Consider this: What did your television look like 10 years ago? What kind of phone did you have? Have you bought a new computer or updated your software in the past decade? As technology advances, products improve and consumers tend to keep pace with the ever-evolving array of options available to meet their needs. Today, flat screen televisions are standard in many homes, offices and schools.
Walk into just about any coffee shop and take a look around at the number of customers using smart phones, laptops or tablets. Though we may not take the time to stop and notice, our entire way of life has changed, so that a coffee shop is no longer just a coffee shop-it is a virtual office, a virtual living room, a virtual library-it’s the gears of America churning right before our very eyes, while we order a latte.
Now think about the bigger picture: How has the world around us changed?
According to one website’s online content, just a little more than a decade ago, “in 2001, [Americans] had runaway wealth, with house values expanding and 401(k)s growing-and we felt justified not saving as much. We were in an optimistic place and spending, plus we were happy.”1
Then, suddenly, the United States was reeling from the attacks of September 11th. America was waging a “War on Terrorism” in the Middle East, and we watched as housing and debt bubbles burst into economic turmoil. In 2008, America saw the worst economic downturn in more than 80 years-culminating in a recession that touched the lives of many Americans: rich and poor, young and old.2
Suffice it to say, a lot has happened over the past decade.
In the “Goldman Sachs Mid-Year [2012] Global Economic Outlook,” the company’s Chief Economist Jan Hatzius said the future “presents quite a mixed picture. [We expect] still very slow growth in the United States, and probably ongoing recession in the European periphery.”3
Even now, after the “great recession” has ended, economists still tread cautiously forward with outlooks of slow but steady growth.4 We can’t help but keep our eyes focused on the present and our hearts hopeful for economic recovery in the future.
Talking about the future is second nature to those of us in the financial industry-particularly in the life insurance sector. The discourse of an entire business is shaped by the concept of what lies ahead, protecting the uncertain future. This is why when people go to compare life insurance from different providers, a whole range of factors and prices could be included within the policy because life is just that… uncertain.
Every day we talk to clients about their future financial goals for their families, for their businesses and for retirement planning. Yet how often are we checking the rearview mirror? How often are we going back to the past and examining the things that have changed around us, in order to properly plan for the future?
While there’s no question that planning for the future is crucial, occasionally we also need to stop and examine what has changed over the past few years-from personal life events to more external influences like the economy, technology and changes in business. This is the primary idea behind the life insurance policy review concept-it’s not a revolutionary theory. Nearly all life insurance companies have a life insurance review policy, especially if a customer has a change in circumstances. This allows consumers to not only see the change in their policy but also allows them to compare life insurance policies with other companies. You can click here to learn more.
Nevertheless, for some reason, many insurance agents are not putting this policy review concept into practice regularly enough. According to LIMRA research, 44 percent of insured households want someone to contact them to review their life insurance policies at least every five years-and almost one third want a review every two years.5
Imagine 10 years ago someone showing you a product from 2012 (e.g., like a 60″ flat screen television that can also make video calls, surf the Internet and play 3-D movies) and then asking you to understand how it works or how much it costs. Keep in mind that 10 years ago, the most popular selling phone was the Nokia 6610-one of the first cell phones with Internet access and a whopping 1.5″ color screen.6
Without knowing much about a product or its capabilities, an average consumer has difficulty estimating its value. So it’s a reasonable assumption that your guess on the television 10 years ago wouldn’t land you a winning spot next on The Price Is Right.
Life insurance, like any other product, changes over time. With the economy in a slow state of recovery and consumers still tightening their belts, it’s important that insurance agents educate clients on the many affordable options available today.
According to LIMRA, consumers over-estimate the cost of life insurance by as much as threefold.7 In fact, more than 80 percent of consumers over-estimate the cost of life insurance, across all demographic groups,8 which shows a significant communication gap happening between the insurance industry and consumers. Not only can this result in a consumer’s lack of knowledge and misunderstanding about life insurance costs, but also a subsequent drop in sales for the insurance agent. Life insurance costs vary depending on who you take out the policy with. For example, a company like Blue may give you a cheaper rate than another insurance company. This is why it’s important to get lots of quotes.
Without a proper life insurance policy, we lose the opportunity to educate clients and help them make informed decisions for their future-based on their current needs and products available to them today.
Recent research has shown that consumers today seek out more information on their own, with only half (51 percent) meeting face-to-face with a life insurance agent when shopping for insurance-down from 63 percent in 2003.9 Eight out of ten consumers prefer to use the Internet as their sole source of research.10
With the combination of a lack of confidence in the life insurance industry and the ability for consumers to rely on the Internet, independent insurance agents have to work harder than ever to find new ways to get in front of clients. A life insurance policy review strategy can be a great way to do that.
The highlight of this strategy for insurance agents is that they don’t have to go out and drum up new prospects, but can instead rely on their current book of clients. This should come as great news for independent insurance agents, who saw a 32 percent loss in new business with the “great recession”-a loss still estimated to take several years from which to recover.11
With the holiday season in full swing, insurance agents should make it a regular practice to set the stage for 2013 by filling their calendars with appointments in January. The odds are good that these appointments will result in sales-more than seven in ten insurance shoppers who met with sales representatives or financial advisors during the shopping process purchased life insurance as a result.12 Here are a few steps to get you started:
First, talk to clients to find out how their needs have changed since they last met with you. This could be due to life events like a marriage, divorce, birth of a child, new home purchase, change in employment or salary, or an inheritance. For clients who were originally rated as substandard, find out if they’ve made any lifestyle changes that have improved their health enough to qualify for a better rating. For business clients, it’s good to check in and see how the business is doing-has it grown or decreased in value? Have there been any changes in ownership or key employees?
Fact-finding is crucial to discover the best financial solutions for any client. In fact, research has shown that helping prospects better understand their life insurance needs improves the likelihood that they will buy (and buy larger amounts), with 73 percent of shoppers who received a needs analysis, purchasing life insurance from their agent.13
Second, take a look at the policies your clients currently have, and see if there are better options available. With life expectancy increasing, the price of insurance has gone down, thus you may be able to offer more affordable solutions to help meet your clients’ needs.
New products have become available, such as indexed universal life insurance (IUL). IUL offers death benefit protection with significant cash value growth potential and favorable policy loan rates for the consumer, making life insurance an appealing option to help supplement retirement income. Additionally, features that may not have been available 10 years ago may also be available now (e.g., living benefits, which can help address the growing concern of chronic illness and the cost of medical care).
Finally, ask for a referral. In today’s social media world, consumers are just as likely to receive insurance advice from a friend or family member as they are from a life insurance agent, with 35 percent relying on an insurance agent, closely followed by 30 percent who seek information from friends and family.14 Even consumers who currently own life insurance but need more coverage consult with people they know before making a decision with a life insurance agent.15 Consumers who have far less knowledge and access to information regarding life insurance options should seek professional advice before making a decision. With consumer trust in the life insurance industry still low, a referral from a friend or family member can speak volumes to new clients.16
In order to successfully implement a policy review practice, agents need competitive products from a financially strong carrier. With all of the drastic changes clients may have experienced over the last decade, now more than ever both insurance agents and clients want something they can count on. Look at an insurance carrier’s ratings, capital position and, perhaps most important, financial stability.
Insurance agents, like clients, may also be under-educated on various products that have gained popularity in recent years. They need training too-and not the run-of-the-mill 10-minute webinars. They should have the kind of in-depth, personalized training that can put them in command of a life insurance policy review, helping to give them the confidence needed to be successful. Look to work with insurance carriers who can provide top-notch marketing materials, for both the insurance agent and the consumer, that cover everything from product descriptions to the way policy loans work, to comprehensive kits that can help walk an agent through the policy review appointment.
A policy review practice is designed to help provide an enhanced business service for the client, which helps establish the insurance agent as a professional. In order to continually help provide clients with top-notch service and advice, it’s crucial that managing general agents partner with life insurance and annuity carriers that can help them provide this level of support and training to their insurance agents.
Between the constant change that happens day-to-day in our personal lives-our gains, our losses, our shifting goals and priorities-and the changes that surround us externally in the form of a shifting economy as well as advances in technology and medicine, there is a confluence of events. Consumers need professional advice when it comes to life insurance and financial planning, and brokers need to grow their practices and increase business.
Make it an annual year-end strategy to go back and review your clients’ policies to help seek out improvements and, ultimately, get a referral. Put a life insurance policy review practice in place now, for the future of your clients and your business.
The opinions and ideas expressed in this article are those of the individual author and not of North American Company for Life and Health Insurance. For agent use only; not to be used for consumer solicitation purposes.
Footnotes:
?1.?New, Catherine. (2011). “Then and Now: How the Economy Has Changed Since 9/11.” AOL Daily Finance. Retrieved from http://www.dailyfinance.com/2011/09/11/then-and-now-how-the-economy-has-changed-since-9-11/.
?2.?Hatzius, Jan. (2012, June). “Goldman Sachs 2012 Mid-Year Economic Outlook.” Retrieved from http://www.goldmansachs.com/our-thinking/topics/global-economic-outlook/jan-hatzius/.
?3.?Ibid.
?4.?Isidore, Chris. (2010, Sept). “Recession officially ended in June 2009.” CNNMoney. Retrieved from http://money.cnn.com/2010/09/20/news/economy/
recession_over/.
?5.?LIMRA. Household Trends in U.S. Life Insurance Ownership 2010.
?6.?Oswaks, Molly, “The Gadgets that Got Us Going Back in 2002,” Gizmodo. Retrieved from http://gizmodo.com/5935228/the-gadgets-that-got-us-going-back-in-2002.
?7.?LIMRA, “Facts from LIMRA: Life Insurance Awareness Month, September 2012.”
?8.?”2012 Insurance Barometer Study: Understanding Consumer Perceptions of Insurance” [abstract], Denley, Norah and Mitchel, Jim, LIMRA.
?9.?LIMRA, “To Shop or Not to Shop for Life Insurance: Turning Shoppers Into Buyers,” 2011.
?10.?Denley, Norah and Mitchel, Jim, op. cit.
?11.?LIMRA, U.S. Individual Life Sales Survey and Industry Estimates, 2012.
?12.?LIMRA, 2011, op. cit.
?13.?Ibid.
?14.?LIMRA, September 2012, op. cit.
?15.?Ibid.
16.?Ibid.
