To sell more permanent coverage, stop selling death insurance
May 27, 2015 by Marlin Bollinger
Over the past decade or so, life insurance agents have sold a greater percentage of term insurance as compared to permanent coverage. We are all aware of the transition from needs analysis selling to transactional order taking. Although we look at ourselves as professionals, many independent agents will have to admit they too have fallen into this transactional mode, selling blocks of 10- and 20-year term insurance as if prepackaged in $250,000, $500,000 and $1,000,000 units.
To make such a broad generalization really isn’t fair to those advisors who do take time to provide a total needs analysis for their clients. But, as advisors, we are constantly bombarded with new and different versions of the latest permanent products. It becomes difficult for us to properly analyze and evaluate the benefits of these respective contracts, let alone recommend them to our clients.
It’s no wonder that today’s consumer doesn’t understand the permanent products we sell; nor do they understand the multiple uses of the modern permanent insurance policy. So, they just purchase our recommended term coverage.
I assume most consumers have heard that the death benefit from most life insurance contracts can be received income tax free. That hasn’t changed over the years. Other than that, a lot has changed in today’s all-in-one policies, particularly when it comes to providing benefits while the insured is still alive. We finally have a reason to call it life insurance, although many of us are still selling death insurance.
I host an ongoing group of insurance company RVPs, touting just how superior their IUL, whole life, GUL, or current assumption portfolio is compared to the competition. That’s their job and they do it well, showing us their competitive features and key marketing cells.
That’s when my staff and I buckle down to the tedious task of digging as deep into these contracts as possible to make a reasonable determination of their use and value in the marketplace. Here’s my point. Let’s stop selling death insurance and start promoting the unique benefits of life insurance. No matter how deep we dig, there are still only three components of a life insurance policy: mortality, interest, and expenses.
So, all these IUL and all other projected cash value illustrations are only that, illustrations. Everyone’s IUL look back differs from the next, although the numbers over the years are the same. Whole life cash values are guaranteed, but the dividend projections fall into the same boat as the IUL projected rates and current assumption rates.
One thing we know for sure is that the projected cash values somewhere down the road on these policies are only projections and not real. These values are going to be higher or lower, dependent upon an uncertain economic future. That’s why we are hesitant to project an income stream from these products, although many agents like to show them. If we do show an income stream, we recommend projecting at a responsible interest rate (6 percent) and projecting the income based upon the guaranteed loan rates in the contract, not creating a positive arbitrage from a variable non-guaranteed rate.
With pending regulatory legislation right around the corner, it is prudent, and consumer-oriented, to take an illustrative approach that tends to err on the conservative side of things. We’ve got an incredible arsenal of products, designed to solve the human asset and future financial risks for our clients. These unique products with living benefits are truly deserving of being called life insurance. No other profession has the opportunity to positively affect the lives of millions of Americans.
Today’s permanent life insurance products are the most flexible, consumer-centric contracts we have ever offered.
So, now we need to beg the question: Why do less American families (percentage-wise) own permanent life insurance than in previous decades? Here’s what we know. Less than half of middle market consumers, ages 25 to 64, have individual life insurance coverage. Forty-four percent of those without life coverage say they need it.1
Many consumers struggle with different elements of the decision process when shopping for life insurance. Forty-four percent of consumers are most concerned with determining whether they are getting their money’s worth. They also find understanding the policy details and knowing how much coverage to buy challenging. A large portion of people procrastinate when it comes to shopping for life insurance, not knowing what kind of life insurance they should buy or, as we stated, how much coverage they need. Only about one-third of adults have someone they consider their agent or financial advisor who could help them determine what they need. Research shows an advisor’s ability to educate, listen, and develop trust are the qualities most desired by consumers.1
In order to increase our permanent life sales, we must be prepared to engage the millions of potential clients waiting for someone to answer the questions posed above. Before we embark on this campaign, we must feel confident that we fully understand how our contemporary portfolio of permanent products can solve the issues our clients face in each phase of their lives.
I am sometimes shocked and surprised that many agents do not understand the structure of the permanent products we market. For example, Agent Smith has never sold a whole life policy and does not understand the difference between participating and non-participating contracts, never mind all the dividend options of a participating contract. He is somewhat foggy when it comes to shadow accounts and index crediting. From this example, you can see why Agent Smith may be a bit hesitant to discuss the virtues of permanent coverage with his clients.
Even those of us who think we understand the myriad of permanent products in the marketplace can use a refresher on how to position and sell the most current permanent products.
Most IMOs offer ongoing product training and consultation to bring you up to speed on the latest and greatest they have to offer.
Together, we can embark on a campaign to expose potential clients to the products and services they truly deserve from the life insurance industry. Good luck and good selling.
1LIMRA Life Insurance Consumer Studies 2014