Consultants' Corner

Breaching the Life Insurance Sales Gap

Howard Mills
Insurance Experts' Forum, May 7, 2012

The life insurance industry has a problem. Two recent studies have found that the industry needs to do a better job of communicating the need for and the cost of life insurance.

According to the 2012 Insurance Barometer Study, released in late April by the LIME Foundation and LIMRA, consumers on average believe life insurance costs three times as much as it actually does. For young people, the disparity between expectation and reality is even greater. Young people think insurance will cost seven times as much as it actually does, the study found.

Considering the study also found that 83 percent of people cite a belief that life insurance is too expensive as a reason not to buy, I see this as what my old professor used to call a teachable moment for the industry.

There is truly a bad news/good news dichotomy here. On the one hand, it says that for whatever reason, current insurance marketing just isn’t working as well as it could. On the other hand, it also says that in a slow-growth economic period where organic growth may be hard to come by, life insurers have an opening here to make some inroads.

People aren’t foregoing life insurance because they feel they don’t need it. The 2012 Insurance Barometer Study found that one-third of women, 36 percent of people age 25 to 44, 42 percent of African-Americans and 37 percent of Hispanics think they need more life insurance.

My colleague and longtime industry observer Sam Friedman recently led a study with his team at Deloitte Research that touched on similar topics. In his recently-published "The Voice of the Life Insurance Consumer: What makes prospects tick?" Insights from a Deloitte Research survey of life insurance buyers and those without coverage, Sam found that 51 percent of non-buyers of life insurance said they had not bought life insurance because it was too expensive.

Again, this points to a disconnect between companies’ marketing efforts and how those efforts are received by consumers. But people didn’t buy only because they thought it was too expensive or they had higher priorities. Many just weren’t asked, and some of those who were didn’t trust the person asking.

Friedman’s research indicated there was “a fundamental failure to communicate, as many of those who are currently uninsured noted that a prime reason they don’t have coverage is no one has asked them to buy it. Even those with insurance who are open to buying additional coverage often say they have not received offers from carriers. Meanwhile, most of those who have in fact received insurer solicitations to buy a policy said they were not influential in their purchase decision.”

Life insurers need to focus on narrowing the disconnect between insurers and insured. Much can be done with the help of technology, including the use of analytics to better target existing and potential customers when they most need, and are most likely to buy, life insurance. But it’s hard to escape the feeling that many life insurers still need to do more to figure out how to reach a society that is more familiar with social media than social clubs, more multicultural, more different from the industry’s traditional customers—or workers—than ever before.

The reward could be significant. Sam’s research found that one in five of those who now have no life insurance coverage plan to buy within two years, while 27 percent of those with coverage would like to buy more if they could afford it. That’s a market worth fighting for.

Howard Mills is Chief Advisor for the Insurance Industry Group at Deloitte LLP and a former Superintendent of the NY Insurance Department. This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

Howard Mills is a director and chief advisor of the Insurance Industry Group of Deloitte LLP and can be reached at

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