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Online Sales: Panacea or Pipe Dream for Life Insurers?

Organizations across all industries are leveraging direct-to-consumer (D2C) strategies. Although the financial services industry has always had a “stake in the ground” with D2C distribution, they have accelerated their efforts with more “customer-centric” D2C experiences — particularly online.

The advent of the internet as a potential sales channel has life insurance companies — as well as other organizations — encouraged by the possibilities. The greatest possibility is in reaching the sought-after, untapped markets. When asked in a 2016 survey why people in those underserved market segments don’t own life insurance, 36 percent of nonowners noted they had never been contacted by a life insurance agent. Given that consumers regularly choose the internet for their retail shopping experiences, it’s perfectly reasonable for the industry to expect that the same could be true for life insurance, providing another channel to reach consumers directly.

But will it? Will the internet prove to be a panacea or a pipe dream for life insurers? LIMRA research suggests that the truth is probably somewhere in between. But taking things online isn’t as simple as it sounds.

Something as straightforward as the messaging of a marketing initiative for purchasing life insurance online could do more harm than good. LIMRA research has shown that common industry messaging, which touts the “convenience of buying life insurance online,” does little to motivate consumers, and might even elicit negative opinions about the product. It’s not that consumers don’t value the convenience of buying online. They expect it. In fact, convenience is one of the few areas where consumers imagine online would be better than in person when buying life insurance. However, this belief doesn’t appear to be a differentiator when it comes to buying. On the other hand, the graphic shows that people who are much more likely to buy online are those who believe online is better for their ability to learn about the product and options. The same is true for:

» The level of customer service they would receive.

» Their understanding of what they have bought.

» Getting the right type of coverage for their needs.

LIMRA recently set out to improve upon the standard convenience message or find an alternative online message that does a better job of motivating consumers to buy. Among other selling points, our approach included test messages that touted the attributes noted in the graphic. In the end, we were hard-pressed to find a winning message. No test message did a better job of motivating people to buy. Instead, it became clear that who the consumers are and how they feel about life insurance and the internet are more important than what we say to them about the benefits of buying online.

It appears that the people who are most receptive to buying online are those who will buy life insurance anyway. LIMRA calls these consumers “online enthusiasts.” They make up 11 percent of the consumer base. In addition, they are primed for the life insurance purchase and they prefer buying online to buying in person. They are comfortable with life insurance products. Two-thirds of this group is male. This group’s median age is 34, and they are more likely to be wealthy, college-educated, employed full time, and have a financial professional. In essence, they are consumers whose attention the industry already has. Even for online enthusiasts, how they buy (online or in person) is an afterthought.

The role of the internet is different for buying life insurance than for most retail or packaged goods, which lend themselves to an online purchase. People’s comfort level with the topic of life insurance and the trust that they’ll get this important purchase right is much more meaningful than the convenience or ease of buying. What is more, the decision to buy life insurance at all, let alone deciding to do so online, remains the biggest hurdle for consumers. Motivating people to buy life insurance — regardless of the method — remains the industry’s greatest challenge.


Jennifer L. Douglas, M.S., associate research director for LIMRA’s LTC & developmental research, oversees LIMRA’s LTC Research program, as well as marketing studies on long-term care topics of interest. She can be reached at [email protected] [email protected].

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