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