Sponsors and Project Oversight Group

In Search of the Industry’s Holy Grail: Penetrating the Middle Market

Walter H. Zultowski, Ph.D. WZ Research + Consulting, LLC

Brian Perlman, Ph.D., CLU, ChFC, FLMI Mathew Greenwald & Associates, Inc.

Society of Actuaries Webinar November 15, 2012

Sponsors and Project Oversight Group

• Marketing and Distribution Section

• Product Development Section

• Reinsurance Section

• Committee on Life Insurance Research

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Adam Vanevenhoven, Chairperson Donna Megregian

Doug Bennett Scott Sheefel

Jeffrey C. Harper Michael Shumrak

Jeff Johnson Ronora Stryker, SOA staff

Past Research…

• Treats the market as an undifferentiated whole

• Asks very general questions

• Too much reliance on demographic segmentation

• Overlooks the role played by workplace access/buying

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Consequently, Past Research…

• Produces general findings diluted by mixing

subsegments of the market

• Produces superficial understanding of the market

• Provides very general direction for action:

– Provide more education

– Motivate agents to pursue the middle market

– Sell to the market online

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How this Research Effort is Different:

• A program of subsegment studies rather than a

single study

• A two-stage market segmentation approach

• Attitudinal/behavioral vs. demographic segmentation

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Phase 1: “Young Families”

• 1,000 primary financial decision makers• Age: 25-40• Household income: $35,000 - $125,000• At least one dependent in the household• If no dependents, but have purchased life insurance

• 18 minute online survey, conducted by Matthew Greenwald & Associates

• August 6 – 13, 2012

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Study Deliverables

• SOA Annual Meeting presentation

• Research report

• “White paper” (strategic implications)

• Webinar

• Articles, interviews, etc.

• Subsequent decision to be made regarding future

studies in the program

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Objectives

• Provide a new way of looking at the middle market

• Help marketers apply this information in their

business models (recognizing that different

companies may use this information differently)

• Help companies penetrate the middle market more

efficiently and effectively

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Planners

ProtectorsOpportunistic

Buyers

35%

39%

26%

Segmentation Results

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Understanding the Segments

• Not a strong belief in life insurance• Buy because it was made available to them• Have less coverage; less confident in adequacy of

coverage• Least likely to be planning for the future• Least likely to seek advice of an agent or advisor• Less likely to have children• Often buy at their place of work

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Opportunistic Buyers (39%)

Understanding the Segments (cont’d)

• Most likely to appreciate the lifetime value of life insurance

• More likely to buy as a part of a financial plan• More likely to buy for “general peace of mind,” or

because it’s the “right thing to do”• Value the role of the agent• Somewhat more likely to be female

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Planners (35%)


• Buy based on specific needs• Purchases typically life event driven, most likely the

birth of a child• Need for life insurance is temporary, rather than a

part of a lifelong plan• See little need for life insurance beyond age 55• More likely to buy term• More likely to buy based on affordability• Somewhat more likely to be male

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Protectors (26%)


• Income, education, employment status• Health status and mortality expectations• Perceptions of adequacy of life insurance coverage• General views of agents

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The segments are similar in terms of:

• Somewhat older• More likely to be married/in a civil union• More likely to have children• More likely to describe themselves as “upper middle

class”

Protectors:

Attitudes Toward Life Insurance

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41%

43%

15%

1%

69%

28%

2%

0%

36%

48%

15%

1%

19%

53%

27%

1%

Total (n=1,000)Planners (n=345)Protectors (n=258)Opportunistic Buyers (n=397)

Very important

Extremely important

Not too/Not at all important

Somewhat important

Overall, how important do you think it is for a family to purchase life insurance?

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Please indicate how much you agree or disagree with the following statements:

Everyone with someone depending on their

income should have some form of life

insurance

It is important to have life insurance throughout

your life

Life insurance is an integral part of a person’s life long

planning

Life insurance is as much of a necessity as food,

shelter, and clothing

(Planners n=345, Protectors n=258, Opportunistic Buyers n=397)

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Life insurance serves only a temporary need until

such time as kids leave the house or the mortgage

is paid off

The life insurance offered by employers is sufficient

to meet your needs

There is little need for life insurance past age 55 or

so

At your age, it is more important to put money

toward retirement savings than life insurance



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How knowledgeable would you say you are about the following?

Auto insurance

Health insurance

Life insurance


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Your most important goal is to increase your

family’s financial security

It is your responsibility to make sure that your

family has everything it wants

If you or your immediate family member ever

needed assistance, you have close friends or

relatives who would be willing and able to step in

and help

Being able to buy whatever you want for

yourself and your family makes you happy



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Life Insurance Purchase

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Where would you go to get information regarding life insurance products and costs?

Multiple responses accepted

Online

A relative

A friend

A financial advisor other than a life insurance agent

A life insurance agent

Call the life insurance company directly

Written material

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To what extent was the following ever a reason that motivated you to purchase life insurance?

I simply thought I should

Getting married

You were given the opportunity at work

Birth of a child

As part of a financial plan


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Your spouse/partner or a relative told you to do it

A new job

Purchase of a home

Your started feeling older

Someone you knew died

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To what extent was the following ever a reason that motivated you to purchase life insurance?

Thinking about the most recent life insurance policy you purchased, did you purchase it…?

(Filter: Has individual life insurance; Planners n=308, Protectors n=229, Opportunistic Buyers n=330)

At work

Online without working with an agent

Through the mail

From an insurance agent

From a financial advisor other than an insurance agent

Through a bank

By calling the company directly

* <.5% 24

How likely are you to purchase more life insurance coverage in the near future?

(Filter: Has financial advisor and would like more coverage; Total n=109, Planners n=44, Protectors n=24, Opportunistic Buyers n=41)

Very likely

Not too likely

Not at all likely

Somewhat likely

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Thinking about the next time you might purchase life insurance, would you most likely purchase it?

From an insurance agent

By calling the company directly

Through the mail

At work

From a financial advisor other than an insurance agent

Through a bank

Online

* <.5% 26

Life Insurance Ownership

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What is the total amount of coverage or death benefit from this life insurance and how much to you feel you should have (In $1,000)?

(Filter: Has life insurance and reported amount, n=827; total reporting amount should have, n=924)

AverageCoverage

Averageamount

should have

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Which of the following best describes how you feel about the total amount of life insurance coverage your household currently has?

(Filter: Has financial advisor; Total n=977, Planners n=338, Protectors n=251, Opportunistic Buyers n=338)

You have much/a little more than you would like

You have a little less than you would like

You have much less than you would like

You have the right amount

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Putting This Research to Use

• Categorize prospects into the three market segments

• Can be accomplished by:

– Agents asking questions in a fact finder

– Call center reps asking the questions

– Prospects answering the questions on a website

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Putting This Research to Use (cont’d)

• Develop different marketing approaches for different segments. Can extend to:

– Different website “landing pages” based on one’s

segment

– Different sales presentations by agents

– Different scripts used by call center reps

– Different direct mail letters

– Different products emphasized with different

segments

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Putting This Research to Use (cont’d)

• The fundamental concept:

– To use this information to improve the efficiency and

effectiveness of one’s marketing efforts

– Applications will vary depending on a company’s

target market(s), product set, and overall marketing

strategy

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Examples

“Opportunistic Buyers”

• Emphasize general education about the value of/need for life

insurance

• Promote price and value instead of conducting a needs analysis

• Encourage workplace buying, disturb them about its “portability”

• Don’t view workplace purchase as an end in itself, seek

opportunities to make additional sales to workplace buyers over

time

• Attempt to identify future major life events, at which time they may

“morph” into another segment

• In developing leads for agents, leave them off the list

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Examples (cont’d)

“Planners”

• Don’t emphasize the purchase of life insurance in response to major life events, instead emphasize the role life insurance can play over one’s lifetime

• Emphasize the emotional side of the sale – e.g., “peace of mind” and the “right thing to do”

• Use needs analysis tools, and sell life insurance within the context of one’s total financial picture

• Discuss a program of planned term conversions as their incomes and assets grow

• Reinvigorate product concepts – e.g., graded premium life and guaranteed insurability options

• Given no additional information about a female prospect, assume she is a “Planner”

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“Protectors”

• Don’t discuss needs analysis and the value of life insurance over one’s lifetime

• Emphasize the value of life insurance in providing income protection in response to major life events

• Be vigilant for future “non-traditional” life events -- e.g., divorce, job change, death of a parent

• Disturb them with the idea that many in their ‘50’s and’60’s today are finding their life insurance coverage expiring before their need for income protection has passed

• Consider new product designs – e.g., “term to age X” with an option to renew for X number of years on a guaranteed issue basis

• Given no additional information about a male prospect, assume he is a “Protector”

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Examples (cont’d)

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