It’s easy, and unfair, to think that life insurance is a stodgy old product that hasn’t changed much since its inception eons ago.
But an overview this week of current life insurance trends and what leading advisors are doing to maximize the use of life insurance for clients portrayed an industry radically changing to meet consumer needs. And those needs, particularly in these times of economic upheaval, have never been greater. Life insurance should not be an afterthought when it comes to planning for retirement, building assets, or simply financial protection, experts said.
“It’s an exciting time to be in the business, there's a lot of opportunity,” said Dr. Guy Baker, founder of Irvine, Calif.-based Wealth Teams Alliance. “Life insurance as an asset class. Life insurance as a retirement benefit. Life insurance for business continuity.”
Baker was speaking at webinar this week sponsored by Protective Insurance and hosted by Insurance & Financial Media Network that asked the question: “Can Life Insurance Rescue Your Client’s Retirement?” The panelists, which also included Jennifer Torneden, senior vice president of Legal & General America’s insurance division, and Michael Fontanini, vice president, advanced planning and design, Lion Street, Inc., answered with a resounding “yes.” But in doing so, they raised a wide range of issues affecting the industry and propelling significant transformation.
“Life insurance becomes a great equalization tool. Life insurance can provide both relief from estate taxes and cost recovery on income taxes." — Dr. Guy Baker
Torneden said there were four areas her company, which includes William Penn Insurance, was focused on, all involving improving the agent and customer experience:
Using artificial intelligence to determine pricing
End-to-end digital processing
“We have about a 50% instant decision rate for customers under the age of 50,” she said. “We are finding those challenges are all about the data quality, she said, adding that this is especially true around having instant decisions or impaired risk become easier and faster processes. "It's not yet all the way there but I think data quality and consistency is one of our biggest challenges to making cycle times faster and easier,” she said.
Fontanini agreed that decision making and risk tolerance are areas where the industry is using technology to raise the sophistication and complexity of the processes while, at the same time, producing faster and better outcomes.
Decision based on risk, reward
“We don't advocate for one product over another,” he said. “We base that decision on risk tolerance and what type of underlying risk and reward characteristics the client is comfortable with and looking to achieve. If they have a protection need, we design the life insurance to maximize the protection and minimize the cost.
"If they have an accumulation need, we look at maximizing the investment component, minimizing the protection component. There's a lot of very nuanced and specific applications once you understand the need or the problem, then the design, and the product selection kind of follows that.”
Baker, however, emphasized that all the AI and technology innovation cannot replace human wisdom gained from years of experience in the business.
“The more you hone your wisdom, the higher the probability you're going to be successful with your high-end clients,” he said. “Agents still need to spend a lot of time talking to people, learning the ins and outs and the strategies and how to apply them and what the needs are. The problems are really where the sale is. The solutions just come naturally.”
Despite the longevity of life insurance – it’s believed the first life insurance policy was written in 1583 – there is still misunderstanding about all it can do, the panelists said.
“There are tremendous tools in the tool chest,” said Baker. “Life insurance becomes a great equalization tool. Life insurance can provide both relief from estate taxes and cost recovery on income taxes. That’s a double duty and you've really helped families in a way that nobody else can.”
Torneden agreed, noting there are 13 million single parents in the U.S., 80% of whom are women raising a total of more than 21 million children. Only 47% of them have life insurance, she said.
“There's a huge opportunity to help educate and help prioritize around the need for life insurance, particularly in those scenarios, for college expenses and care and mortgages and debt,” she said.
Asked what the industry can do to instill more interest in life insurance products, Baker reminded the attendees that life insurance is “not a demand product.”
“You have to push it,” he said. “During the pandemic, people may have become more aware of their mortality, so it brought them out of a denial that most people have about mortality. But most of the people we work with are in denial and they think they’ve got all the solutions they need for the problems they’ve got. Our job is to help them understand the problems they don't understand. And as long as that human nature dynamic exists, we will always have a job.”
Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].