New series: The Question
Today we are introducing a new series on the Montoux blog - in each new post, we have posed a potentially controversial question to prominent members of the life insurance industry, to gather their unique perspectives.
Today we are asking:
Currently, do you believe life insurance bought or sold? What do you think will be the case in the future?
This classic question of whether life insurance is “bought or sold” is debated when trying to articulate the difficulty with how to get individuals to purchase individual life insurance and how to contrast its sale to other consumer goods such as cars, food, clothes, TVs, phones, etc.
I believe that life insurance is a unique financial instrument unlike any other good and because its unique attributes it is generally neither bought nor sold. It is not bought because human brains by evolutionary design are programmed focus on living versus dying and because of this focus we do not plan for death as a normal course of our daily existence. Moreover, when you purchase life insurance you never get anything tangible. Buying life insurance helps you obtain piece of mind and a good feeling of being protected for the benefit of their loved ones. What also makes life insurance more complicated is that our humanistic views about life, death, and the future. What other financial instrument exists in the world today where the moment that you need it – i.e. you are starting to experience death - you can never buy it. And depending on your religious and personal perspectives of what happens post death – which no one has ever experienced – will influence your decision today about this very important benefit.
Life insurance is also never “sold” as no one likes being sold anything. What generally happens today are generally three situations:
Consumers are personally moved to seek out individual life insurance through experiencing the loss of a life of a friend/loved one or by a change in a life event (such as the new responsibility of having a child, buying a house, etc) or
Consumers are lucky enough to meet someone who can help explain the value of life insurance by rigorously re-articulating the value of human life and how to protect in case of a loss or
Their employer offers life insurance as one of many options as part of a benefits package while employed at that company.
Independent of these three situations, I don’t think individuals wake up and day “today is a day that I wanna buy life insurance”.
In the future, I see technology with the intersection of marketing, underwriting and product design helping to bridge the divide of an under-insured population for a subset of our population with a subset of life insurance policies – primarily term or temporary insurance. I also see a more complex world where individuals will seek to deep experts in holistic planning to help coach them through their financial lives.
The analogy I like to use in what happens when you get sick. For some illnesses WebMD or the MinuteClinic are sufficient. If you have a broken arm or a brain tumor you seek out specialized expert care. The industry will have insurance solutions all along this value chain and not every carrier or distributor will own all aspects of it.
- Andrew Gordon, VP and Actuary, Life Insurance Product and Risk, Guardian Life
Insurance has a uniquely horrible buying experience. This means it’s a purchase that is hard to motivate yourself to make. In that sense a lot of insurance is “sold” – a motivated adviser or salesperson can help the customer to make it through the buying process.
But digging deeper, the phrase “Insurance is sold not bought” is flawed and represents the information and power imbalance in the industry. All insurance is bought – if customer is paying premiums, then she has bought the insurance.
- Conor Sligo, Consultant, Sligo Consulting
Today life insurance is mostly "sold" through advice as consumers don't usually understand the problems that life insurance is solving. Life Insurance is "bought" when consumers are confident that they know what they need and there are easy to buy solutions available. The biggest area of change is likely to be in the way consumers access advice.
- Sam Knowles, Director, Montoux
If you would like to share your own perspective on this question - or be part of a future post - please contact us.