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Author: Craig Simms

Author: Craig Simms

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Estate Planning

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If we truly want to promote financial products to everyone, it’s time to remove the name estate from the term “estate planning.”

Life Insurance Looking Outward

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Buying life insurance for the benefit of people and causes is gaining traction.

According to recent LIMRA research, the reasons for owning life insurance are changing. This trend, in combination with the modern life insurance buyer’s increasing comfort to complete the purchase of permanent products online or through a contact center, may present a new distribution opportunity for visionary insurers.

A New, Profitable and Untouched Distribution Opportunity

Life insurance, by its nature, is a selfless purchase. Generally, it is the people or entities who receive the death benefit, and not the buyer, who benefit from the purchase. The primary reason why people buy life insurance, according to LIMRA, has traditionally been to cover burial, or final expenses. But the tide is changing. While “covering final expenses” is still the overwhelming buying motivation, “transferring wealth” or “leaving an inheritance” has overtaken “replacing lost income” and is now the second most popular reason for making a purchase according to LIMRA’s 2020 Barometer study. This undoubtedly includes using these products as a vehicle to leave a legacy to charity.

This trend may be indicative of an increased interest in traditional permanent insurance. LIMRA’s U.S. Individual Life Insurance Sales Survey seemed to bear this out. According to the survey, three quarters of whole life carriers reported significant growth in the first six months of 2021, including nine of the top 10 carriers. Further, premium for permanent life sales was 22% higher than sales in the first six months of 2020. Whole life represented 36% of the U.S. life insurance market in the second quarter.

Permanent Life Sold Directly

Perhaps the most interesting phenomenon buried in the data is the fact that a significant percentage of these permanent policies were purchased directly by consumers, not through an agent. According to David Levenson, LIMRA’s president and CEO, “We saw significant growth in direct-to-consumer (D2C) distribution for whole life products. In the second quarter of 2020, D2C whole life sales rose by 33%.” 

While relatively simple term life insurance has solidified its place as the preferred D2C product on multiple agentless platforms like Ladder, Ethos, Vantis, Fabric and others, permanent products have been seen as “too complicated” for D2C sales. But is it? The core challenge of selling permanent products directly is teaching prospective buyers the primary function of these products vs term insurance. But the research shows that buyers are beginning to understand the power of these types of permanent products for passing money to the next generation and supporting charitable causes that are close to the heart.

Vantis Life, a subsidiary of Penn Mutual focused on the mass market, is one company that has had two D2C whole life products available since 2018. “A significant portion of our direct sales, either purchased through our contact center or online, are permanent products,” notes Manny Lirio, AVP e-commerce and sales acquisition at Vantis Life. “It shows that simple whole life products, presented clearly and targeted for a specific use, can be sold without a face to-face interaction.” 

Final expense is an easy product to place on such a platform, especially with light digital underwriting available to reduce the risk of D2C sales (more on that in a future blog). But more traditional permanent products, especially those with no dividend schedule and used for modest inheritance and charitable giving purposes, are about to have their day.

Using such a product for social good makes it a win-win for the life insurers, who gain a profitable product and reputation enhancement, and for the charities, which ultimately receive the benefit windfall. And while some companies get jittery with a charity receiving 100% of the death benefit, this should not be an issue at lower benefit amounts — under $100,000 in most cases — notes Marty Dinehart, Executive Vice President and Chief Operating Officer at Patriot Life. “With smaller gifts, the impact on the estate is less of a consideration and the intent of the insured is clear and not a primary concern of the estate”, said Dinehart. “In most cases, we see that the client has been active with the organization for some time [and] they want to continue their impact well beyond their lifetime.”

It’s important to note that Marty’s company has two permanent products that are available on a modern D2C digital buying platform from Avolanta. 

A recent blog from lifehappens.org calls out the value of every day givers using permanent products as a tool for giving. Spencer Cassidy, CEO and co-founder of Life Legacy, notes “If you’re passionate about making a difference and want to increase your effects exponentially, life insurance can be an excellent way to make that happen.”

Can D2C Permanent Be Profitable?

We have established that the use of permanent life products, targeted to the middle and emerging affluent markets, sold directly for the purpose of providing an inheritance or as a charitable giving tool, could be an exciting new market for insurers. But can it be profitable? 

Bruce Friedland, a former Chief Actuary and Chief Product Officer, and now an actuarial and business transformation consultant, spells out the parameters. 

“Traditionally, small face amount whole life products, outside of final expense or preneed, were less profitable because the expenses the policy had to cover were high, and there were typically fewer underwriting requirements at lower coverage amounts leading to anti-selection,” explains Friedland.  

He noted that modern underwriting platforms and advanced risk assessment are now replacing what was still costly traditional underwriting, helping to increase profitability for lower face amount permanent products.

“These intelligent underwriting engines are typically lower cost per case vs traditional methods,” says Friedland. “At the same time, there is little increase in expected mortality using these new platforms.”

Friedland also talked about the importance of controlling marketing expenses, “Products sold with no or low commissions help improve profitability. But the key is to keep other expenses, like marketing, low. Hyper-targeting likely buyers can help.” 

Capturing the Opportunity – Intelligently

Is there an opportunity to effectively sell lower face amount permanent products D2C with a hyper-targeting marketing focus? The data, technology and large, wide-open market strongly suggests that there may be. Here are some key factors to consider:

  • The marketing must be targeted to two address key consumer buying motivations; — leaving an inheritance to family and supporting charities to promote social good
  • The messaging must be clear and focus on middle-aged and older buyers who may be thinking about their legacies and family financial issues (target age 40+)
  • The UX should be intuitive, engaging, and consistently reinforce the good this product will ultimately achieve
  • Underwriting must be fast, and decisions must be made in real-time
  • A sales contact center option is a good idea for reluctant “pure” D2C prospects 
  • The insurer should have a mechanism in place to inform the family and/or charity of the planned gift/inheritance (with the buyer’s permission)

The capacity to encourage legacy giving is a genuine benefit to both buyer and carrier.  Products focused on inheritance and social good for the mass market are essentially non-existent today, but they may very well be the standard for the future. A profitable product, distributed to specific audiences, with a side benefit of enhancing reputation as an organization that supports social good is a powerful combination of benefits. Could this be an exciting new distribution opportunity for intrepid insurers? The answer is a resounding “yes.”








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