore policies.

What Matters to Millennials

  • Age Range: Late Twenties to Early Forties

Who They Are: Most people buy a life insurance policy after a major life event, such as marriage, the purchase of a home or the birth of a child. This makes members of the Millennial generation— who are key drivers of a recent marriage and baby boom and around the age when many purchase their first home (36)—prime candidates for a life insurance policy.

How They Think/Behave: Millennials are the first generation that sociologists refer to as digital natives, meaning they grew up using digital devices. Millennials’ comfort with the digital realm is integral to their approach to finances. Whereas their parents might schedule an in-person meeting with a broker, Millennials tend to favor personalized customer experiences that they can engage with directly, from wherever and whenever they want. Nearly all Millennials (98 percent) use a mobile app for banking, and Millennials are also open to alternative assets. Brokers that want to appeal to Millennial clients can connect them to a digital life insurance policy application option that cuts processing timelines to meet their elevated standard of convenience.

What You Can Do: There’s also Millennials’ comfort to consider. Millennials just embarking on their personal finance journey might be insecure about their lack of financial knowledge. A recent Haven Life survey of working men and women found 29 percent of respondents admit they have “somewhat” or “no” understanding of the life insurance benefits their company provides and nearly 20 percent admit they don’t even know if their company offers life insurance benefits or not. Younger clients with limited financial experience might appreciate the level of anonymity a digital application process provides, turning to the Internet for answers to basic questions. After all, they grew up performing research independently online. If questions do arise, they can connect with you, their trusted broker, or one of the digital provider’s knowledgeable representatives.

How Brokers Benefit
Brokers sit at the intersection of multiple generations looking to secure their financial futures and that of their family. When considering life insurance carriers, you’ll want to prioritize ones that strike a balance between traditional experiences and innovative platforms. In either case, look for providers that offer clients easy access to a streamlined application process. This level of flexibility can help you navigate relationships with clients from all walks of life.

Singing a Different Tune
Whether you’re a veteran life insurance broker who is beginning conversations with the children of your longtime clients or a relative newcomer to this career, your goal is to help members of multiple generations navigate a key element of their financial health and to bring peace of mind as they seek to protect their loved ones. Partnering with a digitally-enabled life insurance provider gives you the flexibility to meet each generation’s needs in a way that feels most comfortable, familiar and relatable to them–just like a favorite song.

How To Create Your Own Private Reserve Wealth Strategy

Business owners have long been considered by most to be the lifeblood of the American economy. They are what drive our economic growth. Successful business owners really embody three traits:

  • Business owners value the importance of protecting their assets.
  • Business owners value the importance of mitigating tax exposure and paying unnecessary taxes.
  • Business owners understand and value the importance of having access and use to liquidity and capital.

The good news is, although not every one of us may be a business owner we all have access to these principles and strategies within our own portfolio to create our own private reserves of wealth. One just so happens to be properly structured cash-value life insurance. Properly structured cash-value life insurance, when leveraged as your own private reserve strategy, can allow you the ability to make major purchases for big events in your life. It can also allow clients to have access to that cash if needed for unforeseen circumstances. Lastly, it allows clients to have access to position this as supplemental retirement income.

Now, one may ask, “What is needed for this strategy? Or is this a strategy for me?”

The first requirement is the need for life insurance. The second is that you must value the importance of financial protection. There are several benefits of owning a cash-value life insurance plan for your private reserve of wealth. The chart shows of the most common uses.

But what does it look like in action? We’re going to look at a client here by the name of Tom.

  • Tom is 35 years old.
  • He’s in great health.
  • He’s married with two young children.
  • Tom maxes out his contributions to his Roth IRA and 401(k) up to the four percent match.

Tom also understands that his 401(k) cannot be accessed until he is 59 1/2 and there could be times in his life that he may need access to capital right away. So, Tom decides to purchase a properly structured indexed universal life (IUL) policy. A properly structured indexed universal life policy allows the contributions to grow on a tax deferred basis, while allowing clients to access that cash on a tax-free basis. If a client were to pass away prematurely, the beneficiaries will have access to the death benefit tax-free.

In this example, Tom chooses to contribute $10,000 per year to his policy for 30 years. He decides to take out a $40,000 loan at the age of 45 to start a small business. After that loan, you can see that the cash value in the policy is still $68,000. Ten years later, at the age of 55, he takes out a $50,000 loan because he intends to put a downpayment on a vacation home. It is not until the age of 65 that there is enough cash value in this policy for him to now turn on his tax-free retirement income that runs to the age 100. If we now review the values at age 85, which is life expectancy, we can see the following:

  • At 85, Tom has contributed $300,000 over the life of this policy.
  • At 85, Tom has received $842,700 in tax-free income benefits.
  • At 85, Tom has a death benefit of $436,929.
    • Total Value of potential $1,279,629 tax free benefits.

There are some considerations with an indexed universal life policy. These policies are tied to an index and policy performance is important. In addition to policy performance, it is important that clients work with their trusted advisor to set realistic expectations in the form of illustrated rates and work to ensure that the policy remains on track each year by conducting annual reviews. There are an infinite number of ways to fund and structure these policies. However, it is advised to maximum fund an IUL policy, which means purchasing the minimum amount of death benefit and putting in the most amount of premiums that the policy will allow to avoid a Modified Endowment Contract (MEC).

If your clients value family protection, mitigating taxes, and having access to liquidity and capital, I encourage you to reach out to them to see if a private reserve wealth strategy is right for them so they can experience a similar success as Tom did in this example.

Joy And Pain

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Most athletes will tell you that the pain of losing is far greater than the joy of winning. Pat Riley, the legendary coach and team executive, said it even more succinctly: “There’s winning, and there’s agony.” This is a psychological concept called loss aversion that was first posited in the 1990s by Nobel Prize winning economist Daniel Kahneman and his research partner, Amos Taversky. Kahneman used to do an experiment with his students called the Coin Flip Scenario. He asks a student if he or she wants to flip a coin. If it lands on tails, then the student pays him $10. If it lands on heads, how much would he or she have to win to make it a worthwhile gamble? For most people, they would have to win at least $20 to make the bet. In short, the pain of losing $10 can only be offset by the possibility of winning an amount much greater than $10. This is because, for most of us, pain is more acute than pleasure.

This same result plays out over a wide variety of situations, including personal finance decisions. This is why diversification is so important and a core part of every good financial plan. However, even in something as seemingly straightforward as diversification, there are differences of opinion. For some diversification is finding a good potential return and layering it with a great potential return. This is the “if some is good, more is better” approach. This can work in some situations, but, if the two options are closely correlated, you’re really not protecting against the downside risk. You’re really just trying to maximize the positives and hoping to weather the storm when things don’t go your way. However, if we believe that diversification is more about risk management, then our approach should be one of mitigating negatives rather than maximizing positives. In life insurance, I would suggest that putting all of your client’s money into one type of product is closer to the former than the latter, even if you have multiple index options from which the client can choose. To truly diversify your client’s plan you need to look at more than one product. Much has been written in these pages and elsewhere of the power of indexed universal life, so for this article I’m going to talk about the benefits of looking at whole life, not as an alternative, but in conjunction with an IUL.

The First Day is the Worst Day
A whole life policy provides guaranteed cash value growth each and every year. That means that regardless of market conditions, interest rates or company decisions the client sees an increase every year. In addition to the guaranteed cash value growth, whole life also provides a non-guaranteed element—dividends. While dividends cannot be guaranteed to be paid, the impact that they have on the policy, once paid, is guaranteed. If the client elects to use dividends to purchase paid-up additions, then both the guaranteed cash value and the guaranteed death benefit of the policy increase. That means that those increases can never be taken away. In an IUL the potential for increases in cash value is potentially significant, but it is not guaranteed and can be more or less than what is illustrated. If the return is less, or potentially zero, the cash value in an IUL can also potentially decrease as cost of insurance charges are applied. For a client that is concerned about seeing her values potentially go down or even stagnate for a period of time, whole life can be a solution. If a portion of her money goes into whole life, then that portion will either grow exactly as illustrated on the guaranteed side, or if a dividend is paid, will look even better. In short, with whole life the first day is the worst day her policy will ever have. If anything changes, it changes for the better.

Guaranteed Contribution
The most important part of any financial plan is the money that goes into it. That is especially true for insurance. If the client can’t pay the premium, then the plan won’t work as promised regardless of interest rates or market performance. So what happens if your client becomes disabled and can’t afford to pay their premiums? Most IULs offer a Waiver of Monthly Deduction rider, which is valuable, but doesn’t guarantee that the premium is paid. Rather, it waives the costs that are deducted, so while the cash value won’t decrease due to cost of insurance charges, it also won’t grow as planned because the premium isn’t being paid. Again, for a client who is concerned about seeing her values stagnate in a vehicle that she planned to use for retirement income, whole life can be a solution. With the Waiver of Premium rider on whole life every dollar of the client’s premium into their base whole life policy continues to be paid. Many companies also have a Disability Benefit rider that will waive some or all of the additional premium being paid into a paid up additions rider. This means that, if a client becomes disabled, the portion of her retirement savings that she allocates to whole life continues to be contributed just as if she were paying it herself. In short, with whole life you not only guarantee the cash value growth, you also can guarantee the contribution.

The moral of this story is that our conversations should not be whole life or IUL. The choice shouldn’t be binary, especially when we consider the concept of loss aversion—the pain of losing is far greater than the joy of winning. Whole life ensures that some portion of your client’s plan is guaranteed to grow, even if the client becomes disabled. So to truly diversify your client’s plan and mitigate those negatives, we should be talking about whole life and IUL.

Seeing Through Your Clients’ Eyes

Greek Philosopher, Epictetus, mused, “What concerns me is not the way things are, but rather the way people think things are.”

My daughter Leah owns a cat. Her name is Holly. Holly looks intently at me when I am sitting with her and petting her. Those eyes!

Cats are predators that need to be able to sense movement well, and they are nocturnal, so they also need to see well in very low light. “Humans have a 20-degree range of peripheral vision on each side. Cats can see 30 degrees on each side. Their visual field overall is just bigger—they see 200 degrees compared to our 180 degrees.”1 And yet, humans have better distance vision. Cats have to be roughly 20 feet away from something in order to clearly see something we can see sharply from 100 feet away.

Cat
Photo courtesy of Leah Perry, 2023.

All mammalian eyes contain photoreceptors that convert light rays into electrical signals. These signals travel via nerve cells to the brain, where they are translated into the images we see. There are two types of photoreceptors: Rods and cones. “Rods are responsible for peripheral and night vision. They detect brightness and shades of gray. Cones are responsible for day vision and color perception.”2

Cats have a low concentration of cone receptors. “Cats can see blue and yellow colors, but not red, orange or brown.”3 Although somewhat color blind, cats’ eyes have more rods, and consequently see approximately six times better than humans in the dark. In addition, their pupils are elliptical and can open widely in dim light. Like owls, cats have a tapetum lucidum, the reflective layer of tissue that bounces light from the cornea back to the retina again for a second chance to be absorbed by the rods. The tapetum lucidum gives cats those terrifyingly glowing eyes in the dark. It is also why they can careen crazily all around the apartment or house at night.

All this weirdness is what makes me nervous when I look deeply into the eyes of my daughter’s beloved feline.

Point: Scientists have collaborated to study how cat vison compares to human eyesight in order to better understand their perspectives that lead to their behaviors.

Seeing through Your Clients’ Eyes
The human eye is a miracle of engineering. The eye has amazing wavelength sensing, in the form of color discrimination. “Photopigments are made of a protein called opsin and a molecule that’s sensitive to light. This molecule is known as 11-cis retinal. Different types of photopigments react to certain color wavelengths that they’re sensitive to, which results in your ability to perceive those colors.”4 It is estimated that humans can see about one million colors.

While all that is fascinating and useful, the human brain is not always able to conclude what it is the eyes are reporting. Much of what we perceive through our eyes is repetitive. We have seen it before. We know its relative size, textures, shapes, and colors. We know which direction it is traveling. Sometimes, however, we see something unfamiliar. Perhaps it is familiar but just out of place. That is when we must use “mental rotation.”

Mental rotation helps us recognize objects in their environment. “Mental rotation can be described as the brain moving objects in order to help understand what they are and where they belong.”5 This is a skill that happens automatically sometimes, but in other circumstances, takes hard work.

Mental rotation is required for us to virtually see things from another person’s perspective. It begins with imagining we were them. We need to form a mental image of how the world looks to another person. As we interact with other people, we are more effective when we understand how the world looks from their point of view.

Simple examples:

  • When we are reading books to children, we know how to hold the book so they can see the pages.
  • When we are presenting before an audience we know how to move, where to stand, and how loudly to project our voice because we imagine we are sitting where they are.
  • When we are sitting in rows, and everyone is asked to stand, we each make sure to tuck in our shirt or smooth our skirt, because we know what it is to sit behind other people.

Matching Vision with Client Perspective
You likely have a vision statement or mission statement. In whose voice is it told? One wealth management firm states their purpose as follows: “We are committed to helping you pursue your long-term financial goals. As specialists in retirement planning and estate conservation, we can help you answer the questions you may have about your financial future.”

Notice:

  • Number of times first person pronouns are used: Twice. (We)
  • Number of times second person pronouns are used: Five. (You, Your)

Contrast the above to this: “We make lives better by solving the financial challenges of our changing world.” The client might very well wonder, “What does this have to do with me?”

Client’s expectations change quickly. To see things the way clients do requires constantly thinking about the client experience. Seeing through the clients’ eyes starts with knowing what new and creative ways can be created in order to take great care of those clients. The client must be at the center of every single interaction and decision, and abundantly present in the vision statement.

Perception is largely a matter of expectation. If the clients’ expectations are met or exceeded, they perceive the service or product received as excellent. This, then, demands that we understand their expectations.

Business Needs and Priorities
Many independent financial professionals (IFPs) look at their clients through the eyes of their own corporate needs, or the needs of their financial services businesses. This is revealed by how success is measured. Consider these metrics:

  • Assets Under Management
  • Average Revenue Per Client
  • Net Profit Margin

It is understood that all of us are in business to make a profit. We all know that the lesson of Nature is you are either Growing, Dying, or Dead. Still, what if, instead of the usual profit and growth metrics, IFPs measured the following:

  • Percentage of recommendations that are implemented
  • Time horizon it takes for them to be implemented
  • Average gain in invested assets per client
  • Average rate of return enjoyed by clients this quarter
  • New lives insured for life Insurance
  • New lives insured for disability income
  • New lives insured for long term care
  • Number of clients who transitioned successfully into retirement
  • Number of new clients referred by existing clients

Point: How you keep score influences how you see. Your ability to see through your clients’ eyes is directly proportional to what you measure.

Be Where They Are
Many IFPs make elements of their service overly-complicated and confusing. Clients want things simple, quick, and easy. The beginning of client-centric vision is summarized in four simple words: Be where they are.

Applications:

  1. Ask yourself, “Do my clients know the sound of my voice?” Similarly, if your clients saw you at a sports event or restaurant, would they recognize you? How personally relatable are you?
  2. “If you have an audience online, be where they are. This is especially true with your website. Make sure that you visit each page, use the contact us forms, walk through the purchasing process online, etc. If you have a live messaging system, have you used it first? Outside of your website are you visible on social media? Your business will need a platform where your customers can voice their concerns, sing your praises, and where you can inform them about new things your business is doing, and capture their attention not just so they will buy from you, but so that they will feel connected to you and even share your business with others.”6
  3. Try sitting in the chairs reserved for clients. Have someone sit behind your desk or on the side of the table you usually sit on. Ask them to act like you. What do you see? What is behind you where you normally sit? Is it distracting? Where does the light come from? Is it ample? Are windows in line of sight? Can the clients look at people passing outside your office?
  4. Ask a trusted friend to stop by your offices unannounced. Request an evaluation of the following:
    • How were you greeted?
    • What was your first impression of the offices?
    • How soon were you attended to?
    • Would you describe the environment as warm?
  5. Practice reviewing documents upside down for you. When an object is placed upside down for the person opposite, it makes it harder for that person to fully comprehend it.
  6. Video yourself in a client meeting. What is your posture? How useful or distracting are your hand motions?

The truest way to see as the client sees is to try to apprehend what the client feels when working with you. This requires both empathy and imagination. The first step is to create your own sense of fresh awareness about your business practices. Knowing how you yourself feel when you are receiving advice, looking for solutions, or making a purchasing decision, how do your services compare? What do you imagine people feeling when they contrast your services with their universe of experiences?

Client Journeys
When your life intersects with a prospect’s life, your encounter is only one of dozens of interactions impacting their reality. Each person’s life is a journey. Your encounter can become nothing more than a scenic overlook, a rest stop, or a flat tire; or conversely, through the art of creating connection, a delightful destination.

The client’s journey has a clearly defined beginning and will eventually reach an end, but at present their life spans a spectrum of multiple touchpoints. One way to stand out is simply by providing a friendly experience. If you want to provide friendly service, hire friendly people. Ask the people who see you in your work life if you are someone worthy of the adjective—friendly.

Simple test: Listen for laughter in your office.

The Walt Disney Company has a common purpose that drives all of their employees: “We create happiness by providing the finest in entertainment for people of all ages, everywhere.” Happiness is a big objective, especially if you are targeting “people of all ages.”

IFPs need not aim quite so high. Rather than seeking to provide happiness to all clients, IFPs can strive to contribute the following to their clients’ journeys:

  • Replace negative or anxious feelings about their financial lives with positive direction.
  • Help clients successfully and confidently navigate the different stages of their financial lives.
  • Diminish their clients perceived snail’s crawl toward financial milestones by engendering a feeling of progress.
  • Place the client in the secure position as decision maker by providing simple options that give them a feeling of control and choice.

Summary
Sometimes to see things the way our clients see them, we need to make a mental rotation.
The artist Paul Klee once said, “The painter should not paint what he sees, but what will be seen.”

As an independent financial services professional, it can be easy to forget that you are actually serving your clients and not the other way around. IFPs work hard to build a successful clientele but sometimes forget that that is the goal. Clients get lost in the urgency to achieve profits, productivity, and prominence.

If a strong clientele is desired, the clientele needs first to be seen.

Footnotes

  1. https://www.popsci.com/article/science/see-world-through-eyes-cat/.
  2. https://www.businessinsider.com/pictures-of-how-cats-see-the-world-2013-10.
  3. https://www.popsci.com/article/science/see-world-through-eyes-cat/.
  4. https://www.healthline.com/health/tetrachromacy#causes.
  5. https://en.wikipedia.org/wiki/Mental_rotation.
  6. https://www.i7marketing.com/blog/seeing-through-the-eyes-of-your-customers.

Do You Have Retirement Income Insurance?

As I look at my life, I realize how many things I need to have insured just to live in the United States. If you currently own a house or rent from somebody, you need to have renter’s insurance or home insurance. If you drove your car to work today, then you need to have car insurance. Lastly, if you have young children and want to make sure they are taken care of financially if you pass away, then you probably have life insurance on you and your spouse. We rely on insurance carriers to provide a financial benefit if we ever need to make a claim. If we need insurance on all these parts of our lives, then why are we not putting insurance on our retirement income streams?

The foundation of our parents and grandparents’ retirement model was built on the income provided by social security and pension plans. The income stream was protected and guaranteed, while the risk was put on the employer and government to deliver on their promise. All our parents had savings accounts which portrayed the message of growing your assets and focusing on getting a good rate of return on your money. With this advice, they would potentially go out and risk all their money in the stock market. If the market crashed and they lost a significant amount of money it would not be a concern to them because most of their retirement income was coming from protected sources. These clients could afford that loss and move on.

Unfortunately, this retirement model for our generation is currently broken and completely flipped upside down. Pensions seem to be all but gone (or extremely difficult to come by) and the retirement benefits from social security have dwindled down dramatically from what previous generations received. So where is the rest of your income going to come from? The answer is you. Most of the risk now is on you–the consumer–to make sure you have enough money to last throughout retirement. Yet, this directly contradicts the message we’re all being conditioned to believe: Continue to focus on growing your assets as much as possible and get the highest rate of return on your money.​

I am here to tell you that the only way to have a successful retirement plan is to have an income plan that is guaranteed to life expectancy and will not lose any money to dips and fluctuations in the stock market. The strategy used to accomplish this goal is straightforward and used to protect and grow assets. It involves moving a portion of your money into a fixed indexed annuity (FIA) with a guaranteed lifetime income rider. An income rider is the contractual guarantee from an insurance company to pay you no matter how long you live. This strategy puts insurance on your retirement income and leverages your risk to an A-rated insurance company. It’s the same with medical insurance. Your provider is there to help take the financial burden away from you in the case of a health or medical emergency. You wouldn’t leave your health to chance, so why wouldn’t you want to have insurance on your retirement income?

The definition of an annuity is a fixed sum of money paid to someone each year, typically for the rest of their life. You may not know it, but if you are paying into social security, then you are currently participating in the biggest annuity plan in the United States. The definition and strategy changes depending on who is paying you. Social Security comes as payments directly from the government. A pension is guaranteed lifetime payments from an employer. An annuity is guaranteed lifetime payments from an insurance company.

There are so many risks that we must protect ourselves from in retirement. FIAs typically focus on addressing three main risks: Stock market volatility, longevity, and inflation. How many times did you turn on the news this last year and hear the word “volatility?” Every time that message is broadcast it typically means that your retirement account just lost money, which is going to directly affect when you retire and how much money you will receive. When you move your money into an annuity, you are taking your money out of the “investment” category and into the “indexed” category. This means that your original principal is completely protected from the negative returns you see in the stock market. So, the next time you turn on the news and see those treacherous headlines, you will have peace of mind knowing that your money is protected.

Longevity means that you are going to have a long life. It is hard to think of this as a risk because it means that you are healthy and plan to live to age 90 or above. I call longevity the risk multiplier. The longer you live, the more likely you are to see high inflation rates and more volatile markets. If you plan to have a long and healthy life, then you need an income stream that can last your lifetime. The FIA with an income rider is a contractual guarantee by an insurance carrier that those payments will last your lifetime. You can live up to 110 years old and still get payments sent to your mailbox. If you are currently married there is a 50 percent chance that one of you will live to at least 90 years of age, so it is extremely important to guarantee an income stream for the surviving spouse.

A retirement risk that I cannot ignore, especially in today’s climate, is inflation. Inflation is defined as the general increase in price and decrease in purchase value of money. This means that if your income in retirement does not increase each year, then you will not be able to afford the same goods and services that you did the day you retired. Depending on the acceleration of the price increase, this could really burn a hole through your wallet! I call this the stealth tax. There are many annuity products that have increasing income options on their income rider products. These are typically tied to market performance and as long as you do not get a zero percent return, then your income will increase.

Whenever you are planning your retirement, you always want to keep in mind your “why.” Most people’s “why” is protecting their spouse and kids to make sure they are taken care of financially in any situation. I would argue that you should be your why. Think about it. If you run out of money in retirement, who is going to take care of you? Typically we see the spouse or kids needing to pitch in their money and assets to take care of their family members who did not create or follow through with a plan that would take care of them until they actually pass. By putting a portion of your money into a fixed indexed annuity with a guaranteed lifetime income rider, you are creating an income plan that will alleviate stress in the lives of you and your family. People who have money in FIAs do not lose sleep at night over negative downturns in the market because they know that they have a check from the insurance carrier coming to their mailbox each month no matter what happens to their investments. 

Businesses Get Disabled Too!

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It is funny how people look at their insurance and how they value certain things over other things.
Take the case of a business with multiple partners. The partners will diligently work toward building the business. Sometimes this means not taking much of a paycheck and “investing” back into the company to help it grow. This is normal with a start-up, but it also has been common with many businesses who have had major financial impacts from the pandemic. Many companies have failed and many others are teetering, but surviving!
So what do these diligent partners do about protecting the business?
Well of course they buy insurance! But what kind and how much? And what are they actually protecting?
The P&C producer who works with them puts into place all the pertinent business coverages ranging from liability coverages to property insurance plans. This even includes business interruption insurance in the event of a fire, theft, vandalism, etc. (But not a death or disability!).
Next comes the benefits producer who helps the business and its employees with medical, life and perhaps some group disability.
This leaves the remaining pieces for the business insurance plans.

Buy-Sell
Every business with more than one person involved needs to formulate a plan of how to dissolve the partnerships in the event of a business dissolution, death or a disability. A death or disability cannot be planned, but is insurable. In the absence of a written plan, new, uninvited, partners could enter following one of these events. Unfortunately, what most business partners think is that of these three situations, only a death could cause this sort of problem! Very wrong!
A disability is worse to the company. There is no “finality.” A disabled owner has a different mind-set. They are no longer interested in growing the business. They are now in survival mode and need salary, benefits and maybe even part of the profits!
A buy-sell agreement forces a disabled owner to sell their ownership, but in exchange for a financial reward. In the absence of insurance, a company will be forced to come up with the funds either through company savings, a loan, or if there is not enough of either…A company sale!
A company that doesn’t have the financial protection for its buy-sell also puts every employee at risk of losing their job! Uncertainty is also a major destroyer from outside sources such as competitors who can take advantage of a “disabled” company. Suppliers also get nervous without the owner in full operation.
The Magic Castle has been a wonderful home for professional magicians for decades. Two brothers basically ran the operation. When Bill Larson passed away, it was revealed that he would personally take out a loan each year to carry the club through the “thin times” until all dues were collected and the loan would be paid off and the process would continue once again. Upon Bill’s passing, the bank no longer was willing to do this as the main principal was no longer involved with the company! It took years for the club to turn around and redevelop the business operation and repair the damage done by the passing of the main partner.

Business Overhead
A business owner or a major partner who becomes disabled also affects the stability of a company through a more immediate basis because, with the absence of a central owner, the bills must still be paid!
Even a relatively small business can have huge monthly expenses and, with no income coming in, these expenses can destroy a company within a very short time. These expenses can include, but not limited to:
Insurance
Rent/Mortgage
Utilities
Professional Memberships and licenses
Staff Salary
A law firm needs an attorney to generate the cash flow. A dentist office needs a dentist to keep the cash flow moving. Most businesses need the key person or owner to maintain the cash flow into the business.
At first bills will be paid from company savings but as time goes on, without generating new funds, bills will either be ignored or paid from the sale of the business (or the owners personal savings). As this occurs, the business will spiral into a total loss.
Every business owner has business interruption insurance built into their business coverages. Business interruption insurance says that should you not be able to open your doors Monday morning because of a fire, theft, vandalism, etc., the overhead expenses will continue to get paid. What if the reason you cannot open the door Monday morning is because you cannot open your doors?

Excess Disability
Business disability plans, like life insurance, are pennies on the dollar and protect the business and employees as much as the owners’ hard earned investments. Oftentimes sufficient amounts of business disability insurance coverages cannot be obtained from one source, which is when the need for excess coverages are used.
For example, if a buy-sell valuation indicates the need for $10,000,000 and there are two partners, it is logical that both will need $5,000,000. Getting $5,000,000 of life insurance is easy, but many disability carriers will only issue a maximum of $2-$3 million for disability insurance. The excess disability insurance markets can add a layer over the maximum issued from the base coverage to bring a company’s coverage up to sufficient amounts.
Bottom line is that in the world of disability insurance we often think of just one person involved when a disability occurs. The reality is that the disablement of the one can impact the whole business! In this case, businesses can become disabled too and need proper protection!

Silicon Valley Bank: Are Annuity Companies Next And What Does This Mean For Annuities?

What happened to Silicon Valley Bank—along with Signature Bank—that represents the two largest bank failures since the financial crisis? Silicon Valley Bank failed because of six primary reasons, among other things:

1. Deposits were drying up relative to in the past and relative to SVB’s expectations. Because SVB’s customers were largely startup companies and because the economy had been rough on those startup companies, that meant these customers needed their cash back from the bank (SVB). Furthermore, with deposit interest rates being less than other places that startups can put their money, deposits left SVB.

2. Because of the above loss in deposits, the bank needed to raise capital in order to meet reserve requirements that banks have to abide by. They did this by selling long-term bonds that were not yet at maturity. Many of these bonds were Treasury bonds that they had to sell at significant losses. These losses were because of the fact that interest rates have risen so much over the last couple of years.

3. Because of the concerns of these losses that Silicon Valley Bank was now recognizing, there was a good old-fashioned “run on the bank.” These startup companies swarmed to the bank to take out their deposits, which further exacerbated the issue.

4. The run on the bank happened because the average account balance at Silicon Valley Bank was well into the seven-figures versus the $250,000 that FDIC covers. As a matter of fact, somewhere around 90 percent of the $175 billion that the bank had in deposits was “uninsured,” meaning that those dollars were above the $250,000 threshold.

The FDIC was created back in the great depression (1933) to provide consumers with this protection and to avoid runs on the bank. However, when you have more than $250,000 at a bank, the FDIC insurance does little to keep you from “running to the bank” to get your money. Hence, in the SVB scenario, the government later rushed in to make an exception and back-stop all deposits, regardless of the size. The reason being, this was “systemically important” because of the dollar size we were looking at and the potential “contagion.” (Note: I believe that large banks having a blank check by the government will unfortunately direct the flow of capital away from smaller regional banks to those large banks. The big will get bigger. But I digress.)

5. Asset/Liability Duration mismatch: In my college banking classes, one of the most basic things we learned is that assets’ and liabilities’ duration should be matched to each other as much as possible. This is another reason that SVB failed. The liabilities—which were deposits—had a very short “duration“ relative to the assets backing them. The liabilities were not very sticky (obviously). The assets backing those liabilities were largely long-term bonds that needed to be liquidated. That in turn created significant losses, as interest rates have skyrocketed over the last year. To oversimplify, in a perfect—and impossible—world, the assets being liquidated would have been right at maturity when the deposits were fleeing, which would have avoided losses.

6. The inverted yield curve (brought on by the Fed) hasn’t helped banks either. Because banks usually borrow money short term and lend money long term, banks’ “net interest income“ has been suboptimal. (Note: Insurance companies generally borrow money long term and buy bonds that are long term. Asset duration=Liability duration.)

Are Annuity Companies Next?
I do not believe that annuity companies will follow the same path as Silicon Valley Bank (and other banks to come). There are two primary reasons for this:

1. Annuities with surrender charges and market value adjustments are significantly “stickier” to insurance companies than what bank deposits are to banks. Therefore, carriers being forced to raise capital because of “runs on insurance companies” is not likely. Even if that did happen, carriers have the ability to pass-through bond losses via market value adjustments—at least with annuities. MVAs were created for times like this and are a good thing in this type of environment because they insulate carriers from interest rate risk that pummeled SVB.

Because of the inability of consumers to easily access their annuity money, the matching of duration on assets versus liabilities is much easier for insurance companies, which helps everybody—the companies and the consumers that rely on the financial stability of the companies.

2. Insurance carriers do not practice “Fractional Reserving” that banks utilize. “Fractional Reserve Banking” is a fancy term for, “If you deposit $10 at a bank, that bank only needs one dollar on hand and can lend out or invest the other nine dollars.” Of course that example assumes a 10 percent “reserve requirement” as set by the Federal Reserve. “Fractional Reserving” is leverage.

To oversimplify, this means that the $100,000 that you see on your bank statement is backed by only $10,000 that the bank has on hand! Needless to say, this can create significant “asset sales” when the customers want their deposits back, as we saw with SVB. The banking regulators’ justification for the “Fractional Reserve System” is that the FDIC is “usually” there to back the deposits if the bank cannot. Plus, fractional reserving does create more money in an economy, which can be a good thing. Can be a bad thing too.

Insurance companies are not able to use “Fractional Reserving” but rather abide by a “Legal Reserve” system. This means that one dollar that customers have at an insurance company is backed by at least one dollar that the company can access. This might create less profit for insurance companies versus banks in good times, but it also means less drama than the banks in the bad times!

Now, a risk that insurance companies do face is: What if the bonds that the carrier purchased were bonds issued by one of these failing banks? This is indeed a risk that insurance carriers face, especially if this “crisis” gets worse. However, the reports that I have read show that the largest exposure to SVB by an insurance company was nothing of consequential size.

Contagion—in addition to direct exposure—is also a risk for insurance companies, at least if this crisis gets worse. An example of contagion might be where an insurance company is exposed to a bond that was issued by a customer of the banks that went belly-up. Or, a bond that was issued by a bank of a customer that is a customer of a bank that went belly up.

Counterparty risk can also be a concern. A “counterparty” would be one of the banks where insurance companies buy their hedges/options. If one of these banks go belly-up, the insurance companies would be left holding the bag on indexed products, or other areas in their portfolio where they have “hedged” certain risks. I don’t view counterparty risk as a huge concern at this point because insurance companies usually use the mega banks as counterparties. As mentioned, the mega-banks may actually get more “mega” as a result of what is happening.

I would not say that the current crisis that the banking industry is dealing with is a great thing for the insurance industry, but it is not necessarily a horrible thing either. Afterall, much of the money that is leaving banks is going to insurance companies, because of the ability to get higher rates on those savings. I would bet that anybody reading this article that does annuity business has had a client or two write a $100k check from their bank account to an annuity that is paying a higher rate of interest.

Additionally, because of the way the bond market works, investment grade corporate bonds’ yields have actually increased in recent days, even though the 10-year Treasury has lost 60 basis points in a short time. Hence, credit spreads have increased. These higher corporate rates help insurance companies make even better products!

Lastly, in times of turmoil, annuities do well. Annuity sales did well in the great depression, they did well during the financial crisis, and they will do well now!

Consider The Importance—Roth Conversions

The SECURE Act had a significant impact on clients’ retirement accounts and strategies. For clients whose retirement accounts feature heavily in their overall estate and legacy planning, this impact is only heightened. For many advisors, the natural response to the SECURE Act is to suggest Roth conversions for clients with sizable traditional IRAs. Let’s take a look at this approach and determine any potential pitfalls. (Note: For the purposes of this article, we will be focusing solely on non-spousal beneficiaries that do not meet the criteria to be an Eligible Designated Beneficiary or EDB.)

Secure Conversions
In light of the SECURE Act, traditional IRAs have lost a significant amount of appeal from a legacy planning perspective. Clients used to be able to factor in the stretch capabilities as a means of transferring wealth with the knowledge that inherited IRAs could continue to grow while non-spousal beneficiaries* took required minimum distributions over their lifetimes. Now, not only does the ten-year distribution requirement limit the opportunity for continued growth, but it also burdens a non-spousal beneficiary with increased taxation as they are forced to take larger distributions.

As a means of combating this, many advisors are suggesting that clients execute Roth conversions so that the transfer to non-spousal beneficiaries will be income tax free. Of course, this strategy is not without its price as a client will have to pay taxes on the conversion and therefore consume additional funds that otherwise could contribute to their legacy. For high-net-worth clients, it should also be noted that while a Roth IRA may pass free of income tax, the overall balance is still includable in calculating a taxable estate. Despite this, for some clients the Roth conversion strategy remains a viable option for dealing with the tax implications of the SECURE Act.

In Practice
However, while a Roth conversion may adequately address tax issues, it could still fall short from an estate and legacy planning perspective. Like traditional IRAs, Roths are still subject to the ten-year distribution requirement. So for clients with spendthrift, creditor, or special-needs concerns for their beneficiaries, a Roth conversion does little to help them in that arena, and Trusts that are named as a beneficiary of IRA accounts are still subject to the same SECURE Act distribution rules.

From a pure wealth transfer standpoint, the growth of assets in a Roth must also outpace the tax cost of the conversion in order to be financially worthwhile. And finally, recent proposals in Washington have mentioned changes to conversion rules, leading some to wonder what future legislation might hold for Roth conversions entirely.

Where Do We Go From Here?
To be clear, this is not an indictment of Roth conversions; for many clients a conversion will make sense and help them better achieve their goals despite the SECURE Act. It is important, however, to remember that Roth conversions are not a one-size-fits-all strategy, especially for clients with particular estate and legacy objectives or concerns. As planning professionals have had time to digest the new regulations, alternative strategies have emerged to address various client profiles.

For example, charitable clients may want to explore implementing a Charitable Remainder Trust (CRT) as beneficiary of their retirement assets to both provide for beneficiaries and accomplish their charitable goals, all while receiving a charitable deduction toward their estate. For clients wanting to maximize their wealth transfer to subsequent generations, an IRA Maximization strategy employing life insurance may provide a more favorable financial outcome than a Roth conversion, with the added possibility of addressing legacy concerns through the use of an Irrevocable Life Insurance Trust (ILIT). As is always the case, having impactful conversations with clients and, consequently, the right professionals is paramount.

Underwriters Brokerage Service and its employees do not provide legal or tax advice. The information provided in this article is for informational purposes only, and should not be relied upon as legal or tax advice. You should consult with your own tax and legal professionals.

2023 Life Insurance Industry Trends

The Latest Data, Evolving Business Models, Challenges And Opportunities

To borrow from Bob Dylan, for life insurance carriers, brokerage general agencies (BGAs), brokers and agents, The times, they are a-changin. Based on the research and findings of leading business consulting groups, research firms, industry associations and insiders, the past few years have ushered in new industry dynamics reflected in many trends already underway in 2022 and will impact the industry in 2023 and beyond. According to S&P Global Market Intelligence’s US life outlook 2023, last year the U.S. life industry experienced a 3.4 percent increase in combined individual and group life insurance premiums year over year for the first nine months of 2022. In fact, LIMRA and the National Association of Independent Life Brokerage Agencies (NAILBA) reported that BGAs and independent marketing organizations (IMOs) had increased revenues in 2022 over 2021, with 50 percent of these intermediaries reporting 2022 revenues of $5 million or more compared to 35 percent in 2021.

While LIMRA’s Corporate Vice President and Director of Insurance Product Research, Elaine Tumicki, projected 2023 life insurance sales to be “flat to down,” the year ahead is not without its opportunities for insurance professionals. Beyond those introduced through digital transformation, consumers’ awareness of the need to take greater responsibility for their financial security and not rely on government programs is growing. There are strategies that can be deployed to capture new markets, extend sales with existing customers, and leverage industry partners, resulting in increased revenue. Gaining greater insight into today’s market will help BGAs, brokers and agents position themselves for a strong 2023.

Navigating Today’s Life Insurance Landscape
Consider what has not materially changed within the life insurance industry over the past year. McKinsey & Company reports that:

  • Nominal GDP growth at a Compound Annual Growth Rate (CAGR) of four percent continues to outpace premium growth with its CAGR of two percent.
  • The industry continues to struggle to generate returns in excess of the cost of capital, as well as to revise their performance in order to lift themselves out of the bottom performance quintile where many have languished for a decade.
  • Carriers have not yet addressed their cost base from a structural standpoint such that, since 2003, their costs as a share of revenues have increased.

The industry is feeling the effects of the pandemic, not to mention rising inflation and related inflation-driven pressures on disposable income as well as rising interest rates. With that said, there are expectations that there will be a turnaround in 2023 assuming easing of inflation and interest rate pressures. In its Sigma 4/2022 World insurance inflation risk, front and centre, Swiss Re predicted global life insurance premiums to increase an estimated 1.9 percent.

The Haves and Have Nots
Currently in the U.S., an estimated 106 million Americans lack life insurance or have inadequate life insurance coverage according to LIMRA’s and Life Happens’ 2022 Insurance Barometer Study. That same study found that 68 percent of life insurance owners said they would be financially secure if their households’ primary wage earner was to suddenly pass away. This is in contrast to just 47 percent of non-life insurance owners who felt this way. LIMRA’s 2022 data shows the life individual market share breaking down as follows:

  • Brokers, broker-dealers, personal producing general agents, and registered investment advisers: 50 percent.
  • Agency building, multiline exclusive and home service agents: 39 percent.
  • Remaining 11 percent of market share going to direct response marketing efforts with no agent involvement, and financial institutions, worksite, and other channels.

Gaps in insurance are evident in two distinct markets—women and black Americans. Notably, LIMRA reports that the life insurance ownership rate for women is actually declining, having dropped 10 points to 47 percent. This is due largely to their lack of knowledge and related misconceptions (e.g., that it is too expensive) about life insurance when compared to men. LIMRA’s studies also found that 56 percent of black Americans own life insurance and that many of these individuals recognize its valuable role in protecting their families. Still 46 percent of black Americans also realize they need to purchase life insurance or buy more coverage. Like many women, a majority (75 percent according to LIMRA) of black Americans overestimate the cost of life insurance and also hold the misconception that they would not qualify for coverage. Clearly, each of these markets where insurance coverage is lacking represent opportunities for insurance professionals.

From a geographic perspective, there are some states in the nation where life insurance sales are particularly low compared to other states. According to the American Council of Life Insurers, the states/district with the lowest individual life insurance ownership include Alaska, Delaware, the District of Columbia, Hawaii, Idaho, and Maine. Those with the lowest group life insurance ownership include Alaska, Arkansas, Hawaii, Idaho, Iowa, and Maine. For insurance professionals serving these regions, there are untapped market opportunities to capture.

A survey by Forbes found that less than one in five U.S. adults is covered by both an employer-based life insurance policy and a personal life insurance policy. Approximately one in four American adults are covered only by an employer-based life insurance policy. Therefore, selling voluntary life insurance policies at the worksite presents another sales opportunity for insurance professionals.

Opportunities and Challenges
In addition to capturing untapped or underserved markets, insurance professionals have an opportunity to leverage current market trends. Chief among these are:

  • Utilizing advanced digital and online capabilities to increase productivity and improve customer engagement and service. Digitalization is also effective in capturing sales with the younger “digital native” generations who value online capabilities in their product/service providers.
  • Partnering with professionals in aligned fields (e.g., estate planning attorneys, wealth managers, financial planners, bankers, other insurance professionals) to expand one’s network.
  • Considering creating partnerships whereby life insurance products can be embedded in other product/service sales such as opening a bank account.
  • Anticipating Environmental, Social and Governance (ESG) to win over socially conscious consumers who value doing business with organizations that show a commitment to protecting the planet, social causes, and workforce diversity and inclusion.

Along with leveraging these market opportunities, insurance professionals will need to be proactive in order to mitigate ongoing challenges that include:

  • Capturing and converting sales leads not only by targeting underserved markets, but also by following best practices in sales follow-up, customer engagement and ongoing communications.
  • Overcoming consumers’ lack of financial literacy, specifically as it relates to life insurance misconceptions, by being fully transparent with them and taking the time to educate them on policy features and terms, both during in-person meetings as well as through online information and product videos.
  • Mitigating increasing cybersecurity threats by ensuring that your information technology systems and customers’ sensitive personal data are fully-protected by contracting with a third-party cybersecurity service provider that can provide cyber threat penetration testing, vulnerability assessments, remedial measures for detected threats, advanced technologies, employee education and training on best practices, review of incident response and business continuity plans, and ongoing information and monitoring for the latest threats.

Final Thoughts
While it is true that marketing life insurance today in an environment of shifting models, increasing economic pressures, the demand for digitalization, and an underlying lack of consumer understanding of life insurance and its value proposition is not for the faint-hearted, those with the inclination to evolve along with the industry are most likely to succeed.

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