The Changing U.S. Family: What Does It Mean For Advisors?

By Cyril Tuohy

InsuranceNewsNet

Morphing cultural diversity across the U.S., changing family structures, growing swaths of underinsured Americans and the delaying of what the industry calls “life events,” will influence the demand for life and retirement product buying patterns, life insurance experts say.

Reasons for the changes include the rapid increase in the U.S.-bornLatino population, multigenerational households living under the same roof, tens of millions of women and members of Generation X and Generation Y who are underinsured or uninsured, the delaying of marriage and homeownership, and the explosion of single-parent households.

The demographic changes add up to big new opportunities for life and annuities financial advisors, but cracking the new household code isn’t going to be easy, these insurance veterans told InsuranceNewsNet.

“Traditional family households are in the minority,” said Anand S. Rao, principal with Insurance Advisory Services at the PricewaterhouseCoopers Analytics Group. Rao is the co-author of a report published earlier this year on the top issues facing the insurance industry in 2013.

The startling statistics are well known to the statisticians with the Life Insurance and Market Research Association (LIMRA), the industry’s information clearinghouse. Yet for all the data staring the industry in the face, there remains a curious disconnect.

Life carriers often reach out to prospects with marketing campaigns featuring a husband and wife, two children and a dog; financial advisors hustle to sell annuities geared to single-income husband-and-wife households; agents offer coverage that doesn’t address the prevalence of families with stepchildren on both sides.

“The roles may be changing but the needs are still the same,” said Loretta Worters, vice president of communications for the Insurance Information Institute. A recent poll found, for example, that as many as 43 percent of adult women in the U.S. have no life insurance.

Life insurers, said Rao, have been focused on the primary family member--the male income earner—but the beneficiaries are the others on the policy. Yet the industry hasn’t done much to build up the relationship with the beneficiary. The result: when the spouse inherits the benefits, she moves the money elsewhere because agents haven’t really bothered to nurture a relationship that first began with the husband 20 years ago.

Rao said that beyond the mass media images of well-coiffed insurance agents selling coverage to the “traditional” American family, there are interesting trends taking place among financial advisors and brokers.

As minorities make up larger portions of the total population, some insurance carriers are targeting their messages to particular ethnic groups through television advertising or non-English language websites and marketing materials.

“Agents are being recruited that are not white males,” he said in an interview. Carriers are recruiting agents from the local community who have a social affinity for the neighborhoods in which they live. “People are more likely to take advice from people like that. So distributions of agents and advisors are more ethnically oriented,” Rao said.

The strategy of recruiting local agents with ethnic affinities is being used both among captive agents as well as independent advisors, he said.

Helping the industry decipher changing household profiles depends on powerful analytics. Carriers are just beginning to scratch the surface of how technology can help develop the “household view of the world,” Rao said.

“What they are still not able to do is project how the household is going to look in a few years,” Rao said.

Therein lies the key to the industry’s future opportunity: projecting just what these diverse and constantly changing households are going to need in terms of life coverage down the road.

Cyril Tuohy is a writer living in Pennsylvania. He has covered the financial services industry for more than 15 years. He has also written about food, restaurants and travel. He can be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].