When it comes to communication, agents generally have winning personalities and connect easily with clients.
It's the words they are using that could stand to change.
In life insurance contracts, phrases like “cash surrender value,” “convertible term insurance,” “premium loan,” “non-participating,” and “yearly renewable term,” entail a heavy slog for most people. Better to leave them out of the discussion, some people say.
Annuity contracts can do without mention of “riders,” “surrender charges,” “death benefits,” “contract values” and even “principal,” according to Jean Statler, executive director for the Alliance for Lifetime income.
Best to substitute those with terms like “add-on option” or “add-on benefit,” “early withdrawal charge,” “family protection option,” “account value” or “initial investment amount,” she said. At least that’s what her group’s recent market research has found.
“Nobody wants to talk about a 'death benefit,'” Statler said. But mention a “family protection plan” and now you’re talking.
Jargon has always been a part of the industry, but some industry watchers can’t help but point out the irony between stagnant industry growth rates and abstruse language that doesn’t do much to draw in a new insurance buyer.
An insurance primer published several years ago by Great-West Life contained 13 pages of text, three pages of which a glossary was devoted to explaining terms like “cash surrender value,” “convertible term insurance,” “premium loan,” “non-participating,” and “yearly renewable term.”
To be fair, regulators and lawyers have had a role to play and deserve some of the blame for shaping industry phrases, but even they are open to working to turn insurance language into something more meaningful and approachable.
It’s important to remember that advisors need to play the role of educator and stop assuming that everybody understands insurance language as well as they do, said Dave Wood, the Martin Chair of Insurance at Middle Tennessee State University.
Insurance contracts aren’t the same as going to the supermarket to buy milk where prices pretty much the same and everybody is basically buying the same thing. “Wording in the contract is very important,” he said.
Mass torts claims have gotten advisors in trouble in the past when life insurance products were sold as retirement products, which they are not, he said.
“There’s a balance to be struck,” by advisors between explaining a contract in understandable terms without losing the client’s attention, he said.
You never want clients to shy away from asking questions, but if you come off spouting a lot of technical jargon people’s eyes glaze over and they tend to steer away from engaging with the advisor, said Sallie Mullins Thompson, an advisor in New York City.
Thompson has developed a keen sense of when she’s starting to lose her audience.
“Only speaking in plain English will create that atmosphere and they then trust you,” Thompson said. “If you talk about something too complex they get suspicious and ask 'Are they really on my side?'”
Phrases like “tax exempt” and “tax deferred,” phrases that advisors take for granted, often confuse people not attuned to the nuances and use the phrases interchangeably, she said.
Even terms as basic as “conservative” and “growth” mean different things to people, she said
Many people understand “growth” to mean a steady increase in their portfolio, but advisors know that values can shrink and that talking about growth is meaningless without also talking about the time a client stay invested.
Explaining that to people often uncovers that clients may not be that growth-oriented after all, she said.
“There are really a lot of different gotchas in the investment arenas,” Thompson said.
Insurers play a role in urging advisors toward the vernacular.
Instead of using terms like “premium,” better to use “cost,” or “price,” said Mark Teitelbaum, vice president of Advanced Markets with Axa Equitable, which distributes life and annuities through thousands of agents around the country.
Consistency of language – plain English – across advisor and consumer sales channels is critical so that consumers don’t have to decode what advisors mean.
Instead of a loan or a withdrawal, better for advisors to tell clients about how they have access to their money. When clients hear about “overfunding a policy,” they immediately think they’ve paid too much instead of securing a higher dividend.
“Dividend” – there’s another word advisors can delete and instead use the word “benefit.”
“It does make a difference. You want to be heard,” said Jessica Baehr, chief operating officer of Life & Employee Benefits at Axa Equitable. “For Axa, this is our focus, and this is our approach – to speak in plain English and in the language of our client.”
Insurance terms need to be easily understandable outside of the life insurance industry, Baehr said.
“You have to speak a human if you want humans to understand,” said Emily Wilcox, head of account management at the ag agency Johannes Leonardo, MassMutual’s create and strategic lead agency which helped create the “Live Mutual” campaign.
The trend is particularly pronounced in the financial services arena as brands strive to become more transparent and relatable and move away from complexity, jargon and opacity, she said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].