Insights from a Deloitte Research survey of life insurance buyers and those without coverage

Transcription

1 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

2 Contents Executive summary 1 Current events: What do consumers think about life insurance today? 3 Past lives: Purchase and channel experiences 6 Back to the future: Purchase expectations and channel preferences 12 Conclusion: Where do life insurers go from here? 15 Appendix: Survey methodology and profile of respondents 16 Acknowledgments and contacts 18 As used in this document, Deloitte means Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP (which provides tax services), Deloitte Financial Advisory Services (FAS) and Deloitte Services LP (which includes Deloitte Research). These entities are separate subsidiaries of Deloitte LLP. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

3 Executive summary What makes life insurance buyers tick? And perhaps more importantly, why is it that so many people don t have life insurance protection? These were two of the key questions we sought to answer with a pair of online surveys over the summer of 2011 one involving consumers with life insurance, and the other querying those currently without coverage. It may surprise some people, but life insurance is anything but a mature market in the United States. A mature market is typically one in which a product is widely held, with deep penetration and little room for organic growth. That s not the case with life insurance, what with the Life Insurance and Market Research Association (LIMRA) reporting that 56% of U.S. households did not have an individual policy as of 2010 a 50-year high while 30% lacked any coverage, not even through an employer s group benefits plan, up from 22% six years earlier.* Deloitte s surveys were undertaken to provide life insurers with insights into the beliefs, motivations, influences, priorities and preferences of buyers and non-buyers alike. Specifically, we examined how respondents perceived the value of life insurance, where the coverage ranked among their other financial priorities, and their channel preferences. We also identified some of the marketing challenges life insurers face in expanding their penetration among the uninsured and underinsured. The results shed light on a number of insights that can shape a carrier s success in this underdeveloped market: Current buyers had a better appreciation for many of the financial needs life insurance can address than did those without coverage. Yet the surveys found plenty of opportunity to further educate even existing policyholders, as half or fewer of those with coverage don t associate their policy with certain common goals that can be met by life insurance products. While life insurance is not the top financial priority for most, the coverage is very prominent on the to-do list for many respondents. The survey found that a significant number of consumers intended to buy a new policy in the subsequent two years, both among those currently without insurance as well as respondents looking for additional coverage beyond what they already have. The surveys revealed 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 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. What makes life insurance buyers and non-buyers tick? Future purchase expectations Influencers Channel preferences *Source: Ownership of Individual Life Insurance Falls To 50-Year Low, LIMRA Reports (Aug. 30, 2010) newscenter/newsarchive/ ArchiveDetails.aspx?prid=145 Value proposition and financial priorities Insights sought in the June/July 2011 Deloitte survey Marketing challenges The Voice of the Life Insurance Consumer 1

4 At the same time, the surveys indicate that carriers cannot afford to wait for prospects to seek them out, as many respondents said they don t shop for life insurance on their own initiative. A generation gap was uncovered in a number of responses, including the fact that older prospects are generally harder to persuade with purchase offers, while younger consumers can be more easily influenced by such solicitations. The surveys also showed that the youngest respondents found the application and underwriting process to be much more onerous than was the case among older consumers. In this report, we ll examine the survey results and their implications from three distinct time perspectives how respondents think about life insurance today, a look at their past purchase experiences, as well as a peek ahead into how (and how much) respondents intend to buy in the near term. Financial triggers are very significant in the life insurance purchase decision (such as getting a raise, thereby easing affordability concerns), and so are familiar life events (to provide income replacement and asset protection after getting married, having children or buying a home). Yet because many respondents are either not aware of or don t understand the broader roles and benefits of permanent life insurance, they don t necessarily think of the product as a more comprehensive, longer-term financial planning solution for example, how such products can help them fund their retirement with guaranteed income, or finance college expenses for their children. The statistical results and Deloitte s qualitative analysis are based on responses from 1,071 consumers with life insurance, and a separate survey of 1,000 currently without life coverage, with respondents pre-screened to generate representative samples by age, household income, education and family status. (Additional demographic information about the survey samples is available in the study s appendix.) Although life insurance wasn t a top financial priority for many respondents, the coverage was not off the map entirely. On the contrary, 45% of non-buyer respondents included life insurance among their top-five financial priorities and 21% ranked it in their top-three. Life insurance ranked even more prominently among those who already have life insurance, with 70% putting life insurance among their top-five priorities, while 34% included it in their top-three. 2

5 Current events: What do consumers think about life insurance today? When it comes to assessing the value life insurance has to offer, respondents who already have a policy felt more strongly about what financial needs the product can help them fulfill than did those currently without coverage. Indeed, half or fewer of non-buyer respondents agreed that if something happened to them, life insurance could help pay for their family s living expenses, repay their mortgage or other debts, or help finance the college education of their children. In addition, fewer than half agreed that life insurance could help them provide funds for retirement or for financial emergencies. However, the survey indicated that even among those who have some form of life insurance, half or fewer also don t recognize many of the potential benefits of the coverage. Where does life insurance rank as a priority? The surveys found that life insurance is the top financial priority for only a small minority of respondents in either sample 10% of buyers and 4% of non-buyers. Health insurance was by far the most important financial consideration for both samples, included among the top five by 79% of buyers (including 28% who listed health coverage as their top priority) along with 76% of non-buyers (with 30% putting health insurance at the top of their list). Other financial priorities ranking higher than life insurance among respondents in both samples included home ownership, paying off student loans, paying back debts other than mortgages or student loans, and retirement savings. However, that doesn t mean life insurance was off the map entirely. On the contrary, 45% of non-buyer respondents included life insurance among their top five financial priorities and 21% ranked it in their top three. Life insurance ranked even more prominently among those who already have life insurance, with 70% putting life insurance among their top five priorities, while 34% included it in their top three. Other than health insurance, life generally ranked higher as a priority than any other insurance coverage, with the exception of auto insurance, among those without life coverage. What do respondents think life insurance can do for them? 76% 66% 65% 54% 43% 47% 48% 47% 45% 31% 43% 38% 39% 33% Help pay for my family s daily living expenses Help pay for my home mortgage and other debt Help provide for my family s long-term financial security Save for financial emergencies Increase the value of my estate Save for retirement Help pay for my children s college expenses Buyer Non-buyer Those with life insurance are more aware of the various benefits the coverage offers, but insurers could do a better job educating both current buyers as well as the uninsured about the many financial needs their products can address. *Percentages indicate those that strongly agree and agree with the mentioned statements in order of importance Totals exceed 100% because respondents could choose more than one option The Voice of the Life Insurance Consumer 3

6 Why don t non-buyer respondents have life insurance? No dependents (50%) Too young (26%) Need Dependents have other means of support (20%) Dependents provided for without life insurance (19%) Other, more important financial priorities (55%) Affordability Want coverage, but too expensive (51%) Let policy lapse, couldn t afford premium (21%) As for knowledge factors, 23% said they hadn t bought the coverage because they didn t understand the need for life insurance. In terms of trust, 25% of respondents said they did not have a policy because they don t trust life insurers, while another 25% said they haven t purchased coverage because they do not trust insurance agents. Either way, the industry has some serious trust issues to address with a significant percentage of consumers. Knowledge and trust Convenience Don t trust life insurers (25%) Don t trust life agents (25%) Don t understand the benefits of life insurance (23%) No offer to sell them a policy (33%) Employer doesn t offer life benefit (30%) Buying process too difficult (26%) Lost coverage when left job (22%) Percentages represent total of those who strongly agree/agree with these reasons. When it comes to convenience, 33% of respondents said they did not have coverage because no one had offered to sell them a policy. Thirty percent said their employer does not offer life insurance as a benefit (suggesting a major opportunity for the group, voluntary/worksite and retail life markets). Twenty-six percent found the application and underwriting process too difficult, while 22% said they had forfeited their coverage when they lost or quit their last job. What factors and individuals influence the purchase decision? The surveys found that both financial and life events can serve as key triggers in the decision to purchase life insurance. Why don t non-buyers have coverage? In analyzing the data, five key factors emerged to explain why non-buyer respondents don t currently have a life insurance policy affordability, need, knowledge, trust, and convenience. In terms of affordability, 55% percent said they didn t have life coverage because they had other, more important financial priorities (as outlined in the previous section). In addition, 51% said they would like to have coverage, but felt it was too expensive. (Indeed, 21% said they had allowed their last policy to lapse because they could not afford to pay the premium.) In terms of need, half said they didn t have life insurance because they had no dependents to protect, while 20% said either that their dependents had other means of support or had been provided for without life coverage. Twenty-six percent said they were too young to think about life insurance. In terms of financial events, half of the respondents without coverage said an increase in their income would be very (24%) or extremely (26%) influential in deciding whether to buy life insurance. Among buyers looking back at what influenced their last life insurance purchase, 32% cited an increase in income as very (19%) or extremely (13%) influential. Getting a new job that offers life insurance as a benefit was cited by over half of non-buyers as very (24%) or extremely (28%) influential in their decision to purchase coverage. About half of current buyers said getting a new job with a life benefit had been a very (26%) or extremely (23%) influential factor in their acquisition of life insurance. Coverage becoming more affordable was cited by 57% of non-buyer respondents (including 30% who said this would be extremely influential), compared to 43% of current life buyers only 18% of which cited this as extremely influential when they last purchased insurance. (Income differences between the samples likely accounts for the difference 4

7 here. While 57% of those in the uninsured sample reported household income of less than $25,000, only 12% of those respondents currently with life insurance had income that low, while nearly half reported having more than $75,000.) Looking ahead, non-buyer respondents also indicated that a number of economic considerations would be very or extremely influential in deciding whether to buy life insurance, including the need to provide for their family s long-term financial security (48%) and save for financial emergencies (48%), as well as to help pay for their family s living expenses (45%) and repay mortgage or other debts (34%). Additional considerations were to help finance retirement (41%) or college expenses for their children (33%), increase the value of their estate (24%) or help pay estate taxes (28%). As for life events, getting married or entering into a long-term relationship was cited by 43% of both samples, about equally split between being very or extremely influential in their decision whether to buy life insurance. Having children was a bigger factor for both samples, but loomed larger for current life buyers (cited by 59% as having been very or extremely influential) than for those currently without coverage (48%). Seeing their spouse or significant other losing their life insurance coverage (40% of buyers and 32% of non-buyers), buying or refinancing a home (37% of buyers and 29% of non-buyers) or starting a business (about 30 percent of both samples) were also cited as important considerations. What are the takeaways? From this series of questions, it s clear that while life insurance may not be the top financial priority for most respondents in both survey samples, the need for coverage is top of mind for a significant number, and many do appreciate the benefits offered by the product. To increase penetration among the uninsured and underinsured, life insurers likely need to make a stronger case for the full range of benefits a policy could provide to meet many financial priorities beyond offering immediate monetary support for their families if something should happen to the policyholder. For example, life insurers could better promote their product s role as a flexible and tax-sheltered savings and investment vehicle to finance a variety of goals, such as retirement and a child s college education. In addition, with affordability an important factor for respondents, better marketing to clarify the price and benefits of life insurance could overcome this hurdle among a number of cost-conscious prospects. Marketing that targets prospects when they might be most open to the idea of buying life insurance after getting married, having children, buying a home, getting a raise at work or a new job could also serve to boost sales, the survey results indicated. Looking at who would drive life insurance purchase decisions, family members were the most influential among both current buyers (38%) and non-buyers (44%). Employers were next, cited by 33% of both samples as either extremely or very influential. Friends were more influential for non-buyers (26%) than buyers (18%), while business associates were cited as influential by only 14% of those in both samples. As for the influence of insurance professionals, 25% of buyers and 20% of non-buyers cited agents, while financial planners were named by 20% of both samples. The Voice of the Life Insurance Consumer 5

8 Past lives: Purchase and channel experiences Respondents with life insurance as well as those currently without a policy but who did have coverage in the past were asked about the factors that had influenced their last purchase decision. They were also queried about their purchase experience through whatever channel they had used. Among current holders of life insurance, cost was the biggest consideration, with the vast majority of respondents (84%) having either strongly agreed (35%) or agreed (49%) that they bought a life policy because the price was affordable. Among other factors, about one-third of current buyers strongly agreed (14%) or agreed (21%) that they bought life insurance because of advice from a family member, friend or business associate. A similar percentage said that they decided to buy due to the recommendation of an insurance agent. Thirty-seven percent cited the fact that they were impressed by the brand name, reputation and/or rating of the insurance company. A quarter of the buyer respondents said that a recommendation from their employer was important (not surprising, since 44% of the sample bought coverage through their workplace, including 28% who only had group coverage). The remaining choices were far less influential, with 19% of respondents citing a recommendation from a financial planner, 18% noting an endorsement from a group or association, and 15% citing a recommendation from a bank. There were a few interesting differences in the strength of responses on these same factors among those currently without life insurance but who had purchased individual coverage in the past (representing 12% of the uninsured sample). For example, 69% of this uninsured group (versus 82% among current buyers) either strongly agreed (33%) or agreed (36%) that the fact the policy met their needs had influenced their decision to buy. And in terms of cost, only 63% (compared with 84% of current buyers) strongly agreed (35%) or agreed (28%) they had bought coverage because the premium was affordable. The uninsured group was also more influenced in their purchase decision by the recommendation of a bank (21% versus 15% for current buyers), although the influence of an insurance agent, financial planner, group or association was about the same for both samples. How satisfied are life insurance consumers with their buying experience? In learning about life insurance benefits, coverage needs, options and costs, among current buyers for whom each purchase channel was applicable, respondents were most satisfied when it came to reviewing their employee benefits information package (67%), followed by speaking with an insurance agent (59%) and reviewing information packages received from an insurance agent (58%). Among those dealing directly with an insurance company, respondents were far more satisfied with the information packages received from a carrier (56%) than they were speaking to a call center representative (41%). Which sources have contacted respondents over the past year with unsolicited offers to buy life insurance? 44% I have not A life insurance received an company unsolicited offer to buy life insurance in the past year Buyer 62% 37% Non-buyer 20% 17% 8% An insurance agent 16% 9% A bank 14% 4% My auto insurance company 12% 3% A group or association I belong to 10% 2% My homeowners insurance company 8% My employer 5% 4% 3% A financial planner While large percentages of respondents could not recall being solicited to buy life insurance in the prior year, buyers were more frequently pitched than were non-buyers from various sellers across the board, including a significant number who were cross-sold life insurance by their auto or homeowners carriers. Totals exceed 100% because respondents could choose more than one option 6

9 Satisfaction levels were also lower among those speaking with a financial planner (44%) as well as those either speaking to a bank representative or reviewing information packages received from a bank (36% each). Meanwhile, among those surveyed who are currently uninsured but who had either group or individual life insurance in the past (37% of those queried), lower satisfaction levels than the buyer sample were also registered on a number of points in the life insurance transaction. How influential were unsolicited offers to buy life insurance in the respondents purchase decision? Not at all influential Not very influential Some what influential 13% 19% 24% 24% 38% 46% For example, only about half of this sub-sample said they were either very satisfied or satisfied with reviewing their employee benefits information package, compared to 67% of current buyers. And only 45% of those speaking with an agent about life insurance were satisfied, compared to 59% among current life policyholders surveyed. Very influential Extremely influential 6% 5% 11% 14% Among current buyers, only about half of the respondents expressed satisfaction when it came to the advice they received from an insurance agent, as well as in using decision tools or worksheets provided by their insurer or employer. Satisfaction levels dropped to about 40% when it came to advice from a financial planner or for decision tools or worksheets provided over the Internet. Responses in this area among those currently uninsured but who had life insurance in the past were similar to those of current buyers. However, one difference is that among those who had dealt with banks, 46% of this sample was satisfied with the advice they had received from a bank representative, versus only 32% among those currently with life insurance. As for satisfaction with the process of applying for life insurance coverage, the largest percentage among current buyers (70%) was satisfied in filling out a paper application (compared to 57% among those filing an application electronically). The percentage of those satisfied with paper or electronic applications was lower than the overall sample among the youngest respondents. Buyer Non-buyer Of those who did receive offers to buy life insurance, large segments of both survey samples said they were not at all influential or at least not very influential in their decision whether to purchase coverage. Source: Voice of the Life Insurance Consumer Surveys, Deloitte Research, June/July 2011 Among those without life insurance but who had coverage in the past, like their current buyer counterparts this sample expressed higher satisfaction levels filling out a paper application (63%) versus one filled out electronically (44%), although satisfaction was lower on both counts among these respondents when compared with buyers. Among current buyers, 68% percent were satisfied (including 17% who were very satisfied) with the amount of personal information and medical evidence required in the application and underwriting process, including lifestyle, health and financial history, plus a doctor s exam and tests. And 64% were satisfied (including 19% who were very satisfied) with the ease of providing such information. The Voice of the Life Insurance Consumer 7

10 The satisfaction levels were lower among non-buyers who had coverage in the past when it came to providing personal information. Only 47% were satisfied when it came to the amount of information required, while 56% were satisfied in terms of how easy it was to provide such information. About two-thirds of current buyers were satisfied with the time that elapsed between submitting the application and getting an underwriting decision, as well as how the decision was communicated. Among non-buyers, far fewer (only half) were satisfied on these aspects of the process. Can life insurers bridge the generation gap? The surveys found that the younger generation tends to be less satisfied with what they perceive to be a cumbersome transaction process. Indeed, among the younger age segments for those currently with life insurance, satisfaction levels were about 10 to 12 percentage points below the sample-wide average. This indicates that life insurers might need to simplify the application process and make the entire transaction more convenient to attract younger buyers without coverage, as well as sell additional coverage to younger buyers who already have a policy. Meanwhile, in terms of evaluating options and making a decision about a life insurance purchase, satisfaction levels for the younger uninsured respondents were about 20 percentage points below the sample average, leaving plenty of room for improvement in reaching this segment. What channels did life insurance consumers prefer? The experience that a life insurance consumer had in acquiring coverage through a particular channel can be critical in determining whether the buyer would use the same channel again in a future purchase. An unsatisfactory experience may prompt the buyer to shift to another channel and perhaps a rival insurer. Among the survey sample of those currently with coverage, the workplace was a prime market for life insurers, as 32% of respondents said they had coverage automatically provided by their employer, while 19% said they bought additional insurance through their employee benefit program and 9% bought an individual policy from an agent at their place of employment. Of those who purchased coverage outside of work, the largest percentage (36%) bought an individual policy through an agent, while 22% bought directly from an insurance company. Only 10% bought a policy through a group or association to which they belonged. (The total percentage adds up to more than 100 because 38% of buyer respondents had more than one policy.) How satisfied are respondents with their insurance companies and agents on service factors?* 100% 64% 72% 60% 68% 52% 67% 56% 65% 61% 53% 56% 52% 53% Professionalism and courteousness Agent Responsiveness of my agent/company when I contact them Insurance carrier Method of unsolicited communication Quality of advice Respondents with life insurance were generally more satisfied with their agents than with their carriers on most service factors, particularly when it came to professionalism, where all respondents were satisfied with agents, compared with just 64% for insurers. * For those that selected extremely satisfied/ somewhat satisfied Accuracy of information Frequency of unsolicited communication Relevance of unsolicited communication 8

11 Looking at the uninsured sample, among the 37% of those who had life insurance in the past, the workplace was an even bigger source of sales as 43% automatically had a policy through their employer, while 20% bought additional benefits through their group plan. Far fewer from among this sample either bought coverage on their own through an agent (16%), or directly from a carrier (13%). Only 5% bought through a group or association. Of those who had looked for coverage on their own initiative, the most popular point of contact by far among current buyers was an insurance agent (48%), but far fewer among the uninsured who looked for coverage sought out an agent (27%). Only about 12% of both samples contacted an insurance company call center. Even fewer respondents (7%) of both samples sought out a financial planner to talk about life insurance. The Internet was a key information source for both samples. Thirty-two percent of current buyers and 27% of non-buyers did a general web search about life insurance, while another 21% of buyers and 16% of non-buyers had surfed specific insurer websites. In addition, 8% of buyers and 10% of non-buyers had surfed insurance agency websites. However, nearly twice as many of those currently uninsured contacted a bank (13% of non-buyers versus 7% of buyers), while slightly more non-buyers (20%) than buyers (17%) got in touch with their employer. Sixteen percent of buyers sought out advice about life insurance from a family member, friend or business associate, compared with 13% of current non-buyers. Disconnect: What marketing challenges do life insurers face? The surveys found that many respondents from both samples have not looked for life insurance on their own initiative including 46% of buyers and 66% of those currently uninsured. That indicates that life insurers cannot afford to wait for prospects to seek them out. However, the surveys also showed that many respondents had not been approached about buying life insurance recently. Indeed, of those currently uninsured, nearly two-thirds (62%) had not received an offer to buy life insurance in the past year, while among current buyers who might be underinsured, 44% had not been offered additional coverage. In addition, among current buyers who had received unsolicited offers in the prior year, only 17% said they had been extremely (6%) or very (11%) influential in helping them decide whether to buy, while nearly half (46%) said they had not been at all influential. And among those in the uninsured sample who had received an offer, only 19% said they had been extremely (5%) or very (14%) influential in helping them decide whether to buy, while 38% said they had not been at all influential. The influence of such offers differed greatly according to age. In fact, the older the respondent, the less influential such offers were among this set of respondents, and vice versa. Among current buyers over 50, 70% said such offers were not at all influential, falling to just 12% for those under 26. No one over 50 characterized such offers as extremely influential, compared to nearly one in five (17%) of those under 26. The same age-related trend was evident with the uninsured sample as well. The Voice of the Life Insurance Consumer 9

12 Among those current policyholders who had received solicitations, the most (67%) came directly from life insurance companies, with other sources trailing far behind, including agents (37%) and banks (30%). However, significant numbers of respondents also reported getting cross-selling offers from their auto insurer (26%) and home insurer (19%), as well as groups or associations (22%). Only 15% had received an unsolicited offer through their employer, and only 7% had received an offer from a financial planner. However, only 53% were either extremely or somewhat satisfied with the frequency of unsolicited communication from their agent, compared with 56% satisfaction with carriers on this point. The biggest distinction was on professionalism and courteousness, with 100% expressing satisfaction with their agent on that account, against only 65% for their insurance carriers. Among current non-buyers who had received solicitations in the prior year, the majority of offers (52%) also came from life insurers. Banks were next at 25%, followed by agents at 22%. In terms of cross-selling, far fewer among the uninsured received offers via their current property and casualty carriers only 11% had received offers from their auto insurer, and 6% from their home insurance carrier. Financial planners accounted for only 8% of unsolicited offers to this uninsured sample segment. How did respondents with coverage acquire their life insurance policy/policies? I purchased an individual policy through an agent outside of my place of employment It is paid for by my employer and came automatically with my employment I purchased an individual policy direct from an insurance company outside of my place of employment 22% 32% 36% How satisfied are current consumers with life insurers and agents? Among those respondents who have life insurance today, a majority are satisfied on most counts, led by the 65% who were extremely (33%) or somewhat satisfied (32%) with the professionalism and courtesy of their carrier. Although few were either somewhat or extremely dissatisfied, there is still room for improvement here, as from 30-to-45% of respondents were neither satisfied nor dissatisfied with carriers on a variety of service factors, including the quality of the information and advice they receive. I elected to pay for optional coverage through my employee benefits program I purchased a policy through a group or association I belong to I purchased an individual policy through an agent at my place of employment Other Buyer 6% 10% 9% 19% Among the 36% of current buyers surveyed who had bought a policy through a life insurance agent, respondent satisfaction levels with agents were somewhat higher than for the insurers writing the policy. Seventy-two percent were either extremely or somewhat satisfied with the responsiveness of their agent when contacted, compared with 60% satisfaction with insurers on responsiveness. Sixty-seven percent were extremely or somewhat satisfied with the quality of the advice they received from their agent, with similar numbers happy with the accuracy of information agents provided, compared with 56% and 61%, respectively, for satisfaction with carriers on those points. Of those respondents with life insurance, most either bought a policy from an agent or had coverage through their employer, although one in five bought directly from an insurance company. Totals exceed 100% because respondents could choose more than one option 10

13 What are the takeaways? Life insurers face a number of marketing challenges, based on the responses to these two consumer surveys. While a significant number of respondents 54% of current buyers and 34% of those currently uninsured have looked for a life insurance policy on their own initiative, a large portion of both samples have never sought out coverage on their own. This means that if they are not solicited by insurers or their agents to buy coverage (or buy more, if they already have a policy), they are effectively a lost prospect. At the same time, 62% of those without coverage and 44% of those with insurance said they had not been solicited to buy coverage recently, while those who had received solicitations didn t find the offers very influential in convincing them to buy. Thus, a fundamental failure to communicate effectively emerges that has definite consequences one-third of uninsured respondents said they don t have life insurance because no one offered to sell them a policy. Based on these samples, life insurers might consider stepping up their prospecting and marketing efforts to more effectively reach those without coverage, as well as those who already have life insurance but might be underinsured. And they also might benefit from reassessing how to make the solicitation messages they do deliver more effective in convincing prospects to buy. In other takeaways: Age makes a difference, with younger respondents more strongly influenced by unsolicited offers, and less satisfied with the transaction process. The web is becoming a major marketplace for consumers shopping for life insurance, as respondents looking for coverage on their own initiative did general web searches, while also surfing insurer and agency websites. Overall, satisfaction levels were fairly strong for those dealing with life insurers and their agents, and those who are dissatisfied appear to be few and far between. But there is room for improvement here as about one-third of respondents were on the fence, neither satisfied nor dissatisfied with their carrier or agent on a variety of factors. In conclusion, any attempt to penetrate the uninsured market or sell more coverage to current buyers who may be underinsured will likely require more focused and effective marketing through a multitude of complementary channels, particularly among younger prospects. The Voice of the Life Insurance Consumer 11

14 Back to the future: Purchase expectations and channel preferences The two surveys by Deloitte Research showed that a significant number of respondents both those currently covered and those without life policies are either looking to buy coverage sooner rather than later, or could be convinced to buy if either the price was right or they had a better understanding of whether they actually need insurance. Do current buyers want more coverage? 27% 39% Among those who already have life insurance, 18% said they probably should increase their coverage and 27% said they wish they could afford more life insurance but can t, while another 6% said they have no idea whether they have enough coverage. This suggests opportunities to sell more life insurance to current policyholders with educational marketing demonstrating the need for and affordability of additional coverage. 18% I should probably increase my coverage I wish I could afford more coverage, but can t My coverage is adequate 6% I can afford to buy more, but don t need it 5% I probably have more than I need 6% I have no idea if I have enough coverage Indeed, the results indicate there is a group of ready prospects available for insurers right now even among current policyholders. When those with insurance were asked when they might buy another policy, 11% said they expected to buy additional coverage in the next year (including 4% who said they would buy within six months), while 8% expected to buy a replacement policy within a year. Another 9% said they would buy additional coverage within one-to-two years, along with 6% who expected to buy a replacement policy in that time frame. A significant number of those with life insurance think they should get more coverage, but don t believe they can afford it. Better marketing to address affordability concerns might convince such prospects to add to their life insurance holdings. Totals exceed 100% due to rounding off Future purchase expectations: When do non-buyers expect to buy life coverage? 39% The same can be said for a segment of respondents currently without coverage. Thirteen percent of the uninsured said they expected to purchase a policy within a year, including 7% who anticipated buying within six months. Another 9% expected to buy within one to two years. 7% 6% 9% 9% 8% 24% Within the next 6 months From 6 months to 1 year 1 to 2 years Between 2 and 5 years More than 5 years I don t know when I might purchase life insurance I don t expect to ever purchase life insurance One in five currently without coverage were looking to buy life insurance within two years, while four in 10 didn t know when they might buy but could very well be open to a sale if the need for coverage and its affordability are explained. Totals exceed 100% due to rounding off 12

15 How much coverage might respondents be looking to buy? (Among those who answered that they might purchase life insurance sometime in the future) 15% Less than $50,000 Buyer 29% 23% Non-buyer 26% $50,001 to $100,000 19% 11% $100,001 to $200,000 14% 8% $200,001 to $500,000 12% 6% $500,001 to $1 million 5% 2% $1 million to $2 million 1% 1% More than $2 million I don t know Although respondents currently uninsured are likely to purchase more modest coverage levels than those already having life insurance, there are a significant number in both samples who simply don t know how much they might need, presenting another opportunity for carriers to open conversations and educate prospects. Totals exceed 100% due to rounding off How did respondents go about looking for life insurance on their own initiative? 10% 17% How much might respondents buy, and from whom? Among respondents from both samples who indicated they might be in the market for insurance, those without a policy are anticipating buying a more modest amount of coverage than those who already have the product. More than half (55%) of non-buyers expect to purchase less than $100,000 in coverage (including 29% who are looking for less than $50,000). But among those who already have coverage, 62% expect to buy more than $100,000 in life insurance, including 32% who anticipate purchasing more than $200,000. This could be because the uninsured sample had many more respondents with household income below $25,000 (57%) and far fewer of those above $75,000 (14%) when compared with the survey of current buyers (12% below $25,000 against 38% over $75,000). However, a significant number of current policyholders are in the market for lesser amounts, with 23% looking for between $50,000 and $100,000, and another 15% seeking less than $50, % 32% Ten percent of those with life policies who want more insurance, as well as 17% of those currently uninsured who are looking for coverage, said they don t know how much they expect to buy, revealing another educational opportunity for carriers and their agents. 27% 27% 21% 16% 17% 20% 16% 13% 12% 11% 11% 7% 10% 8% 8% 13% 7% 7% 6% When asked what sources and transaction options they would prefer to use if they were to purchase life insurance in the future, the most common response for both samples was to buy directly from an insurance company, cited by 35% of current buyers and 37% of non-buyers. 0% Contacted an insurance agent Did a general web search for life insurance Surfed insurance company websites Through my employer Sought advice of a family member, friend, or business associate Contacted an insurance company call center Through a group or association I belong to Surfed insurance agency websites Contacted a bank Contacted a financial planner Other Buyer Non-buyer Buyers were nearly twice as likely as non-buyers to have approached an agent for coverage, but significant numbers of both samples went online for life insurance information, giving a potential edge to those carriers that have the most user-friendly websites and mobile applications. Totals exceed 100% because respondents could choose more than one option. The Voice of the Life Insurance Consumer 13

16 How would respondents prefer to buy life insurance in the future? 37% 36% 35% 28% 28% 27% 24% 17% 21% Those currently uninsured were far more likely than those with coverage to prefer to buy through their employer (36% versus 24%) or their bank (21% versus 12%), while those with coverage are more likely to buy through an independent agent (28% versus 17%), although buying through an agent representing only one company were cited by about 28% of both samples. Buying through a financial planner was chosen by the fewest number about 10% of insured and uninsured respondents alike. Direct from an insurance company Buyer Non-buyer Through an insurance agent representing a single company Through an insurance broker representing multiple companies Through my employer 14% Through a group/ association to which I belong 12% 12% Through a bank 10% 10% Through a financial planner Those surveyed cited multiple channel preferences for their next life insurance purchase, with direct sales the most popular, drawing about one in three respondents. Those without coverage are more inclined to buy through their employer (creating opportunities for group sellers), as well as through their bank, while current policyholders are more inclined to work with an independent broker. Totals exceed 100% because respondents could choose more than one option What are the takeaways? These results appear to indicate that life insurers have a marketing opportunity to educate prospects and thereby set the stage to close new sales for the uninsured and additional sales for those already with policies. A significant number of respondents with coverage said they simply don t know if they ll buy another policy, leaving them open to suggestion. Some say they don t know if they have enough coverage now, while others who expect to buy don t know how much they ll purchase. Additional respondents would like to buy, but don t think they can afford it. Opportunistic insurers and agents who can reach these prospects and provide enough compelling information to overcome their hesitation, doubts and ignorance about their need for life insurance, the purposes it can serve beyond death benefits, and their ability to afford the investment should be able to generate more organic growth. 14

17 Conclusion: Where do life insurers go from here? Life insurers have some serious macroeconomic hurdles to overcome as they look to increase sales and bolster profitability in 2012 and beyond. The sluggish recovery of the U.S. economy has consumers thinking about a number of other financial priorities, while historically low interest rates and volatile equity markets make it difficult for sellers of permanent life insurance to guarantee returns and still make a profit. However, from these surveys it is clear that life insurance is very much on the minds of many consumers both those respondents without coverage today as well as those who already have a policy. Significant numbers of these two samples indicated they were in fact poised to buy coverage in the near term. What s holding them back? Part of the problem identified in the surveys is a failure to communicate. A significant percentage of respondents has simply not been offered coverage recently. With many respondents noting they never shop for coverage on their own initiative, not soliciting their business only exacerbates the gap between insurer and consumer. Others say they don t know if they need more insurance or if they do, they don t know how much they might need to buy. Still others say they want life insurance but cannot afford it leaving open the question as to whether these cost-conscious prospects would in fact purchase a policy if they realized what the price for coverage might actually be. In addition, even current buyers surveyed did not overwhelmingly recognize some of the critical financial needs life insurers cite to pitch their products particularly when you get past the standard purpose, which is to provide money for a family to live on should something happen to the policyholder. Additional benefits of life insurance including its use as a source of cash in retirement, as well as a way to save money for financial emergencies or help finance a child s college education scored relatively low in awareness among both buyers and non-buyers of the coverage. Regardless of the state of the economy, life insurance still fulfills a variety of financial needs but can apparently be more effectively marketed to both the uninsured and underinsured populations. An educationally-focused effort might be called for since the survey showed that many respondents even those who already have coverage might not fully appreciate the potential benefits versus the likely cost of life insurance. Such marketing could help spur greater penetration, higher market share and organic growth for carriers. A significant percentage of survey respondents are already learning more about their life insurance options by doing general web searches as well as surfing carrier and agency websites, a trend likely to accelerate as younger consumers who grew up living their social lives and conducting business online via computers, tablets and smartphones enter the market. With more consumers living their social lives and conducting business online via their computers, tablets and smartphones, reaching life insurance prospects in the virtual world is likely to become more important than ever. The web and all the devices through which people access it provide a tremendous opportunity for carriers and agents to better educate consumers about the value, cost and intricacies of life insurance, with social media a potentially prime outlet. It might take more innovative marketing and advertising, more efficient distribution, underwriting and administration to not just survive, but prosper in this challenging environment. But the fundamental benefits of life insurance remain valid, as do the financial security needs of clients which life insurance can fill. The key is for insurers to narrow the disconnect revealed in these surveys by delivering to prospects the information and services required to close the deal. Indeed, far from being a mature market, carriers have a large uninsured and underinsured population to target if the right products, marketing messages and delivery systems can be devised and implemented to bring these prospects into the fold. In some cases, all you might need to do is ask. The Voice of the Life Insurance Consumer 15

18 Appendix: Survey methodology and profile of respondents Deloitte Research contracted with an independent organization, Andrews Research, to conduct an online survey of 1,071 U.S.-based life insurance policyholders and 1,000 individuals currently without life insurance in June Of those currently with insurance, 56% only had individual coverage, 28% had coverage only through their employer, and 15% had both. Thirty-six percent had bought individual coverage through an agent, while 22% bought directly from a carrier. Sixty-two percent of those with coverage only had one policy, 29% had two, and 9% had three or more. Forty percent had a term policy, 45% had a permanent policy and 27% said they did not know what type of life insurance policy they had. For those who knew they had a permanent policy, 68% had a whole life policy, 12% had a universal life policy, 5% had a surviorship life policy, 4% had a variable life policy and 11% did not know what kind of permanent policy they had. For those with life insurance, 33% had coverage for more than 20 years, 20% had it between 10- and 20 years, 18% between five- and 10 years, 15% between two- and five years, 8% between one- and two years, and 6% less than one year. In terms of how much coverage life policyholder respondents had purchased, 24% reported less than $50,000, while 17% each had between $50,001 and $100,000, $100,001 and $200,000, and $200,001 and $500,000. About 9% had between $500,001 and $1 million, 6% had over $1 million, and 10% did not know how much life insurance they owned. The core demographic segments identified for the surveys were age, education, family status and household income. A minimum of 200 completed surveys were obtained for each of the sub-categories within these core four segments. The surveys also captured a set of non-core demographics, which did not have a pre-specified minimum quota, including gender, ethnicity and type of community. In terms of age, for the current life Insurance buyer survey, the largest percentage (32%) of respondents came from the segment. For the uninsured survey, the largest respondent group was (28%), which was the smallest percentage for the buyer survey (14%). Among the uninsured, the smallest age group (4%) were those over 65. Age Education % 17% Post-graduate 9% 20% % 21% % 32% Four-year college 20% 34% % 22% % 28% Less than four-year college 46% 72% Buyer Non-buyer Buyer Non-buyer 16

19 On education, 72% of the uninsured had less than a 4-year college degree, versus 46% among the buyer sample. As for family status, 63% of the life buyer respondents were either married or in a committed relationship, compared to only 33% for those without life insurance. Among buyers, 28% were single, compared to 59% among the uninsured respondents. Fifty-six percent of buyer respondents were without children or other dependents, compared to 70% for non-buyers. With household income, nearly one-third among the buyer sample made less than $50,000, including 12% who made below $25,000. Eighteen percent made between $50,001 and $75,000, 27% between $75,001 and $125,000, 17% between $125,001 and $250,000, and 4% over $250,000. Income was lower among the non-buyer survey respondents, with 57% in households making less than $25,000 and only 14% making over $75,000. The gender split for both surveys was reasonably even for the life insurance buyer survey with 47% male and 53% female respondents, but more skewed towards women among the uninsured with only 35% male respondents. On race, whites made up the vast majority of both survey respondents, accounting for 81% in the life buyer survey and 69% among non-life buyers. The next biggest ethnicity was among Black or African-American at 8% for the life buyer survey and 14% for non-buyers. In terms of type of community, for the life buyer survey half of the respondents lived in the suburbs, with a quarter each in either urban or rural areas. In the non-buyer survey, 40% of the respondents each lived in either an urban or suburban setting, with the remaining 20% living in rural areas. The margin of error for both surveys is + / 3% at the 95% confidence level. Household Income Family Status Over $250K 4% 2% Single 28% 59% $125K-$250K $75K-125K $50K-$75K 4% 8% 10% 17% 18% 27% Married/Committed Widowed/Separated 9% 8% 33% 63% $25K-$50K 23% 20% No dependents 56% 70% Below $25K 12% 57% Dependents 30% 44% Buyer Non-buyer Buyer Non-buyer The Voice of the Life Insurance Consumer 17

20 Acknowledgments and contacts Executive Sponsor Rebecca C. Amoroso Vice Chairman U.S. Insurance Leader Deloitte LLP Author Sam Friedman Insurance Leader, Deloitte Research Deloitte Services LP Sam Friedman joined Deloitte Research in October 2010 after 29 years at National Underwriter, where he served as Editor In Chief of the company s flagship property and casualty insurance weekly newsmagazine and daily online news service, while also supervising four monthly publications and websites covering the industry s distribution, claims and technology sectors. In addition, he shared his views about the business in an award-winning blog and magazine column, A View From The Press Box. Today he continues to write columns on industry trends twice monthly for National Underwriter and once a month for Claims Management magazine, while also serving as a charter member of The Blog Squad for Deloitte s insurance practice. Co-Authors Aditya Udai Singh Senior Analyst, Deloitte Research Deloitte Services LP aditysingh@deloitte.com Vasu Krishnamurthy Senior Manager Deloitte Consulting LLP vakrishnamurthy@deloitte.com 18