Life insurance coverage in the US
has reached its lowest level in five decades with almost half of
Americans with annual household incomes of between $50,000 and
$250,000 having no cover, according to Genworth Financial.
Almost as disturbing, points out
the life insurer, those with insurance have only enough to cover
3.6 years of income, potentially leaving their families
significantly underinsured.
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To address the problem, Genworth
teamed up with Gregory Fairchild, associate professor at the
University of Virginia, Darden School of Business in a research
project dubbed LifeJacket, aimed at assisting financial advisers so
they close the insurance coverage gap.
Results of the research project
were released in September in a study entitled
Genworth LifeJacket Study, 7 Key Insights to Help Close the
Coverage Gap.
Senior vice-president of life and
annuities at Genworth Anthony Vossenberg said: “The [life] industry
has done an excellent job of offering products that meet the
consumer needs.
“We now have the deep insight
needed to bridge the coverage gap and bring consumers to the table,
creating a more effective way of doing business.”
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By GlobalDataAs a strong starting point in the
drive to increase life coverage, the study reveals that 40% of
consumers do not believe they have enough life insurance to meet
their family’s long-term needs.
In addition, the study found that
Americans have a desire to work closely with an agent or adviser to
understand the role of life insurance in securing their families’
futures.
To build on this positive
foundation, Genworth’s study emphasised that financial advisers
must change the way they approach their clients if they are to
break down the barriers that keep families from obtaining adequate
coverage.
As a start, financial advisers must
pay more attention to consumer desires. For example, the study
found that more than 60% of consumers who currently own life
insurance want to meet with their adviser at least once a year.
However, only 38% of this group
indicated that annual meetings were occurring.
The study also found that meetings
with clients need not be lengthy affairs.
“Clients want an annual life
insurance review that is fast and efficient, and those who receive
one report having a stronger relationship with, and more trust in,
their adviser,” the study noted.
Specifically, 77% of respondents to
the study indicated that they expect an annual review of an hour or
less.
A lack of attention by advisers to
clients’ changing needs is also indicated by the study which found
that of consumers who own life insurance, one-third purchased their
policies more than 10 years ago.
“A simple conversation with a
client can uncover unforeseen gaps in their coverage,” emphasised
the study.
Supporting this, the study found
that 77% of respondents felt that life insurance policies should be
reviewed throughout their lifetime, or as their needs evolve. Only
23% felt that life insurance is a one-time transaction.
Also of note is that although life
insurers are providing online tools to assist consumers in
assessing their insurance needs, more effort is required to
persuade them to start making effective use of these tools.
Specifically, 77% of consumers
polled for the study said they had never used an online insurance
needs calculator. However, when they were shown an online example
of their functionality, 88% of respondents indicated that they
would find them helpful during a life insurance transaction.
Vossenberg also pointed out that
during the study Genworth had an opportunity to assess how
insurance coverage has influenced financial conditions experienced
by families following the death of a primary wage earner.
“We gained great insight from these
discussions that we can draw into our practice,” Vossenberg
said.
“Specifically, we learned the
things beneficiaries wished they had known about prior to the death
in the family.”
Among the findings was that 94% of
beneficiaries indicated they needed additional life insurance
coverage in order to maintain their standard of living.
In addition, 43% of respondents had used life insurance income
to pay outstanding debts, even though only a third had intended to
do so, while 48% indicated that insurance benefits are used to pay
for basic living expenses, while only 32% had expected to use it
for this purpose.
