One of the largest inhibitors of insurance sales is a perception gap between clients and advisors.

The gap is highlighted in the findings of two separate studies, one by this magazine in conjunction with The Hartford and the other by the Life and Health Insurance Foundation for Education (LIFE) and LIMRA International.

The differences revealed by the surveys can go a long way toward helping reps meet their clients' insurance needs more effectively.

In the Numbers

According to the LIFE survey, 81 percent of Americans say they need more life insurance. Only 41 percent own a personal policy (as opposed to group coverage at work). This means up to 40 percent of interested buyers have no personal life insurance, and a comparable number do not believe they have enough life insurance. The other 20 percent are not likely to buy any life insurance, according to the survey.

In the broad survey of American households, nearly half said they believe they need more life insurance and more than one-quarter said they actually expect to purchase more in the coming year.

Meanwhile, the Rep. survey respondents seem to be looking for reasons why clients would not be interested in insurance. Sixty-five percent of the reps that do not sell life insurance say that the product is important or very important to their clients' overall financial health. When asked why they do not sell insurance, many reps essentially say that their clients don't want it — flying in the face of the LIFE/LIMRA findings. Typical client hurdles, according to reps, are: “It's too expensive”; “I prefer to put my money elsewhere”; “I haven't gotten around to it”; and “The coverage I get through my employer is sufficient.”

A knowledgeable rep easily refutes each one of these statements, but the rep must also appreciate that clients find the purchase of life insurance daunting. Clients look to their financial advisors for assistance.

Choices, Choices

When choosing which life insurance product is right for which client, there are a few guidelines to follow. For starters, term life costs far less than the same amount of permanent insurance, but still consumes liquid assets and reduces cash flow. If a rep's primary focus is gathering and managing assets, convertible term life insurance can be an attractive way to provide for clients' protection and income replacement needs while preserving liquid assets. According to a 2004 LIMRA study, term life insurance accounted for almost half of all life insurance purchased, and 27 percent of households expected to buy more life insurance in the coming year.

Product guarantees are most important to consumers, the surveys say. Fixed premium, guaranteed death benefit and lifetime coverage are the most important policy features consumers cited. Sixty-six percent of those surveyed said replacing the lost income of a deceased wage earner was their reason for buying life insurance.

Even more interesting is the following (also taken from a LIMRA survey): The consumers most likely to buy life insurance in the next 12 months are younger (under age 45) and married with children. More than half of consumers said they would like to review their life insurance needs every two years. Once reps get a clear view of their clients' “big picture,” they might find the sale of life insurance much less daunting — taking it out of the “too hard” category and making those commissions a major component of the bottom line.

Reasons People Don't Buy (More) Personal Life Insurance

Rep Beliefs
(Registered Rep./The Hartford survey):
Don't think they need it
Clients' Obstacles
(LIFE/LIMRA surveys):
Don't view it as part of wealth management — 2/3 of clients feel financially secure Difficulty deciding how much to buy — assuming group coverage is enough
Too complicated Procrastination
Don't have/take time to learn about its benefits Worry about making the wrong decision
Feel the sales process is too personal Preferring to put money in other financial products