This summer, the National Underwriter research team conducted a comprehensive research exploration of life insurance product sales. The purpose of this research effort was to identify opportunities, challenges and common obstacles shared by advisors selling life insurance; the expectations and needs advisors have of their distribution partners, such as insurers and marketing organizations; advisors’ product preferences and their perceptions of client needs; and the support advisors need in order to sell life insurance more successfully.
According to survey respondents, life insurance continues to serve an important societal function. Income replacement in the event of the death of a breadwinner remains the chief driver of consumer interest in life insurance. However, advisors are having difficulty contending with consumers’ general lack of awareness of the need for life insurance. They are struggling with how to overcome client procrastination when it comes to financial planning and consumer perceptions about the affordability, or lack thereof, of life insurance.
Most life insurance sales professionals are independent or non-captive career agents running multi-faceted practices. Seventy percent of advisors selling life insurance products are chiefly focused on an area apart from life insurance, such as investment advisory, employee benefits or property & casualty insurance. Further, the large majority (nearly three-quarters of respondents) derives less than half their income from life insurance product sales.
Most respondents wrote between $25,000 and $100,000 in first-year life insurance premium in the past year. Term life is by far the most commonly favored product among advisors of all kinds, followed by whole life, universal life and index universal life.
The survey indicates that life insurance remains a male-dominated profession. Seventy-eight percent of respondents were male in their 50s or older, though most are selling insurance to clients in their 50s or younger. Fewer than 1 in 5 advisors report having a client base that’s at least 50 percent female.
Overall, the survey revealed a group of advisors who are generally optimistic about the coming year, though they are coming off of a fairly stagnant year of sales and are keenly aware of threats to their business.
The majority of advisors (44 percent) report stagnant life insurance sales in the past 12 months (Figure 1; click to enlarge). Forty-two percent report a substantial or slight increase in sales, and only 15 percent report a decrease of any kind.
Younger agents, especially those in their 40s, report a better year than their counterparts. Likewise, respondents whose primary focus was life insurance or financial planning tend to report higher life insurance sales than advisors focused on annuities, health insurance, property & casualty insurance or employee benefits. There is no discernible difference in the reported life insurance sales activity between male and female advisors.
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When asked what kind of impact the fiscal cliff deal, which established a permanent estate tax at the beginning of the year, had on their life insurance sales, 70 percent of respondents reported no impact at all. Of those advisors who did perceive some kind of impact, 17 percent report a positive impact on sales, versus 13 percent who reported a negative impact.
When it comes to anticipated life insurance sales levels in the coming 12 months, advisors are overwhelmingly optimistic (Figure 2; click to enlarge). Nearly three in four advisors expect an increase in sales in the next year; 28 percent expect a “substantial” increase. Roughly one quarter (24 percent) expect sales to remain the same, and only three percent expect any kind of decline in sales.
Despite advisors’ positivity about life insurance sales in the coming 12 months, they are acutely aware of threats to the future of their sales (Figure 3; click to enlarge).
The greatest perceived threat to future sales is the passage of laws that would change the tax status of life insurance, considered a threat by more than 1 in 3 advisors. The more sales production respondents experienced in the past year, the more likely they are to perceive this as a threat. The federal government’s budget crisis and the passage of the Patient Protection and Affordable Care Act (PPACA) could be exacerbating the fear of industry-unfriendly legislation among advisors, but this is purely speculative. The study did not ask follow-up questions related to laws affecting the tax status of life insurance, though it is clear from participants’ open-ended responses that PPACA figures heavily on advisors’ minds at the moment.
Of the top five threats to advisors’ future sales, three are directly related to consumer disengagement from the life insurance industry: affordability (34 percent), consumer apathy (32 percent) and lack of consumer awareness about the need for life insurance (31 percent).
Three times as many advisors feel that online and direct sales are a greater threat to their business than already established distribution channels, such as banks and competition from other financial sales professionals. Interestingly, advisors whose primary focus is property & casualty insurance are more likely to perceive online sales as a threat to their life insurance business, presumably because they are accustomed to contending with online P&C platforms like Progressive and Geico.
Methodology: In July of 2013, the National Underwriter research team randomly surveyed more than 2,000 financial sales professionals licensed to sell life insurance in the United States. The names were selected from a proprietary database of more than 1.2 million licensed professionals across the U.S. These financial professionals were invited by email and online promotions to participate in the survey, which was conducted online. The results represent the responses from financial professionals who have sold a life insurance policy to at least one client in the past 12 months.
Note: For the purposes of reporting on this study, the financial sales professionals who responded to this survey will be referred to as “advisors.”