Insurance Bait and Switch
There has been negative publicity for life insurance carriers lately, and it may impact the way consumers view and interact with agents and carriers.
In 2014, life insurance ownership was at an all time low. According to MIB Life Index, policy applications have seen an average increase of 5% year over year in the last 19 months. This increase is for all types of life insurance requiring underwriting. This has been great for the insurance industry. The upswing means more people have coverage, and the people believe in the necessity of life insurance.
In the last few months, carriers have begun to notify Universal Life policy owners that their premiums may increase 15-40%. These premium increases are due to COI rate increases. Cost-of-Insurance (COI) rate increases are allowed, but rarely implemented. COI rates take into account mortality rates, interest rates and length of policy ownership. The majority of the consumers impacted by these changes own policies of $250,000+, and are over the age of 60. These consumers can usually afford the rate increase, and were most likely advised of their potential when purchasing a Universal Life policy. However, the negative publicity may reach to consumers who do not understand the difference in life insurance policy types, and may fear they will face the same increase in premium.
As a marketing agency, we work with carriers across multiple distribution channels. Regardless of distribution channel, included in the messaging to consumers are the rates and when the rates will increase. Those carriers who rely on agents as their primary distribution channel can provide the agent with talking points regarding the rate increase and specific policy types. The carriers that rely on direct mail, digital media and other direct to consumer channels may have a more difficult time explaining the situation.
In the last 12 months, carriers offering less than $50,000 in coverage delivered over 625,000,000+ direct mail, email and digital messages to consumers. The consumers who have received these solicitations often purchase guarantee issue or simplified issue products. They are also the most reluctant insurance buyers. Among the top 10 reasons consumers do not purchase insurance are the following thoughts:
- Insurance is too expensive / I can’t afford it
- I have other financial responsibilities that take priority
- I don’t trust insurance agents or insurance companies
Carriers who sell products through direct to consumer channels are at a greater disadvantage than those with an agent sales force. In addition to selling the product, the direct to consumer carriers have to overcome the negative thoughts associated around trust and price. These are two key elements that can be addressed and overcome with a face to face meeting. Direct mail, email, telemarketing and digital distribution channels do not allow for that person to person interaction.
When working with our carrier client partners, we always stress that reaching the right consumers with the right message at the right time is critical to acquiring new policy holders. We need to now add in assurance that the carrier and/or agent will not pull a bait and switch. The rate the consumer pays now will not arbitrarily change, and will only change as the consumer ages into the next age bracket, if applicable.
Insurance carriers, and those who work in the industry, have to acknowledge that there is a lack of trust by consumers. Whether or not this is warranted, it is the perception of the consumer. Many insurance companies try to impart their trust worthiness by including customer reviews, AM Best and other ratings, as well as slogans that show the company’s longevity. All of these messages help, but there is one additional factor that can be added to the messaging. Carriers must educate the consumer on the details of the policy, including premiums and rate changes. Communication with the policy holder on a frequent basis is key, and must not be limited to once a year when the premium is due.
Frequent communication with the policy holder base with will most likely make the customer feel more like a valued client and less like a stream of revenue that is vulnerable to unfair practices, including unexpected rate increases. This constant communication may diminish any negative publicity in the industry, and make the consumer feel more secure in their purchase and insurance carrier. If they do experience a rate increase, they will be prepared for and aware of the change. They will not feel like victims of Insurance Bait & Switch.