I subscribe to and have written several articles for InsuranceNewsNet magazine, a trade publication that frequently has useful product information in it. When I wrote this in 2011 InsuanceNewsNet did offer useful product information. In 2019 it seems to have bent to the big money interests of the expensive life insurance options. This blog post still has relevant points about how you can save money when buying life insurance.
I was asked to comment on their feature article this month, “The Psychology Of The Life Insurance Buyer”. They had compiled data from a recent LIMRA study and wanted to know what parts I agreed and disagreed with and also wanted to know what I thought was the most important component to a successful life insurance sale.
Just for a minute I would like to put this in perspective. This is an article written by an industry leading magazine about the psychology of, as it turns out, getting you to buy more life insurance than you had planned on or intended to. This isn’t about you buying, but rather about how to sell you. It is about how a life insurance agent can take control of the process and the outcome, something that I respectfully suggest is not often a good idea. My experience is that agents who can control the process and the outcome have usually decided for themselves what your budget is. If they’re good they can leave that meeting with your budget, the amount you are comfortable spending, being nothing more than a footnote in the history of the sale.
The LIMRA study has such nuggets in it as “The figures also show that producers (agents) who recommend specific amounts of insurance to clients can sell more than 60% more coverage than whose who don’t. These are among the most startling findings in the study, “says Todd Silverhart, corporate vice president and director of markets research at LIMRA. The numbers suggest that advisors (agents) could gain a sales advantage by providing a needs analysis as well as making purchase amount recommendations, he says.”
I remember being taught this approach (needs analysis) back in the 70’s when I was a captive agent for Mutual of Omaha. I remember before I really understood what they had me doing, coming away from a sale to a family that was really very close in makeup to my own and thinking I would have never spent that much on life insurance. I knew their income and I knew how it was being spent and I knew from simple math how much they could comfortably spend on life insurance, and I had just sold them almost double that amount. And the reason they bought more than they could afford is because I did a Mutual of Omaha needs analysis that was designed to take out any good news upsides to your future. After some education I revisited this family and corrected the overkill.
There was no asset building. There were no pay increases. We filled in the blanks and did the math and I told them, (I still remember it to this day) that they needed $738,260 worth of life insurance and that 10% of that needed to be whole life. They bought it as if I knew what the heck I was talking about and that friends, is the problem with the LIMRA study. There are as many variations of needs analysis as there are companies and the one thing that I have found that most of them have in common is the idea that you will always need the insurance you buy, and that is simply not the case for 95% of people in the life insurance market.
Each company needs analysis steers the end result to what that company perceives as their strong point or their most lucrative products. It is a way, plain and simple, to get you to spend what they want on the products they want.
Another thing that came from the LIMRA study that leads me to the conclusion that most agents are in the process with their own interests having priority is the lack of followup with their clients. Again, from LIMRA “One realization concern the failure of the producers (agents) to follow up with clients. Thirty five percent of prospects who met with a sales rep thought the rep should have contacted them again, says Silverhart. They were still deciding about whether, or what to buy but the advisor never got back to them, he explains. In addition 28% complained that the sales rep did not take into account what they could afford!!” These are agents who want you to buy on the first call. No time to think. No time to consider whether they want you as their agent. No customer service.
Bottom line. This is troubling stuff. The industry I work in is for the most part made up of self serving agents whose goals put their own income over the needs of their clients.
When asked about the importance of phone interviews in my business I answered, “I work nationally and internationally so I rely on phone interviews. The phone calls are an extremely important way of building relationships with clients…By the way, when people call here, they get to talk to me.” I believe this is important because when I write a blog post that hits a hot button for a client, it doesn’t make sense for them to talk to someone other than me about it.