Every day, financial professionals help individuals determine whether they should purchase a life insurance policy and, if so, what type and how big a policy to buy. LIMRA applies these principles to entire populations to size the overall opportunity. Most recently, LIMRA determined an estimated unmet need of $12 trillion of coverage exists. This represents a tremendous opportunity.
One way to take advantage of this opportunity is to innovate. In his book
Disrupt, Luke Williams suggests beginning by identifying clichés in your business. He defines these clichés as the “widespread, hackneyed beliefs that govern the way people think about and do business in a particular space.” He suggests flipping clichés, or assumptions, upside down as a source of innovative inspiration.
All life insurance policies share the same two benefits: peace of mind for the insured and a benefit to help offset the financial impact of the insured’s death. Life insurance is also unique in that it’s the only type of insurance where the insured is not also the named beneficiary. Here are three examples of flipping assumptions, all focused on the beneficiary, that can help prospects make an informed decision about purchasing a life insurance policy.
ASSUMPTION: Death benefits are paid as a lump sum.
OPPOSITE: Life insurance is an income replacement vehicle.
Life insurance needs analyses typically include a number of years of income replacement. Income is the second-most common reason people own life insurance. Yet death benefits are predominantly paid as lump sums, and beneficiaries may not be well-prepared to manage such a sum for income. Consider thinking about how benefits are paid rather than simply how much.
Doing so may resonate with many prospects, since LIMRA’s 2016 report, “Could Product Design Be a Driver of Growth?” finds that more than 3 in 5 consumers would like to receive part or all of their benefit in the form of a monthly income. Although there are few life insurance products designed to distribute the benefit as an income automatically, most policies actually include a variety of benefit payment options.
ASSUMPTION: Life insurance coverage is a flat amount that doesn’t change.
OPPOSITE: Offer flexible products that change over time.
Life insurance can be thought of as financing the impact one person’s death has on other people. But should the death occur today, it would be difficult to determine accurately what that need would be, since neither the insured’s nor the beneficiaries’ financial situations are constant.
Tailor solutions by layering different coverages. Stay in touch with clients to modify coverage as their and their beneficiaries’ situations change. Clients will likely welcome ongoing contact, as 2 in 3 insured households said they would like to review their coverage at least every two years.
ASSUMPTION: The right amount of coverage is what a traditional needs analysis determines.
OPPOSITE: A modest, flat amount of coverage may be enough for some.
More than half of consumers don’t buy insurance because they don’t know how much to buy, and nearly as many worry about making the wrong decision. A modest policy — such as $50,000 or $100,000 — is certainly better than nothing. Compared with nothing, these can be significant amounts and could make a tremendous difference in the lives of many survivors. Such “starter” policies could give financial professionals a reason to discuss more significant coverage later.
The concept of “enough” is difficult to grasp, especially when trying to plan to have enough of something that may not be needed for many years. Perhaps this is a good opportunity to consider Stephen R. Covey’s second habit, in his book The Seven Habits of Highly Effective People, which is to begin with the end in mind. If we design for the ultimate user rather than adhere to tired clichés, and work our way back to the present, can we achieve better results?
So many things in the life insurance industry have remained unchanged for a very long time. Some things never should change, but for all the others, we should ask why they haven’t. I encourage you to explore some of the industry’s long-held assumptions related to life insurance by turning them on their heads.