How advisers can improve life insurance education
When it comes to learning about life insurance, most Americans are self-educated or gain knowledge through referrals, according to a series of new studies from Lincoln Financial Group.
Only 9% receive information from a financial planner and 13% through an employer, whereas 31% do their own research and 22% consult with family members. The research findings were culled from the Lincoln Financial Group 2017 Life Insurance Awareness Month Omnibus Study and Lincoln Financial Group 2017 Employee Benefits Study.
“I think there’s a lot that both benefit brokers and employers can do,” says Dick Mucci, president of group protection for Lincoln Financial Group. He points to “a tremendous opportunity to make a difference in people’s lives” given that most life insurance that’s bought is employee funded over and above basic coverage from an employer.
Indeed, opportunity may be the operative word. Lincoln Financial found that while more than 90% of people agree that life insurance helps provide financial security, 43% feel they know little or nothing about it. Moreover, 39% of employed Americans consider it the most important non-medical insurance benefit in influencing their decision to join a company.
Employers stand to gain from a talent-management standpoint if their employees develop a greater understanding of, and appreciation for, the value of such coverage, Mucci believes. Industry producers would benefit not only from more sales they generate, but also “do a better job for their clients,” he adds. “Without a financial planner or agent pushing it, they don’t necessarily find out about it as much as they would.”
Although life insurance is primarily associated with death benefits, just 31% of survey respondents were aware of living benefits these policies provide, such as help with medical and long-term care expenses. In addition, only 21% of consumers knew they could use life insurance as retirement income and only 14% realize it can help with college funding.
An industry veteran of roughly 43 years, Mucci has noticed a decline in the number of life insurance policies over the past 30 years with fewer people owning individual-market plans than ever before. The bottom line is that “people who buy life insurance, either individually or through work, are l under-insured,” he says. “People die prematurely. Families suffer. People lose their homes. Children don’t get educated. So it is a serious financial gap.”
Apart from employee benefit fairs at the worksite or face-to-face enrollment meetings, Mucci is a big believer in technology to help spread the word in an efficient and cost-effective manner. Lincoln Financial offers a life insurance calculator that doesn’t require any login to access the tool, while online enrollment systems can share helpful examples. At last count, he discovered about 135 companies, many of them startups, that design benefit management and HR systems. “Some of these new technologies provide a very robust educational process for employees,” according to Mucci, noting the role of chat rooms, video conferencing and telephone banks.
One concern associated with annual enrollment is that employers may run the risk of information overload. “We found that 60% of employees actually prefer to receive benefits information throughout the year,” he says, adding that an off-cycle enrollment can help life insurance from being “lost in the shuffle” relative to other employee benefits.