Protect Your Clients, Protect Yourself

If registered reps don't sell their clients life insurance, someone else will — and that's a risk reps probably shouldn't take. At least, that's one conclusion that can be drawn from the results of two separate studies: one conducted by this magazine together with The Hartford Life Insurance Company and the other by LIMRA International.

According to LIMRA International's Facts About Life (2005), 44 percent of all U.S. households don't own life insurance and believe they should or own life insurance but believe they need more. One-third of affluent households (those with $100,000 or more in household income) also say they need more life insurance, according to the survey. Meanwhile, some two-thirds of reps say they sell life insurance, according to the Hartford/Registered Rep. study, but few of those sell a significant amount — only 22 percent have placed more than 20 percent of their clients into policies with a value of $500,000 or more. In addition, 31 percent of respondents who sell insurance and 28 percent of those who don't say they think their clients get life insurance “through another source.” But here's the real disconnect: Two-thirds of reps who do sell life insurance said the most significant obstacle to selling it is “clients don't think they need it.”

Well, it appears reps aren't reading their clients right. If you don't sell your client life insurance, another advisor may fill that need. And what's to stop that advisor from taking away the assets you worked so hard to gather? “Reps are leaving a lot of business on the table and the competition is cleaning up behind them,” says Michael Kalen, executive vice president at The Hartford in Simsbury, Conn. “Reps need to sell life insurance to ‘lock out’ the competition,” he says.

So which reps do sell life insurance? Independent reps are more likely to sell it (80 percent) than reps from regional firms (67 percent) and wirehouses (58 percent), according to the survey. Not surprisingly, then, reps who work for independent broker/dealers are also more likely to consider life insurance a very important part of any financial plan (60 percent) than respondents from regional firms (44 percent) or wirehouses (40 percent).

In addition, it's those newer to the business who feel life insurance is most valuable. Reps who have been in the industry for five years or less are more likely to consider life insurance very important to their practice than those who have been in the industry for more than 20 years (29 percent versus 10 percent). This may be primarily due to the fact that those same reps — those with five years or less experience — are more likely to have a long-term goal of offering comprehensive wealth-management services (74 percent) compared with those who have been in the business for 20 years or more (56 percent), according to the study.

The Reality Gap

The Hartford study identified a number of issues reps feel are obstacles to selling life insurance to clients. To sum it up, reps seem to feel primarily that it's too difficult and too slow, says Kalen. In fact, among those reps who do not sell life insurance, the most common obstacle cited is that life insurance is too complicated. For those who do sell it, the biggest pitfall was that it takes too long to make a sale. Specifically, the top reasons reps noted for not selling life insurance were:

• “Takes too long to make a sale.”

• “The selling process is too complicated.”

• “Clients get life insurance through another source.”

• “Need more training and/or sales support.”

• “I don't like asking my clients personal health questions.”

So how to simplify the process? Insurance executives suggest reps should take advantage of in-house and external insurance specialists. Some b/ds offer the former, while most insurers offer the latter on a regional and local basis. These external specialists often provide free training sessions, continuing education, one-on-one training and sales support, as well as handle the tracking, underwriting and follow-up details for the rep.

There is an even more extensive support option available from many insurers: “tele-underwriting.” In this process, all the rep has to do is get basic client data — name, date of birth, address, telephone number, amount of insurance being applied for — and then let the so-called tele-underwriter ask the hard medical and personal questions, order the medical, credit, motor vehicle and other reports, arrange the physical and expedite the process. According to a 2004 study by Boston-based research group Celent, there are many benefits to reps of using tele-underwriting, including 1) focusing agents on selling; 2) reducing costs; 3) reducing new-business cycle time; and 4) bringing new sales channels online more quickly.

With the baby boomer retirement wave kicking off, reps were much more likely to use life insurance for things like long-term care expenses and disability income in 2006 than 2005. Likewise, compared to the 2004 study, the use of life insurance products to cover income protection and charitable giving is on the rise. Respondents in 2006 were less likely to recommend life insurance for business continuation purposes than in 2005, however.

“You need to insulate yourself from the competition. If you want to protect and grow your client base, you need to sell life insurance,” Kalen insists.

Reasons for Not Selling Life Insurance

Factors That Reps Say Would Help Them to Sell Life Insurance