Despite all outward appearances, there's growth in the life and health markets. According to the 2015 U.S. Life-Annuity Insurance Outlook by Ernst & Young (EY), consumer needs and expectations are increasing right along with their confidence in the economy. Insurers are seeing annuity sales improve as well, thanks in part to rising credit rates. According to the market survey, things are looking up.
That's good news for the life market, which is grappling with ways to increase business and engage apathetic millennials (born between 1980 and early 2000). A recent LIMRA study revealed that fewer than 20 percent of Gen X and Gen Y millennials are "very likely" to buy life insurance. The opportunity is there, however. The same study showed that a whopping 34 percent of millennials do not have life insurance.
Still, even a growing market isn't much without agent action. Agents are often sitting at a crossroads looking for direction on how to reach and convert client prospects. With retailers like Amazon and Google entering the insurance business – and with a 2013 Accenture study showing 67 percent of respondents willing to consider alternate channels for life, home and auto – the job of selling a product that hasn't seen much action in nearly a decade has just become even more challenging.
It's a challenge that some experts think is ripe for opportunity. According to LIMRA's "Trends in Life Insurance Ownership" study, 72 percent of Americans in 1960 had individual life insurance. In 2010, that number was just 44 percent. Tom Harris, executive vice president of Penn Mutual Life in Philadelphia, says the decline in customers in the life market flattened in 2009 after experiencing a steady decline. "It's hard to cheer flat," he says.
Still, given the reasons for some of the decline, Harris says flat, in this case, is something worthy of optimism. That's because the number of companies in the life industry have also declined. In 1988, he says, there were 2,300 companies in the life business. Flash forward to 2013, where there were 825 remaining. "That's a 65 percent drop," says Harris. "Fewer players in the field mean fewer advisors in the field, which means fewer people getting coverage."
Not all of the companies have exited the life insurance business – some have merged. He cites The Hartford and Prudential merger as a more recent example of one way the numbers of players are decreasing. Even mergers, though, don't always indicate increased business. "When you look at those two companies as individual companies, in terms of new business they wrote in, say, 2009 and then look at the new business that was written by the combined company in 2014, there was much less business written. It's not one plus one equals two or more."
Harris says that capacity too has dried up. He cites the variable annuity with living benefits market as an example. While the product is still being offered, the benefits just aren't what they used to be. "For example, MetLife in 2011 or 2012 did $29 billion in annuities. The next year, they did $11 billion. Imagine $18 billion in capacity coming out of the market."
The sales process: What's missing?
These are not new challenges. The industry has known for some time of the shrinking capacity and the lingering interest. Experts say the tools are there. The problem: agents aren't using them. According to the EY report, insurers and agents in the life insurance space "will need to leverage technology advances in distribution, underwriting and customer service."
There's the majority of the disconnect, in Stuart Ganis' opinion. Ganis, VP of strategic partnerships at Everquote, an Internet marketing firm, and owner/CEO of Ganis Consulting, has consulted for more than 600 local insurance agencies. He says the disconnect is fueled by the online nature of insurance – instant quotes. It's a problem only for those agents who have yet to adopt an online presence. "They didn't embrace the Internet ten or fifteen years ago when they should have," says Ganis. "So now when you search online, you're seeing the big boys and not the local agents. When a consumer goes online and shops for insurance, they want to see you."
Even with the proliferation of technology tools, Ganis thinks agents quickly forget the basics, including reaching out to customers for six-month checkups or annual reviews. He remembers when he was growing up, the local agent would send a calendar at holiday time. The calendar hung on the refrigerator. "That agent was in our kitchen every day," he says. Plus, the agent would send out seasonal reminders and household tips. "Three or four times a year we were getting something in the mail from this person. They were always top of mind. Agents don't do that now."
Worse, Ganis says now there's little excuse for such easy marketing. Digital marketing is automated, and there are several social media outlets at an agent's disposal. "They're not on social media the way they should be. They don't have a process in their agency so that when they sign someone up, they follow them on Facebook, they invite them to their Twitter page or LinkedIn page. They're not top of mind. I hear from you when I get a bill," Ganis adds.
Halting the exodus
That's fueling a migration that's already being spawned by automation. Where price may be the initial impetus for consumer migration, Erik Sandquist says lack of personalization is the turning point for many customers. Sandquist, managing director at Accenture Distribution and Marketing Services in Cincinnati, quotes a recent Accenture study: "In their decision to stop doing business with their current provider and switch to another in the next 12 months, 30 percent of consumers surveyed said it was very important for agents to provide a personalized service and an additional 50 percent said it was somewhat important.
"It's a personalized offer," Sandquist adds. "It's personalized messaging. Are you being relevant to me and my particular life circumstances? Are you offering me personalized pricing? Do you know my habits, my usage, my lifestyle?"
