One Area Where Our Life Insurance Industry Is Failing Canadian Consumers

In my January 2014 blog, “Is the Life Insurance industry failing Canadians?” I indicated some of the disturbing trends highlighted in LIMRA’s most recent research, and suggested that our industry needs to get much better at educating Canadians on the value of life insurance in their financial plans.

One area where we are failing Canadian consumers is in the delivery of sound, life insurance, needs-based planning.  Every person who holds a life insurance licence has an obligation (let’s just call it “doing the right thing”) to provide his/her clients and prospects with needs-based, life insurance planning.

Is this happening? No!  Who is at risk?  Consumers – more specifically, the beneficiaries of those we insure…or under-insure…or do not pursue insuring. Priority Planning Pyramid

Delivering such planning is a function of having received the necessary training in the first place, and then putting what has been learned into practice – religiously!

I am proud to have graduated from North American Life’s Field Management Associate (2 year) program where I received extensive sales and sales management training.   In my experience a simple model can be a good starting point for family life insurance planning – the Priority Planning Pyramid is one such model.  It was followed by a life insurance needs analysis that led to recommendations based on permanent plans to address permanent needs and temporary (term) insurance for temporary needs.  My sales manager reviewed each situation – not only to ensure the sales process process was followed, but to make sure proper recommendations were made that met the customer-specific requirements.  When I was in field sales management, I supervised career agents the same way.  Accountability across the board to ensure the customer was well served!

A key take-away of the Priority Planning Pyramid?  In the absence of a sound “Protection” base, one’s entire plan is at risk. Let’s face it…#@-* happens!

Jim Ruta’s recent article “Go beyond the discomfort and get back to selling life insurance” (see the February 2014 issue of The Insurance & Investment Journal) is a must read for every individual who holds a life insurance licence.  Jim states, “We’ve outsmarted ourselves.  We’ve gotten to be so smart that now we don’t even talk about things that are really important, that really matter and that only life insurance agents can fix.”

While Jim mentions the need to “…get back to selling life insurance” – my concern is how many of those who hold a licence have been trained on the fundamentals of needs-based, life insurance planning.

Consider the following:

(Source:  CLHIA)

1990

2012

# of Life Ins. Agents

53,400 (1993)

94,700

# of Individual Life Policies Purchased

1,200,000

681,600

The number of agents has increased 77% while the number of policies purchased has decreased 43%.  If Jim is right (and I suspect he is), “Instead of selling insurance, they’re helping people with their investment needs, their ‘live-too-long needs’”.

And because we are so ‘smart’, who is at risk?  Consumers!

On Feb. 28th, CBC Marketplace’s “Show Me the Money” (http://www.cbc.ca/marketplace/episodes/2013-2014/show-me-the-money) aired.  As the introduction indicates, “We talk to ordinary Canadians who’ve felt the bite of bad financial advice, and use hidden cameras to catch outrageous promises from some big institutions”.  (p.s. – also have a look at the ‘Comments’ that follow!)

The episode was not about life insurance.  But, if it was about our industry, what do you think they would find? I suspect that we would be embarrassed with the results.  Hmmm – maybe I have just found the subject of my thesis for a Masters degree in Sociology.  Any sponsors out there?

As I stated in my earlier blog, educating Canadians on the value of life insurance in a financial plan would be a good starting point.  However, the delivery of sound life insurance planning must also be a focal point, and this is a shared responsibility of life insurance companies, distributors, and industry associations working together.  After all, it is our collective reputation that is at risk.

I would love to hear what you think.  Scroll down and leave a comment!

Posted in LEADERSHIP, SALES & BUSINESS DEVELOPMENT
16 comments on “One Area Where Our Life Insurance Industry Is Failing Canadian Consumers
  1. John Hughes says:

    Good job Mike: As a 35 year veteran and longtime CLU, I often encounter advisors who concentrate on funds etc and never discuss the risk side. In the old days LUATC proivided outstanding training. We could do better.
    John Hughes

  2. Jim says:

    As you might imagine Mike, I couldn’t agree more. I’m also very interested in the statistics you quoted… I heard recently that life sales in the US are at about 50 year lows. Your data seems to support that thinking. Even further, when you check out the average life sales per agent based on these numbers, you’ll be startled to find that they’ve dropped from 22.5 in 1990 (not that great to begin with) to just 7.2 in 2012! What happened to this industry? And, you’re right, it’s the consumer and their families that are taking the hit. It’s time to get the life insurance industry back on the right track. We have to get past the discomfort if we want to help people get past the pain. Great work!

    • Gerry Belec says:

      Mike – I totally agree as well. I think it all starts with a proper engagement/disclosure letter followed by the proper planning tool(s) depending on the clients’ situation. Our industry for years has focused and moved toward investments and left the risk side of the business to flounder. It’s time to get the companies to get back to marketing life insurance – does anyone remember whole life insurance?

      • mikenurse says:

        I keep hearing that non-par, adjustable premium whole life products are making a comeback. I would love to see if this is all hype, but I am not privy to any of LIMRA’s Canadian, life insurance sales results (by product type).

        I am a big fan of these products, and own several of them. I have a suspicion that most agents need help on how to position, promote, and help consumers buy adjustable premium whole life…

    • mikenurse says:

      I cannot speak for the other companies that invested in the career agency system (back in the day), but at North American Life the focus was on 50 individual life cases per year to survive…100 cases to thrive.

  3. Hi Mike – Thanks for this great post – I was looking for these stats for an article I am writing.
    I am thrilled that you are bringing awareness to this problem. This is one of the main reasons we created FSB to provide meaningful content for advisor’s websites to educate their clients about concepts and ideas the advisors are failing to adequately address with them.

  4. Tony Masi says:

    I think needs based selling is very dangerous. We need to focus on what value the person has to his/her family over their lifetime. How do they Know what they need 1, 2, 5, 10, 20 etc.years from now???? Since we started cash flow planning for clients, they have purchased insurance based on facts on life happens after they have been educated. Sales are up over 1000% in the last 8 months after they know why they are purchasing and not being sold. Do the work and people will get it, don’t just make a sale. Follow up, communicate and stop being short term focused and they will get it. Thank you.

    • mikenurse says:

      Your response suggests a misguided understanding of what a needs-based, life insurance planning program takes into consideration (I did not call it need based ‘selling’). It has a 100% focus on clear, ongoing communication about a family’s entire financial situation – current and projected (and takes into consideration cash flow planning). It is about education and regular follow-ups, with adjustments to the plan as necessary.

  5. Tony Masi says:

    My point was in response to:

    “One area where we are failing Canadian consumers is in the delivery of sound, life insurance, needs-based planning. Every person who holds a life insurance licence has an obligation (let’s just call it “doing the right thing”) to provide his/her clients and prospects with needs-based, life insurance planning.” to quote your article. It should be based on their value to their family. And yes that need to be reviewed regularly.

  6. unpatriote says:

    Mike it is in deed a great failure. How can you justify a culture that deemed it was ok to sell a permanent insurance plan of $25,000 where there was a temporary need of $250,000+. No wonder those who have been presented this permanent insurance believes insurance is too expensive. For 40 years this has been going on when it could have been stopped so easily by the insurers by requesting that the agent submit a needs analysis with an application…Yes I believe it is a minority of agents that did this and are still doing it but it is the majority that look the other way if they encounter such a case by not making a complaint against this agent…Finally when I was Head Office, i made many proposals to develop insurance products focusing on insurance needs. However my proposals were always ignored because the focus was life insurance as an investment and tax shelter. So no I am not surprised by the results of this survey that Canadians are under insured and believe insurance is only for the rich because they are the only ones who can afford it. Indeed a major culture shifts needs to occur…

  7. As you may have anticipated, I fully concur with Jim Ruta and you, Mike, on this issue. I’ve held this view for more than my 40-year involvement with the financial sector regardless of the “fashion of the day” through the years.

    We also need to view the CLHIA stats cited in your article within the context of fundamental changes that have taken place over the respective years, incl.
    -de-mutualization of insurers with only a small percentage of the formerly mutual companies remaining (life insurance companies owned by and for the policyholders (the mutuals) vs life insurance companies owned by stock-holders seeking to receive good investment returns (stock companies))
    -merging of the “4 pillars” in the financial sector (including the significantly larger number of life insurance agent licenses held by practitioners whose focus is “investments” and for whom life insurance is merely a “sideline”) ;
    -the advent of the Internet as a vehicle of commerce (incl. the shift away from person-to-person “face to face” counselor-client interaction to “term-o-matic” online “shopping”, along with “commoditization” of the financial instrument of life insurance);
    -the significant “swings” in interest rates (from those highs in the 80’s where even Canada Savings Bonds were issued at 19.5% to the present when 5-year closed mortgages are available from major banks such as the Bank of Montreal for under 3%);
    -the commercial media and messages that it delivers on behalf of advertisers and prospective advertisers (in that regard, I also question the research, editing, and timing of the Feb. 28th, CBC Marketplace’s “Show Me the Money”, a show that appeared to allege that the majority of financial advisors are either incompetent or negligent, and a show that “coincidentally” was aired just as private Ontario Liberal MPP’s Bill 157 was about to be introduced. Was it a show tailored to set the stage for the tabling of Bill 157? I wonder… perhaps just a mere coincidence, but…)

    Each of these would be a topic for substantive elaboration and exploration that are beyond the scope of this thread; however, we need to keep these in mind at least for context.

    The gradual shift from needs based planning was also evident in ads carried by “FORUM” magazine in the 90’s referring to detailed and comprehensive client-focused needs analysis as “paralysis”. Some others also suggested a move away from comprehensive client-focused needs analysis. This even includes a highly respected and knowledgeable actuary who I hold in high regard but with whom I disagree on his suggestion that a sufficient life insurance needs analysis boils down to a basic calculation of a fraction of the PV of personal earnings during one’s income earning years.

    IMO, the industry needs to return to the model of counselor selling focused on the client’s needs and circumstances with solution options thoroughly researched and presented on the basis of the best interest of the client, including best quantitative and qualitative value within the context of the client’s needs and circumstances. That is simple common sense, something that cannot be legislated but a matter that, IMO, deserves to be recognized by the industry as a whole.

    Easier said than done but a matter deserving thought and consideration nevertheless…

  8. Wayne Cotton, CLU says:

    Great post Mike. IMPO the vast majority of financial advisors have little or no training about the proper and effective application of life insurance strategies. As a result they treat life insurance as a “dirty word” or just an “add-on” when consumers put the topic on the table. When I started 46 years ago I was taught that life insurance is a very important financial cornerstone for financial development. As my education and skills developed in several other areas, so did my profile of a perspective client. But I continued to evaluate effective uses of life insurance as it applied to more advanced situations. Getting the topic on the table is very easy. I have always used and continue to teach the use of self-discovery questionnaires to help consumers identify their primary areas of concern. When you don’t try to hide the topic of life insurance in the background, you’ll learn that most responsible people have a genuine interest or concern. Here is my observation: When advisors learn current and effective uses of life insurance, their sales of investment and retirement products go up. They are simply a by-product of developing a great strategy for clients. But if the advisor’s knowledge and focus is more geared to investments, tax and retirement planning, their sales of life insurance goes down. I believe our industry has done a huge disservice to both advisors and consumers by ignoring the effective use of life insurance while focusing so heavily on ancillary products and services. Life insurance still is and always will and extremely important topic for consumers at all stages and phases of life. The highest paid advisor that I personally know has defined thirty-two life insurance strategies for wealthy people. His services are in high demand and most of his new clients come from tax accountants. Do they know something we don’t? Perhaps it is because they were educated by an advisor that understands effective uses and proper applications of life insurance.

  9. Denis La Rochelle says:

    I totally agree with you Mike, Jim and Wayne and a few others, as a Life Insurance Agent since 1982, I believe that we have failed as an industry because there was too much focus on making the big commissions but under insured people and consumers felt jilted because they knew they needed for coverage but felt they couldn’t afford it. I sold a lot of Level coverage Universal Life policies in the late 80’s and early 90’s and I can assure you no one cancels these policies if they know the value of permanent coverage at a reasonable price. The problem is that most consumers don’t understand what they are buying and the industry has not helped them understand. The usually make the cheapest sale and run, rather than spending time educating.

    The other problem has been with regulators and compliance trying to take control and make a mess of it all. You can’t control ethics, honesty and integrity. No matter how complicated and the amount of paperwork we must do, it only bogles down the honest agent and the dishonest find a way around.

    I believe that if the industry is to do a better job, they have to get back to basics, make sure the client is insured according this his or her needs, and get me out of the mountain of paperwork to satisfy some back room compliance person who hasn’t got a clue of what I do in the field.

    I just want to go sell insurance, not spend half my life doing redundant paperwork.

  10. Christine Haeberlin says:

    Mike, thanks for sharing the CLIHA stats – eye opening. For every challenge, there is an opportunity.

  11. We work for you! We are not limited to any single insurance company! This gives us the power to shop around with over multiple Life insurance companies for the best product.

  12. Phillip Brand says:

    Excellent article Mike. Being a veteran to the industry (23 years) it is refreshing to hear others who preach the same things I believe in.

    There are way to many people in the industry for the wrong reasons. You either run into someone who is “part-time” selling to family and friends or the flip side trying to make a sale versus doing what is in the clients best interest. The longer I am in the industry I am finding the better the “needs analysis”, the longer the client stays with me. Client retention is key!

    It’s funny that all the courses I have ever taken in the industry discuss, “protecting a clients income must come first” yet very few agents are selling or even offering disability coverage. I network with many individuals in the field and I just shake my head. To give you an example, last week, I sat down with an agent who was been with one of the larger companies for 17 years and has yet to sell one disability contract. How is this in the clients best interest?

    I do go back to some of the other comments and they are bang on. The industry lacks proper training. Most pass their exam and are then told to go out and sell. This is why our industry has a huge turnover rate and a bad reputation. Instead, let’s start mentoring our youth. By leading by example, they will be better trained and the client will be properly handled.

    I also recognize that those who get who excel in our industry specialize. For this reason, I align myself with others to work together as a team even if they are not a member of our company. I believe our industry should be more open to sharing idea’s versus closed minded.

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