If We Can Differentiate Coffee, Why Not Life Insurance?

Why are so many people lining up at Starbucks to buy their "commodity" at a higher price than McDonald's? The simple answer is this: perceived value. The Starbucks customer values the normal benefits of coffee (such as the caffeine boost), but also values the other, more nuanced aspects of the brand. These might include the service experience provided by the barista, the implied prestige in being associated with the brand, the artful descriptions of the regions and farms from which the beans are harvested, and even the purchasing practices (for example, fair trade) in which the company engages.

Clearly, if coffee has been de-commoditized, the question is, can we do the same for life insurance? Consider some of the best term products available today. While the rates alone might stand on their own merits, the various ways that certain products can be configured — such as laddering several durations — can add real value to the customer's bottom line.

And let's not forget certain guaranteed UL products. I'm thinking of one that has secondary guarantees, and while it remains competitive in many cells, the key differentiators are guaranteed cash and future flexibility that provide real value. Unless you can guarantee that your client's needs won't change 20 or 30 years in the future, the ability to scale back the premium and death benefit of products like this in exchange for a partial cash surrender can also provide real value.

Look around at the financial world in which we live in today and you'll see that flexibility is in short supply. Look for product portfolios that offer superior flexibility, which — in addition to price considerations — completes the value proposition of the products.