Confidence Counts: Education Leads to Sales

July 2024

It is commonly thought that the first step for many potential life insurance buyers is to become educated and become familiar with the types of products available to them. But for many, it’s not that simple.

Is it Education?

Some of the more interesting insights that come from consumer studies like LIMRA and Life Happens’ 2024 Insurance Barometer Study aren’t as straightforward as who owns life insurance or what is the largest barrier to purchase for that particular demographic — although those types of metrics usually grab the headlines.

Those findings are certainly valuable, but it is just as important to take a step back and look at the industry from the proverbial 1,000-foot view.    

The Barometer Study tracks attitudes and behaviors regarding life insurance across generations, race and ethnicities, household incomes and other demographic splits. As the director of the Barometer project, I am often asked questions like, “How can we get more women to purchase life insurance and long-term care combination policies?” Or “As Gen X begins approaching retirement, what are they looking for in terms of social media marketing content?”

Great questions, but I’d suggest there are other areas to focus on before trying to solve such specific issues.

One consistent theme in our research is that the majority of consumers simply lack a fundamental understanding of the array of life insurance products that exist. For example, a quarter of Americans agree that “life insurance is only for final expenses.”  The younger a person is, the more likely they are to agree with this statement. Lower-income, Black and Hispanic Americans also show more agreement here than others.

Additionally, about three-quarters of Americans (72 percent in 2024) overestimate the cost of a $250,000 basic term life policy for a healthy 30-year-old — many by three times or more of the true cost of an annual premium.

But how many Americans know what a term life policy is or what a premium payment means in this context? How does an insurer define healthy? Does the average American know what the $250,000 represents to the policyowner?

Over half (54 percent) of those surveyed said their life insurance cost estimate was based on “gut instinct” or a “wild guess.”

How many other goods or services can you think of with such a disparity between true cost and estimated cost?

Is it Confidence?

People are going to be hesitant to purchase complicated products they do not understand.

Confidence almost certainly plays a role in self-reported knowledge levels. When asked about life insurance, over half of Americans — 57 percent — claim they are extremely/very/knowledgeable. This is to be expected with The Barometer Study finding 51 percent of Americans saying they own some type of life insurance.

The 2024 Barometer Study reports an 11-point difference in life insurance ownership between men (57 percent) and women (46 percent). Furthermore, when we look at only full-time employees, the 11-point ownership gap remains the same between men (67 percent) and women (56 percent).

Men and women agree equally that there is a need for life insurance. However, a higher percentage of men not only say they own it, but a higher percentage claim to be knowledgeable about it, as well.

Figure 1 shows a 13-point gender gap in self-reported knowledge. We cannot know from these data if men are truly more knowledgeable than women, or, for that matter, if Black Americans are really more knowledgeable than Hispanic Americans, but it can be inferred that knowledge about the products is likely correlated to having confidence regarding life insurance — that is, confidence to speak about it with others and/or confidence to begin the purchase process.

Shopping for life insurance almost always involves a learning curve, either via online searching, from family and/or friends, or directly with an agent. The most successful of these — that is, resulting in a policy purchase, always involves an agent or financial professional.

Men (42 percent) are significantly more likely to have an insurance agent and/or professional primary financial advisor/planner than women (35 percent). Marketing efforts must be made to reach women and other underserved markets effectively. Diversity, equity and inclusion efforts should be second nature in the American corporate world in 2024. Token advertising or pandering language simply won’t move the needle anymore.

When it comes to buying life insurance, experience is king for all demographics, and it’s not even close when comparing to other advisor attributes.

For example, women are not simply seeking women advisors, as only 4 percent ranked that as the most important factor in choosing to work with someone. The lesbian, gay, bisexual, transgender, and queer (LGBTQ+) community is not necessarily looking for agents who share their “sexual orientation and/or is an ally,” with again only 4 percent ranking that as the most important factor. The same can be said for Black and Hispanic Americans.

Confidence Leads to Education … and Potential Sales

It can be difficult to instill confidence through marketing or advertising materials. Different audiences do demand different approaches, but when done in a deft and nonpatronizing way, a prospective policyowner will be more equipped to begin the shopping journey, even if they do not feel well-versed on the topic.

The Barometer Study data tell us that a majority of Americans express a need for life insurance. As an industry, we can do better educating consumers and, hopefully, insuring them and their families.