Providing Solutions Instead of Predicting Rates of Return. In 2015, the insurance industry will continue to face two major challenges: low interest rates and the potential for more government regulation. While none of us have control over either of these situations, we can control the methods we use to market our products and the expectations and ultimate satisfaction our policyholders derive from them. If you’re like me, you’ve probably been in several meetings recently in which you’ve discussed the most advantageous way to illustrate products, how best to explain their rate of return to potential clients, and maybe even how to price new products in an environment of continuing low interest rates. However, while many of us may be deeply involved in trying to develop the most advantageous strategy to explain the future performance of our products, maybe we’re actually just creating more problems for ourselves when we try to follow this route to sales.
As insurance providers, our goal is to solve our clients’ problems. But in a continually low interest rate environment, if our main selling point for our products is rate of return, can we really expect to satisfy customer expectations, or are we setting ourselves and our clients up for disappointment? Imagine if you asked a group of consumers what rate of return they would be satisfied in receiving. What answer do you think you’d get? I think most people would say, “The best rate I can get.” But in today’s continuing low interest rate environment, with its accompanying low investment returns, the expectations of an insurance company and most of its customers probably aren’t the same. So if we’re selling based on a product’s rate of return, we are most likely setting ourselves and our customers up for disappointment.
What’s the solution to this dilemma? At Mutual Trust, we’ve implemented a conservative, concept-focused approach to sales. We give clients what they want and need—solutions to their problems rather than illustrations filled with unconvincing projections of future product performance. We sell our products using a sales-concept approach, and we train producers to use these concepts by offering them extensive, free online training on the concepts, as well as providing them with consumer-designed materials that explain and illustrate them. Producers can personalize these concepts with their own contact information and then email, mail or distribute them at meetings with potential clients.
As of January 2015, Mutual Trust has developed 22 Personalized Product Concepts and more are in the works. The concepts range from our Smart Money solution to how consumers can use the living benefits in their policies throughout their lives. We also have concepts on the potential benefits of a two-premium, non-MEC policy for clients and their businesses, as well as concepts on saving for college and creating a family legacy.
By using a sales concept approach rather than relying heavily on illustrations or in-depth discussions of rates of return—which are both complicated to explain to consumers and offer uncertain projections—producers who sell our products are able to concentrate on satisfying their customers’ needs and providing them with the guarantees they want. Thus producers and Mutual Trust are not making promises to people that they might not be able to keep. With a sales concept approach, producers can look like heroes because they are satisfying immediate needs rather than setting people up for disappointment by promising them returns that in all likelihood will not occur. As I’m sure we’ve all experienced in life insurance sales, when results turn out to be better than what we’ve predicted, our clients’ confidence in us and the insurance carrier increases. This confidence can lead to better persistency rates and more referrals. However, when results are less than expected, policyholders are disappointed. This can lead to lower persistency rates and no referrals.
As the financial services industry knows all too well from recent experience, when an industry like ours promises more than it delivers it can also lead to increased regulation. And this is justifiable. If a client is expecting a 6 percent rate of return because this is what he saw on the sales illustration when the policy was purchased, then he will be disappointed with a 5 percent rate of return. Yet think about the last 20 or 30 years. Over this period of time, how many sales illustrations match the current in-force illustrations? How many products produced a higher rate of return than what was predicted? Because of these inevitable discrepancies, due in large part to 30 years of continually falling interest rates, Mutual Trust has made the decision to focus on the guaranteed aspects of the products we sell. In addition, we emphasize the advantages of our products’ early cash value and the access, liquidity and control of the money our products provide clients.
As a thriving industry that cares about helping people financially, life insurers tend to be optimistic and often focus on what is possible rather than what is probable. Although this philosophy might appear to be useful for accomplishing some goals, for the last 30 years this approach hasn’t worked for life insurance sales. As we can see with many universal life products, assuming the possible rather than the probable has only led to a drop in sales, unhappy customers and stricter regulations.
At Mutual Trust, we’ve gone back to the basics—we’re selling our whole life insurance products through concepts that illustrate benefits and show solutions to the potential problems people face every day, throughout their lives. We specialize in the design and distribution of participating whole life insurance—it’s our expertise and the focus of everything we do. The real benefit of MTL products is the guarantees they offer policyowners. These guarantees reflect what will happen, rather than what is possible to happen. This is an important distinction.
Bringing the Guarantees of Whole Life to the Marketplace. According to LIMRA, during the second quarter of 2014 individual life insurance sales edged up 1 percent—due in large part to a 6 percent increase in new annualized premium of individual whole life insurance. While annualized premium for universal life and term insurance decreased, sales of whole life have grown 19 of the past 20 quarters. These statistics suggest that the public is hearing the message and whole life insurance and its guarantees are winners.
Since it first opened its doors 110 years ago, Mutual Trust Financial Group has believed strongly in the benefits and guarantees whole life insurance offers people. That’s why we’re proud to be known as “The Whole Life Company.” Today, approximately 65 percent of independent marketing organizations are not partnered with a whole life company. Our mission is to provide agencies and agents with opportunities to add whole life insurance to their portfolio of products. Consumers need and want our products. Mutual Trust is ready to help you fulfill your clients’ needs. [LC]
