In my opinion, there seems to be two camps of life insurance distribution in 2021. The first is the traditional agent channel who is focused primarily on helping more affluent people buy whole life and high face amount term insurance. The selling environment for these agents has changed dramatically, especially in the past 24 months, as the entire sales and support process has become digitized. That’s a good thing. My gut says that a relatively small percent of sales from this group are focused on helping clients use life insurance as a charitable giving tool.
The second great wave is the direct to consumer (D2C) environment for term insurance. Online platforms like Ladder, Haven, Ethos, Fabric and the like are chipping away at a market that has largely been ignored by traditional agent sales – the great middle market. And AAA Life continues to flood the mailboxes with good old fashioned direct mail term life. Whether these slick online and offline experiences will have enough reach to really make a difference remains to be seen. Since the focus here is term insurance, it has little value as a tool for giving, other than promoting conversion privileges when they exist.
As a former CMO, I am always on the lookout for distribution targets that have unmet needs. The charitable giving space is a broad market with a unique need that is not being broadly addressed by life insurers and their distributors. This is especially true for middle income buyers.
Some impressive statistics:
- $410b is donated to charities each year in the US; 8% ($30b) is derived from “Legacy Giving/Planned Giving” under which life insurance is an important component
- Legacy giving is vital to nonprofit organization longevity and ability to carry out their mission; legacy giving life insurance policies are among the largest gifts they receive – often 30-100x or more the size of annual gifts.
- Only 5.8% of Americans are millionaires – the average US citizen will not have the financial means to have a sizable philanthropic impact.
- 84% of millennials donate to causes but believe their impact would be far greater if they had the financial means to do so.
- The average annual gift to charities among middle income HH is $3,300
There are 1.5M charities and alumni associations in the US, and a significant percentage of these entities have a planned giving portion of their website that mentions life insurance as a viable option. However, none present the opportunity for the donor to purchase life insurance online and make the organization the beneficiary. That’s a monstrous direct distribution opportunity for a life insurer and/or life insurance platform to step in with:
- A simple, death benefit-focused whole life product with anticipated average coverage/gift of <$100K
- An online, accelerated decision platform
- The ability for 100% of the death benefit to go to the charity selected
I’m working with a marketing platform called Life Legacy that is at the precipice of something big. The company is bringing on charities large and small who see the benefit of adding a “link to buy” life insurance on their planned giving website. It’s a fun new chapter in my life insurance career. And it is a privilege to work with young entrepreneurs and the life insurers who are prescient enough to see a vast opportunity for sales in the charitable giving space and the tremendous chance to repurpose life insurance to make an impact on the world.