As competition heats up from direct market life insurance providers, many brokers and industry observers speculate about the insurance advisor’s future in the life insurance industry.
So, are life insurance brokers on their way out? LIMRA stats suggest that we shouldn’t sound the death knell just yet because there is a strong need for life insurance brokers and face-to-face contact.
A recent study showed that 22% of Americans admitted that they needed more life insurance, but of those respondents, only 54% made purchases. Another startling stat is that only 43% of consumers received a needs analysis from their broker when purchasing life insurance. This suggests that the brokers who are meeting with clients should be and could be doing a better job.
Doing a needs analysis not only gives the client a better understanding of the amount of insurance they need, but it also increases the likelihood of a sale and increases the size of the sale. A proper needs analysis shows the client how much life insurance is actually needed and why it’s needed.
This value-added service is part of what separates a life insurance broker from direct sellers. Anybody can quote a client $250,000 of term life insurance, but is that what the client really needs?
The first step in any life insurance purchase is to determine how much coverage is really needed and what the insurance is needed for. From there, the brokers can explain the different solutions available and let the client know how the different insurance providers stack up against one another.
A good broker can also explain the underwriting process to the client and make specific recommendations. This type of value-added service is not available to individuals looking for a five-minute, quick solution.
LSM Insurance expert Tamara Humphries points out that most people spend more time planning their vacation than investigating their life insurance options — a fact supported by Forbes Magazine.
Tamara knows that a good broker is able to deliver meaningful advice in a low-pressure, concise, and understandable manner and adds that the Internet is a great place to gather information when doing your initial investigation of your life insurance options.
But before making a final purchase, it generally makes good sense to consult with a licensed broker who works with multiple carriers. This is especially true for hard-to-insure clients. People with health issues who participated in certain hazardous activities or travel to certain dangerous regions frequently should work with a broker who has experience in the hard-to-insure market and is familiar with the different underrating protocols of a wide variety of life insurance companies.
Good article, thank you for this info..
Thanks Michael. With the bank and certain insurance companies pushing their direct non face to face sales channels. The issue of face to face contact and life insurance sales will be interesting one on a go forward basis.
Good article, well written and with valid and meaningful facts. There is a “however”, however… While conscientious advisors, brokers, and agents strive to provide service to the best interest of the buyer and are happy to invest the time, effort and investment to build a long-term and mutually beneficial advisor-client relationship, some agents are not inclined that way. Rather, the latter rely on “shout marketing” based on the “mud on the wall” approach… (“throw a lot mud on the wall, and some of it will stick, at least for a while). Rather than taking the counsellor selling approach that is taken by professional advisors, those agents pitch the “no face to face”, online, initial price focused sales (especially of “term” and the so called “simplified issue” offerings). Their claim is that they “shop the market”. While some do, others pre-select individual product offerings based on commission rates, and ease of getting the paper issued and the commissions paid. Those agents are essentially “training” the public to shop for insurance online rather than face to face, and to shop by focus on initial premium.
Banks and insurers who would like to “cut out the agent/broker” stand to ultimately become the primary beneficiaries of this short-sighted approach. We can already see that in their advertising, along with removal of products from the “brokerage” market while making the products available only as “proprietary”, through online shopping and telemarketing call centers.
Likewise, there is a smaller number of so called “lead solicitors” who quote insurance pricing to the public and then sell the “sales leads” that these quotes produce to one or more agents. Another approach by the “lead solicitors” is to sell placements of agent listings rather than sell the leads themselves. Regretfully, and although “prospecting” is an integral and important phase of the life insurance sales process, current regulations don’t require that these insurance sales people be licensed or be E&O insured or be required to maintain ongoing professional education (CE). In other words, anyone with basic knowledge of database programming and some assistance from a high school student in setting up a website can participate in the life insurance sales process and derive revenue from that process without being licensed, etc.
Will the role of the individual life insurance agent/broker change? Yes, it will. There will be those who are life insurance advisors and successful at their profession. On the other hand, the sale of simple “term” insurance and the so called “simplified issue” products will continue to drift towards the “term-o-matic” (online and call center) transaction model.
Thanks Ami. You make a good point about banks and insurers who have removed products from the “brokerage” market while making the products available only as “proprietary”, through online shopping and telemarketing call centers.