Financial advisers are so uncomfortable speaking about life insurance that more than half (56%) simply don’t do it, according to a recent survey by consultancy Saybrus Partners Inc.
Further, almost one-fifth (18%) said they were “uncomfortable” or “very uncomfortable” recommending life insurance policies to their clients. Just a third (34%) of the financial advisers surveyed said they were “very comfortable” recommending life insurance to their clients.
It’s the sales process that advisers find most objectionable.
“The process is cumbersome; the applications are long; the underwriting process takes so long. You’re putting the client through exams. It’s intrusive,” said Kevin Kimbrough, national sales manager for Saybrus Partners. “They are going through medical records and that sort of thing. It causes some advisors to shy away.”
Other factors include the complexity of life insurance products and the weeks-long sales cycle, all before the application is then put on the underwriters’ desk for evaluation, assessment and rating.
“Finding new ways of distributing the product are critical and financial advisors are one logical place to go to, because those folks already have clients who are in the throws of the planning process,” Kimbrough said.
To improve the relationships between financial advisers and insurers, he says the insurers need to simplify the process and better use technology, using electronic forms for example, to speed and simplify the sales, application and underwriting processes. Consumers with life insurance don’t fare much better. Fewer than half than half (47%) of the advisers said they perform an annual review of their clients’ existing life insurance policies. Just 20% review their clients’ policies during major life changes, like marriage or the birth of a child, and the review is typically focused on whether the policy is adequate for the client’s current needs. One in 10 admitted they only discuss existing policies if the clients ask.
“This means that many of their clients may be lacking essential protection for themselves and their families or missing opportunities to more effectively transfer their wealth to the next generation,” Kimbrough said. “Life insurance is not a set-it-and-forget-it product. It should be monitored and adjusted, if needed.”
Changing market conditions can have a strong effect on the performance of variable life insurance products, he adds, and fixed products can suffer in a low interest-rate environment, such as the one we are currently experiencing in the United States, which could lead to an unintentional policy lapse. “Other issues include the possibility of missing out on more affordable rates and newly available features like long-term care riders,” Kimbrough said.
To become more comfortable discussing life insurance, 42% of financial advisers said they would be interested in either working with a life insurance specialist to identify client solutions or attending a seminar—aimed specifically at financial advisers—on life insurance.
“Advisers are clearly interested in integrating life insurance into their practices,” said Kimbrough. “By partnering with a life insurance specialist, they can offer a fuller range of portfolio options, solutions and overall advice to their clients without having to invest the time and effort needed to become experts. In many ways, the adviser is akin to a primary care physician performing an annual check-up and calling in a specialist for a second opinion. Through this type of partnership, advisers can ensure clients’ needs are properly addressed, without exceeding the scope of their own expertise.”
The survey of 103 financial advisers was conducted in early May at the 2012 Financial Advisor Retirement Symposium and the results were consistent with a survey of 2,410 adults, 786 of whom said they currently have a financial adviser and half of whom had never discussed life insurance with their adviser. That survey was conducted online in July 2011 by Harris Interactive on behalf of Saybrus.
— Chris McMahon is the senior editor of Insurance Networking News, a SourceMedia publication.
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