Life insurance is a critical tool for anyone who wants to safeguard their family’s financial security following a death or avoid excessive taxation on money given to beneficiaries. Despite life insurance’s incredible utility, many people seem unaware of how these policies can benefit their financial situation. During the past several years, the number of people in the middle of the market who have a life insurance policy has declined. That dip is concerning, both for producers who have lost an important piece of their customer base and for the families who no longer have the safety net that life insurance coverage provides.
The dip in middle market life insurance sales has many causes, but producers do not need to view this as a lost market segment. Instead, they should approach this phenomenon as an opportunity. This market is ripe for growth, and producers simply need to discover effective ways to educate these clients about the benefits life insurance can provide.
A declining share
The falloff in middle market life insurance participation is linked to the economic downturn. Faced with an unprecedented recession, many people within the middle market avoided spending the money necessary to procure insurance policies. At the same time, producers moved their efforts upmarket, and attempted to court high net worth individuals who had more assets to protect via life insurance, according to LIMRA.
That shift in focus created an environment where a quarter of people in the middle market have no life insurance at all while around half the middle market lacks individual life insurance policies. Those statistics demonstrate a failure of education. These individuals are still worried about their loved ones’ financial well-being, but they do not see the value and peace of mind individual life insurance policies can offer.
Why people don’t purchase insurance
The nonprofit group Life Happens conducts an annual survey with LIMRA to discern why people choose to purchase insurance. The consistent refrain from people who don’t have insurance is that life insurance offerings are too expensive. These consumers believe they are better off saving the money they currently take in rather than paying into an insurance policy that will not pay off until they pass away. Producers must do everything they can to counteract this mindset.
In truth, many people in the middle market are not saving. According to LIMRA, more than half the middle market is not saving regularly. That may change in the next few years as the U.S. economic picture continues improving and wages grow, but it means the middle market is currently unprepared for an unforeseen death.
The task for producers is clear: They must find ways to explain the financial benefits offered by life insurance as opposed to halfhearted savings strategies.
Communicating the benefits
Debt is a major concern in the middle market, and these consumers are looking for a financial professional they can trust. LIMRA found the majority of these consumers are interested in speaking with a financial profession prior to making a purchasing decision. That serves as a clear indication that producers need to shift outreach efforts in ways that communicate directly to these consumers. While the majority of these individuals will start their search for insurance information online, producers should labor to make contact with these individuals as soon as possible.
When left to conduct their own research, people in this market segment are likely to balk at the price associated with life insurance coverage. By speaking with clients directly, financial professionals can assuage these fears and expand into a huge segment of the market that’s currently underserved.