13 Reasons Why People Don't Buy Life Insurance
(and what you can do about it)
At Life Design Analysis we have the pleasure of talking to all kinds of advisors across North America. We love learning about your business and finding ways to help increase your revenue, save you time and help you automate compliance.
In talking with advisors I can confidently tell you the top 3 challenges advisors are looking to solve are:
A quick google search uncovers a lot of data to back up my observations. Various sources on the internet show that a staggering 50% of all advisors struggle with the challenges of lead generation. To me, this is a particularly interesting stat and seems at odds with the fact that Limra says that insurance ownership is the lowest in 30 years
Life insurance Holding Has Sunk to a 30 Year Low
Only 68% of Canadian households have life insurance
Worse yet when asked 1 in 5 customers said they needed more insurance!
This seemed to be a logical flaw to me if ownership is at a 30 year low and 20% of existing policyholders say they want to buy more, the underinsured market should be creating an abundance of leads for advisors.
I wanted to do a deeper dive into where the disconnect happens and find out why people are not buying life insurance.
As it turns out there are a lot of reasons people don’t buy life insurance and quite frankly a lot of them are bad reasons that can be generally be solved with better communication about the value & functions of the various products available to them today.
Let's explore the top reasons people don’t buy life insurance
and look at some strategies to overcome these objections
- It’s Too Expensive
- I don’t understand it!
- Think They Have Enough Coverage
- I have enough money
- I don't want to take a medical
- I don't trust insurance companies or advisors
- I have other financial priorities
- I’m super healthy
- Death is scary
- Nobody has asked them
- I don’t have liabilities /dependants
- My employer provides it for me
Limra’s 2017 Insurance barometer study asked insurance prospects what they felt the cost of a term policy would be for a 30-year-old in good health. The median answer they gave was 3X the actual cost!
So how can you tackle this hidden objection?
One idea could be to challenge your prospects to the same experiment. Set up a campaign that challenges your prospects to guess the cost of their insurance, think of using a Shared needs analysis link to capture how much insurance you should be quoting. When you get notified that your clients have completed the needs analysis follow up with a presentation that shows how affordable life insurance can be for different term lengths.
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Confusion is one of the biggest barriers consumers and advisors face.
In fact according to a BMO Insurance survey:
“88% of people are confused with the different insurance options available to them”
This is a huge opportunity for advisors to communicate better, don’t assume your clients existing or prospects know what they bought or know what they didn’t buy. The survey goes on to highlight that those same people surveyed recognised that:
the best time to buy is as soon as one can afford it, to take advantage of low premium rates.
So how can you tackle this hidden objection?
We use data visualization to make the differences between products as clear as day, as you know a picture says 1000 words. Most people will want time to review options on their own make sure to have outstanding leave behind material for your clients that transparently lay out their options and make it bespoke to their needs. Include a report note that explains some insurance 101 just in case your clients are too shy to ask questions in fear of looking silly in the meeting.
If 88% of people are confused with the different types of options available to them I personally don’t feel they are qualified to determine if they are adequately covered let alone how many are "over insured". However, this hidden objection is a perfect opportunity to review their current policy and focus in on when they want their insurance to end. They very well may have the right level of coverage presently but if it's a term policy reaching its guaranteed renewal, they will 100% appreciate you being proactive with your review highlighting options that will save them money long term and not put their coverage in jeopardy.
Tackle the hidden objectionTackle the hidden objection of having group coverage by creating a report note that speaks to the portability of products and highlights the importance of being in charge of your own coverage. It's also a good idea to perform a needs analysis to make sure the coverage offered from an employer is sufficient.
I love this objection, and you should too. When I was introduced to the insurance industry by my stepfather he started off by saying that while life insurance comes in all sizes and shapes & has even more applications, the primary purpose was to fund a liability at a lower cost.
One hidden objection is that your clients and prospects may have is they may believe they have enough money or assets that should they die life insurance would be pointless because their beneficiaries could liquidate them into cash should the need arise.
How can you tackle this hidden objection?
Highlight the efficiency of a properly structured policy. Highlight how life insurance can complement their asset strategy. Some of the biggest policies I have seen sold have been to solve trapped capital inside of corporations where wealth transfer would have resulted in excessive taxation. Too much money is a good problem as far as problems go but life insurance can reduce taxation and enhance the efficiency of asset transfer, something no client would object to. Even if your clients aren't Warren Buffet you can still mitigate the risks associated with timing should your assets pass during a market crash.
This seems to be an increasingly popular objection amongst younger consumers who are increasingly convenience-oriented or perhaps those more skeptical of revealing their health information to insurers or the MIB.
How can you tackle this hidden objection?
Share information, on the subject. Create awareness, most clients and prospects won't know that insurance companies are updating their underwriting requirements to accommodate societal changes, such as the legalization of Marijuana. Some of your existing rated clients might now be considered standard because of more favourable underwriting requirements. Welcome your prospects to an unbiased comparison of products that are non-med or guaranteed issue. Make sure you're using tools like Life Design Analysis & LifeGuide that can help find the best product for your client’s need and compare them to help highlight they have options and that you work on their behalf and can offer a variety of solutions depending on their preferences.
With so much going on many of your clients will need insurance and want insurance but still not buy life insurance. As our BMO survey pointed out that 63% of people surveyed said the best time to buy was as soon as you can afford it so we know they want to buy we just need to motivate them.
Tackle the hidden objection
Make it easy for your clients, if a client is procrastinating and says they are busy, consider a company that offers a non-face to face application process where you can help them get insurance without hassle. If that doesn't motivate them to take action show them how delaying their purchase can cost them money by performing a cost of waiting analysis.
Trust is a huge factor in big purchases, especially because we’re asking our clients to buy something that they will hopefully not use for decades in most cases. However it only takes one bad apple to spoil the bunch and unfortunately for insurance, there is a lot of different kind of products that all get painted with the same brush. I can’t tell you how many times I hear people say oh insurance companies you can’t trust them to pay your claim. They might be talking about the extended warranty insurance they bought from Best Buy but they are throwing shade on every form of insurance across many industries.
So how can you handle this silent objection?
Transparency is the best way. We can’t erase all the experiences a person has had with the different types of insurance available to them, we can point out that nearly 98% of life insurance claims are paid. We can also clearly lay out how and what our clients can expect when purchasing life insurance from us, what their options are and maybe as important what life insurance is not. Lots of advisors who work with LDA make a custom report note template to make sure their process is outlined, take it to the next level by creating a flow chart using a free tool like draw.io to show your clients your process, you can even link your process flow chart inside every report you create in LDA by creating a custom report note template. You can even add the link to your custom mission statement so it gets included in every report you create.
This can be a hard objection to handle because we know the saying you can't get blood from a stone. Meaning our clients or prospects may want insurance but they believe they can't afford it. Tackle this one by getting creative with their cash flow. See if there is a bundled deal they can take advantage of to further reduced the cost. Look at their cash flow to see if they are spending money in other areas, you may find they are paying for creditor mortgage insurance and could actually save money. Look for deposits that are tied up at utility companies that could free up much-needed cash. Many articles I read recommend picking on their cell phone or coffee. I would suggest you may be correct that your clients are directing a disproportionate amount of their income to this area of their life but based on recent surveys people (young people especially) prioritize these items at the top of their list, right or wrong you may have more success finding other sources for cash.
Lots of people think that because they are super healthy they can buy life insurance at any time, and most advisors would counter with good this is the time to buy because it’s going to be the most affordable.
I think most consumers believe their advisors when they say that howwever I beleive they also think it will still be less if they wait 5 years paying 0 premiums and then purchase. This is another great opportunity to use the cost of waiting analysis to prove this assumption wrong, you might also use the Term Rewrite function to highlight how their age is as big a factor if not greater than their health and that by locking in today they can save a lot of money long term.
Tackle this hidden objection
Highlight the cost and the fact they can lock in their marathon physique health rating so they can convert to a permanent product in 10-20 years at the same heath rating even when the plantar fasciitis has long ended their marathoning and the resulting physique.
Death is scary, but we all know death without life insurance is even scarier. If Life Insurance could make death even 1% easier would it not be worth it? One thing I think people forget is that life insurance is not profiting off death, it's making sure it's not financially catastrophic for the survivors. I think a lot of consumers see $1,000,000.00 of term insurance and think wow that is a lot without ever stopping to think about their own human capital.
So how can you tackle this invisible or visible objection?
Head on, a
good great needs analysis that can expose the real financial impact and show how it can change over time. If your clients don’t want to think about the inevitable maybe shift into a hybrid product like a life insurance solution that also provides a living benefit.
This is a big one and it’s a catch twenty-two: If 50% of advisors struggle with lead gen who do they ask? If consumers are largely confused with the product and want to buy but don’t engage with advisors how are you going to educate them and bridge the gap?
To solve this catch 22
Advisors need to create a platform to reach customers with the sole goal of nurturing them. We have a 3 pronged approach to social media that advisors can use too! It starts with building your network. Find people who you believe would get value from your information (your nitch). You might already have a mailing list but think outside the box, create or join a WhatsApp group, Linkedin group, host or speak at professional lunch and learn sessions, go digital with a tool like DuxSoup. After you create an audience step 2 is to nurture it with the information that you wish people knew about life insurance, but very little to no product pushing or sales, just education and awareness. Once you have earned the prospect's attention with content they value the 3rd is to capture their information and make the ask. Think about keeping some content gated, or using a shared LDA case study to be your gate, this way you segment truly interested prospects. I wrote 11 productivity hacks for your insurance practice to share some of the strategies we use to make social media work for us.
If there is no need, there is no need, plain and simple. In fact, most advisors I know wouldn’t want you to be over insured even if it meant they got a higher commission. However, without performing a needs analysis and reviewing their objectives we can never really be sure. It's a good idea to make needs analysis a benchmark of how you onboard clients and capture their unique financial situation.
This is by far one of the biggest objections I have heard advisors mention about their clients and prospects. I've even heard it from my friends.
There are a few big issues that need to be addressed.
-is it enough insurance?
-will it be there at the time of death?
-does it provide anything for your spouse?
-will you be healthy enough when you retire to buy your own policy?
-what if you leave your job or worse are let go?
How can we let our clients know this information? Prove it to them, use a needs analysis and focus on time. Ask your clients when they want their insurance to end and create a strategy that solves that goal. One of the best ways to do this is a layered plan that can provide affordable term insurance to supplement any deficiencies in insurance offered by their employers but have a base of permanent coverage to take with them and that can be used for final expenses or a tax-free loan to supplement retirement goals. Get creative and start an email campaign using an example case to show how much cash can be accumulated. Have a call to action for them to get in touch for you to create a custom presentation tailored specifically for their goals.
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