Interest Groups Awareness Of The Need For Life Insurance Is Flagging, But The Industry Can Take Steps To Raise Its Profile

The best-laid plans. The best of intentions. The best minds in the business. And still, a 50-year record low for life insurance ownership in 2010, according to LIMRA.

As insurers acknowledge this September as the 8th annual Life Insurance Awareness Month, it makes sense for the industry to look for missing links inside the dilemma of the “sold, not bought” category. “Missing links” are the things insurers have not considered, the things that are supposedly untouchable, and the things they might not yet know.

What’s not been considered? The Consumer Need Pecking Order. This is about relevance in the grand scheme of the consumer’s life. In modern terms, they are “just not that into you.”

“Privately, this may be a closed-door conversation or a deep-seated fear of any life insurance executive who is not close to retiring yet. But publicly, it has not really been acknowledged as far as I know,” said one life insurance executive.

It’s always helpful to go back in time, to the late 1700s or so, and consider the characteristics of life and life insurance when it was an innovation. In that day, many things were present that are also present today, however, at varying levels of strength. For example, death of the family breadwinner was a clear and present risk. So the consequences of loss were very great because of the lack of income alternatives.

However, so was the actual risk itself. The annual death rate per thousand in 1900 was 17.2. In 2005, it is only 8.2, according to the National Center for Health Statistics. While the mortality data for the late 1700s and 1800s isn’t cited here, it was probably far greater than in 1900. Death is just not what it used to be.

By again comparing 1900 to 2005, we see similar maladies that cause death but in very different causes and orders. Influenza and pneumonia caused 202.2 deaths per 100,000 in 1900, but only 21.3 in 2005, the NCHS reported. Tuberculosis is similar.

Cancer, on the other hand, is far higher in the modern world than it was in 1900. Some may blame chemicals or the environment, but it’s also true that longer lives mean a greater time span in which cancer can develop.

How about war? More than a million Americans died in the Civil War, World War I and World War II combined, but about 100,000 died in the following 12 wars or conflicts in which the United States was involved. So while even one death is sad, emotionally tragic and a financial burden, this risk is just not top-of-mind.

Finally, how about safety in the workplace? As recently as 1970 to 2007, the number of deaths as a percentage of the size of the workforce has dropped from 18 percent to 3.8 percent, according to the AFL-CIO website. So, the risk of going to a hazardous job every day is far less than it was in the past. So what is in its place?

In today’s cushier existence, we must consider the “top-of-mind” threats as anything else that might mess up one’s immediate or long-term plans: Job loss? An unplanned pregnancy? The financial dependency of an aging parent? What else?

Overall, the fact that death is not on the consumer’s list of top concerns is a good thing. But it doesn’t mean that people don’t need life insurance. It means that “awareness” needs to take a different spin.

What have insurers assumed is untouchable? The way in which they communicate. The language of life insurance was created at a time when there was significant deference to the institution. The words and their definitions put the insurance company at the center (think about how many companies have names that start with “The”).

It’s very easy these days to get ahold of correspondence from the 1800s and early 1900s in the archives of the nation’s founding life insurance companies. Many of them are celebrating 125-, 150- and even 200-year anniversaries and will unveil these documents for the world to see and for their associates to be proud of.

What’s interesting, though, is that other than ink on parchment, and some older sentence structures, many of the terms used in the 1800s are pretty much the same today. And while in context that may be OK, the world has changed, and the meanings and connotations are now different.

Even more important than words, the emotion that insurance terminology brings about is disturbing. A study by Maddock Douglas showed that when people think about insurance, they experience more frustration, confusion, anxiety and boredom than relief, confidence and satisfaction.

Worse, the consumer believes that insurance companies, the agents and a host of other constituents benefit more from the sale of insurance products than they do, the study revealed.

But imagine the opportunity for the leaders who chose to own this and really do something about it. And what don’t they know enough about yet? The consumer.

Known Unknowns

Insurance executives who think they get enough market input from their distribution sources should think again. Distributors are extraordinarily important, but they are just one lens. The days of “skipping” the insight piece before launching a product or service are over. The days of doing a few ad hoc focus groups after already developing a product are over. The most strategic companies are doing attitudinal segmentation. The most innovative ones are doing that with specific, quantifiable insights.

What is an insight? It’s a statement that is derived from multiple data points that brings out a need or a tension in the marketplace in a way that allows for new ideas to develop easily. It looks like this:

“I [statement of fact] because [reason], but [tension].”

The meatiest piece is the “tension.” It’s the expression that comes after “but.” The bigger the “but,” the more opportunity there is in the market for the insurer that is the one to solve it. So an example of an insight around life insurance awareness might be:

“I want to have the right amount of coverage because my family’s well-being is important to me, but I am afraid I will be oversold.”

The tension is obvious. If people are feeling oversold, what should be done to fix that? Make them understand how much insurance they really need? Or is “oversold” something deeper?

Could the perception of “oversold” have to do with the fact that the amount of life insurance that would keep a family of three or four afloat sounds daunting? It’s more than anyone can conceive of if they are making an average income. Insurance places a lump sum value on a person’s life—with a few recent exceptions, policies aren’t based on the weekly or monthly pay that a person earns. While the math works either way, one must consider perception first and reality second. Math is not most people’s strong suit. If “present value” isn’t top-of-mind, the number will feel outrageous, preventing action.

Thinking more broadly about awareness, is it time to reinvent transparency? Think of transparency as a framework that forms a hierarchy of the industry’s learning.

It starts with disclosure—the things agents and brokers must say in order to present the complete truth. This is where most insurance companies are today.

The next rung is when the consumer truly understands the mechanics. These are the things insurers should do to enable assimilation so that consumers feel empowered. Some companies are beginning to recognize this opportunity and innovate around it.

The top rung is when consumers respect the system, recognize their role in making it better, and behave accordingly. This is what the industry could do to create a better result for all.

So here’s a little inspirational goal-setting for us to consider this September.

Perhaps “awareness” about insurance begins when the consumers understand how their behavior impacts the greater good. Perhaps there is even a little social peer pressure to be truthful on applications; to not sue just because they can; and most important, to take care of their health and well-being so that the pools are not tapped into as much.

It’s been done before. People used to throw trash out their car windows in the 1970s. Not anymore. They used to smoke in public until the ’80s. Not anymore. They used to throw plastic bottles and aluminum cans in the trash until the ’90s. Not anymore. When will they stop treating the insurance industry like it has an infinite pot of money and is out to rip them off? Who can lead that change? Who will create the true awareness that results in respect and participation in the system, versus just buying products?

What’s In A Word?

Because many insurance documents and definitions were written decades ago, today’s consumers may have difficulty relating to them. Here are a few of the industry’s original terms as examples, taken from a 2010 study by Maddock Douglas.

Policy. The document that describes the promise that the insurance company has made. While the consumer is OK with that word in context, the general association is “rules and procedures.” Back in the day, with the company at the center, the “policy” was the embodiment of the rules by which a sum of money would be paid to someone. Today’s younger generation sees rules as things that stand in the way of what they want. They don’t follow them; they make their own.

Agent. Again, in context, people understand. But without context, it sounds like something undercover. FBI comes to mind before insurance does for younger people. Or talent agent. But who is this really an agent of? The company, of course.

Claim. The industry uses this word only as a noun. It arose out of the idea of “claiming” that one is owed money by the insurance company. Claims are either paid or denied. A consumer-centric dialogue would use claim as a verb, as in “What do you claim are your benefits? Who do you claim to be?”

Source: Best’s Review (September 2011 Issue)

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