Americans’ money worries may impact life insurance sales

Things are stressful for many middle-income Americans right now, according to Alison Salka, Ph.D., senior vice president and head of LIMRA research. Those worries are translating into anxieties about insurance, including life insurance, according to the panel at a LinkedIn Live event yesterday.

Faced with economic worries, many middle-income Americans are beginning to cut back on their discretionary spending, Salka said. They are changing their shopping habits, driving less, cutting back on dining out/entertainment, changing or cancelling their vacation plans, putting off making a major purchase and cutting back on memberships or subscriptions. Some are putting less money in their savings accounts and are investing less. Thirty-six percent of them said they have been saving less, while some are reducing contributions to their retirement plans.

This will probably affect the sales of life insurance, Salka said. Six percent of middle-income consumers have reduced/ cancelled or put off buying needed life insurance due to economic conditions, and another six percent said they would reduce/cancel or put off buying needed insurance if economic conditions persist.

Not surprisingly, life insurance policy sales were down in the first and second quarters of 2022.

“But owning life insurance actually helps with financial wellness and security,” Salka pointed out.

About 38% of middle-income consumers surveyed said they need life insurance or they need more life insurance. “There is an opportunity here to help them get the protection they need,” Salka said.

The question is how to give them the help they need to protect themselves and their families. Approximately 43% of middle-income consumers do not own life insurance, and one in five Americans would face financial hardship within a month of the death of a primary breadwinner.

Barriers to owning life insurance

So what are some of the barriers preventing middle-income consumers from owning life insurance? According to Salka, they include:

• They have other priorities, such as saving for retirement and saving for an emergency.
• Forty percent of middle-income Americans are uncomfortable talking about end-of-life issues. Many people are more comfortable talking about politics than about end-of-life issues, Salka said.
• They think the cost of buying life insurance is too high, unaware that are many types of affordable policies.

Overcoming hurdles

To help overcome these barriers, Salka suggested the following steps:

• Make it as easy as possible for consumers to buy life insurance. The industry can increase its efforts to offer digital, automated underwriting, digital signatures, and digital policy delivery.
• Use messages that resonate with consumers, such as behavioral finance messages, and let them know that life insurance can help support other financial goals they might have.
• Focus on the customer experience. Make the conversation comfortable for consumers, offer them a variety ways to gather data, and have a holistic conversation about finances and security, she said.

“Make it easier for the consumer to buy,” Salka said. “Use messages that resonate with and make the buying experience as seamless as possible.”

Although the pandemic is less of a concern to them than it was in previous months, 61% of those surveyed are extremely worried or very worried about the economy, and 70% said that inflation is a major concern. This is up from 65% in January of this year.

Thirty-five percent are feeling stressed about their household finances, 32% about work/career issues (for those who are employed), and 25% about their personal health/well-being. Middle-income consumers also have worries related to their personal relationships and personal, day-to-day demands, as well as to the caregiving of their children and/or older relatives.

Yesterday’s event was organized by LIMRA. In addition to Salka, the event featured Susan Neely, president and CEO, American Council of Life Insurers; and David Levenson, president and CEO, LIMRA and LOMA.

Ayo Mseka has more than 30 years of experience reporting on the financial-services industry. She formerly served as Editor-In-Chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].                 

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Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].