Where do we go from here?
I WAS TOLD many years ago that life insurance is a piece of paper and a promise. In times of adversity life insurance can care for your family, pay the mortgage and send your children to college. That principle hasn’t changed, but over the recent past the industry that guarantees that promise has evolved dramatically.
For good or bad, regulatory and compliance shifts have impacted the industry to the extent that how we are allowed to assess risk has altered. The products we can offer have been restricted. Regulations continue to go ever further in imposing challenges and constraints on how we can sell our products. Consider the impact of ‘Too Big to Fail’, fiduciary obligations, and subsidiary limitations on what types of evidence we can and cannot acquire and how we may or may not use that evidence in assessing risk. Mortality does not discriminate, and predicting mortality is fact-based science, not the manifestation of a preconceived outcome.
All that is occurring while we try to adjust to an ever changing marketplace. All carriers are trying to reach the millennial market. This cohort consists of the most highly educated citizenry in history. But when it comes to insurance, they are one of the least informed cadres ever. Consider that a recent survey found millennials estimated life insurance premiums to be over six times higher than in actuality.
That market is also fraught with challenges including life events timeframe changes such as later marriages, later home ownership, later children, and postponed retirement planning. Plus, the cost of their education has left them burdened with debt that limits discretionary income.
Reaching that market requires a concentrated effort on educating them about the essential need for insurance and retirement planning and that those are not discretionary expenditures.
The techniques of selling to that market are vastly different than prior generations. This generation is use to instant gratification when making a purchase. They have different buying habits; they are tech savvy and demand personalization and mobility. They want to buy anytime, anywhere, anyway.
Fraternal carriers in particular must confront the challenge that cultural, ethnic and societal allegiances have diminished, thus impacting their ability to reach this market group. Millennials do not join the lodge; they don’t join the same organizations as their parents. Millennials tend to affiliate around shared experiences. Consider targeting ’experience affinity’ groups with products that meet the specific needs of that group. Success will also be found in this approach when peer-to-peer marketing forces begin to drive purchases. When members of an experience group have a good purchase engagement with your product, they will become a stealth marketing organization. Peers respect the recommendation of other peers.
The simple facts are;
• Experience groups may be small in size but the spectrum of these groups is enormous
• Carriers need to understand that brand name awareness is no longer the key differentiator that it was before. Experience groups will congregate to the best product and the best service regardless of brand or image.
To meet millennial demands, carrier technology and underwriting must adapt. As the Internet has changed buying patterns, automated underwriting has become a critical tool to match the new buying habits. ‘Fast Data’ such as Medical Information Bureau, motor vehicle reports and prescription histories have dramatically changed application-to-policy timelines. Electronic health records are just beginning to show additional risk assessment progress. Credit scoring as a mortality predictor is becoming more readily accepted by the industry.
With these new vehicles for evidence collection we have the ability to revisit the number and types of questions on applications. Fewer questions are viewed as less intrusive by a marketplace that is increasingly concerned about the privacy of their personal information.
Consider reviewing and eliminating questions on an application where answers can be discovered through evidence sources. If you still regard all the questions on an application as required, then at least consider the value of the answers you receive. Studies have shown that 20% of smokers deny smoking and over 25% of people understate their weight by up to 25 pounds—even when they know a paramedical exam is required.
This overall state of affairs may be viewed as a bleak outlook on the industry or as a call to action. Observe the market, and orient your plan to your goals; decide to move forward with the plan or not; and if the decision is to move forward, then act. No more ‘where do we go from here?’