The mass affluent market represents a unique opportunity for life insurance providers due to their typical use of these products. Life insurance itself is unique among insurance products in the way it is utilized, especially regarding individual wealth. As personal wealth increases, the needs of the typical life insurance consumer tends to change. Where those on the lower end of the wealth spectrum tend to rely on life products for final expenses and income replacement, consumers in higher wealth brackets usually see them as another investment and estate planning tool.
“The unique needs of the mass affluent market presents a challenge for life insurance.”
The unique needs of affluent consumers present a challenge to life insurance providers who want to allocate marketing efforts in the most strategic way possible. With this in mind, LIMRA has authored a number of studies on the issue of the mass affluent market, with the latest focusing on their trends in financial product ownership. Overall, LIMRA found that this market presents a huge opportunity for savvy providers and advisors.
For research purposes, LIMRA separated the mass affluent market into three groups depending on their income, assets and age. The core sector of the market includes more than 5.4 million households who cumulatively hold $2.1 trillion in investable assets. The largest group is the retired mass affluent individuals, numbering almost 6.9 million households. However, given the nature of retirement, this group has just $409 billion in total assets. The emerging portion of the market is the smallest, but could present one of the best opportunities for financial professionals. Although they number just 979,000 households, they also hold around $342 billion in assets.
The mass affluent market holds particular promise for life insurance sales due to their high need for these products and their lower than average ownership. LIMRA found that while 31 percent of middle-market consumers owned both an individual and group life policy, just 15 percent of retired mass affluent members could say the same. LIMRA estimated that retired mass affluent consumers represented more than 2.6 million sales opportunities, particularly for life insurance plans geared toward estate planning purposes like inheritance and wealth transfer.
The needs gap
LIMRA has written extensively in the past about the difference between the level of coverage most people need and the amount of life insurance they actually own. According to their analysis published in LifeHealthPro, the needs gap exceeds $15 trillion for the entire U.S.
The average consumer is not alone in their need for life insurance protection. The mass affluent market has a sizeable gap of its own, by some measures larger than the norm. LIMRA estimated that 84 percent of both emerging and core mass affluent members who don’t own life insurance face a coverage gap of greater than $1,000. Only 70 percent of the uninsured middle market has the same issue.
The actual size of this gap, in dollar amounts, is also quite large for the mass affluent market. Even among the core of the mass affluents who do own a life insurance policy, the average needs gap comes out to more than $300,000. In the emerging mass affluent market without life insurance, the average needs gap sits at a staggering $574,000.
With these statistics in mind, LIMRA recommended growth-minded life insurance providers and advisors pay close attention to the needs of the mass affluent market. With the core of this sector representing around $23 billion in potential sales, there is certainly a large and growing desire for high-quality life insurance products tailored to the needs of these consumers.