In the challenging economic times of recent years, it’s hard to imagine double-digit sales growth for many product categories. Yet, that is precisely the case with final expense insurance. According to the 2012 LIMRA Final Expense Survey, there was a 23 percent rise in new policies of this type in 2011.
See also: Making final expense more profitable
Why the sudden interest? One reason may be that the economic downturn has created a grim sense of urgency among older Americans to take care of the basics and cover their last expenses by purchasing these relatively inexpensive policies. (Premiums of $2 a day are common for average face values of $10,000.) It’s estimated the cost of a funeral today is about $7,750, not counting the burial plot. Other final expenses — unpaid bills, final medical expenses, probate and other legal costs, transportation of the deceased and funeral-related family travel expenses — can add up quickly.
Another reason for interest in this product may be that steep reductions in purchaser’s assets — depressed home values and diminished retirement savings — have removed what once seemed a sufficient cash buffer survivors might tap to take care of these increasingly expensive final arrangements.
But there are other drivers at work in this market that could continue to broaden adoption of final expense insurance across the middle market and deeper into the aging baby boomer segment. These drivers include more synchronized and speedy underwriting and policy issuance, emerging technologies, and innovations in the products themselves, which can make them viable options even for people who are older and not in the best physical condition.
The target market for final expense insurance is people of modest means who are middle age and older. Typical issue ages range from 50 to 80, sometimes even older. In general, this target market neither owns life insurance nor accesses financial planning services, so the most popular tools for prospecting are lead-generation services, direct mail or newspaper stuffers. The sale itself generally takes place across the prospect’s kitchen table — though it may also draw on technology-enabled real-time underwriting support.
Depending on the carrier, producers may be able to access, via phone, dedicated underwriters who walk the prospect through questions that determine coverage eligibility. This tele-underwriter gets the prospect’s authorization to ask questions about health matters, prescription drug use and other points. After interviewing the prospect, the tele-underwriter will then speak with the producer about the prospect’s eligibility for coverage and confirm the premium for the requested coverage. Some carriers can accommodate a broad range of health conditions by offering multiple products that are priced for different levels of insurability.
If the carrier has the technology to allow electronic application submission, the application may be immediately uploaded. The policy could be issued within 48 hours of receiving an app that’s in good order and the new client’s premium payment. There is no need to fax or snail-mail the application.
Speak on the dotted line
What makes such an accelerated policy issuance process possible? Emerging technology funnels answers to medical questions and results from public sources through an underwriting engine to provide an instant decision. If the client wishes to finalize the purchase, he or she can “voice sign” the application, after which it is submitted electronically. A voice signature is the process of digitally recording an individual’s voice approval, so it can be used for sealing transactions in legally complex areas, such as financial services, health care and banking.
Carriers that offer this technology as part of their final expense sales process can completely eliminate the step of asking producers to submit pen-and-paper signed application forms. The proposed insured, policy owner and producer simply let the system record a few seconds of their speech, and those voice signatures produce legally binding results. This process also helps ensure all applications are received in good order.
Flexibility and enhanced options
There will always be cases when a producer must tell the prospect that the carrier is unwilling to issue a policy. Such cases typically involve individuals whose health is failing to the degree that underwriting their policies at an affordable rate would be unrealistic.
Fortunately, some carriers have created multiple products to reflect the relative health of the prospect. For example, the healthiest prospect might be offered a policy in which the level of death benefit is the full face amount for all policy years. Someone less healthy might be offered a policy in which the death benefit is, say, one-third of the face value in year one, two-thirds in year two, and the full face amount after that. Prospects in even poorer health may be offered a return of premium option for the first two years, followed by coverage at full face value after this period is over.
Such options give the producer new opportunities to make sales, even when prospects are in less-than-ideal health. And, of course, these enhanced choices give prospects a chance to secure much-desired coverage to potentially alleviate a future financial burden for their loved ones.
Producers who seek to open a new revenue stream by serving the middle market should be paying serious attention to the final expense insurance market. Most can easily identify prospects for whom this type of policy would be a good fit in terms of budget and stage of life.
These prospects, living on fixed incomes and seeking affordable, predictable insurance options, should also increase in number as the baby boomers age and want to prepare for a suitably funded and dignified exit.
For more on final expense, see: