Selling to the middle class can be unappealing for many life insurers when selling more expensive products to richer clients yields a fatter commission. It’s hard to justify working on small-potatoes fare when a similar amount of effort can snag a much greater return, companies and researchers say.
But in the three years since market researcher LIMRA released a report bemoaning the 48 million middle-class Americans it found to be uninsured or underinsured, some companies boast that they’re paying special attention to the middle market by selling more term life insurance, a less-expensive product popular with households in the $25,000 to $100,000 income range.
And the numbers seem to back them up: Nationally, term sales increased 5 percent from 2006 to 2007, according to LIMRA.
Term is among the simplest of life insurance policies, providing a death benefit for a set amount of time, and created for people with limited budgets.
ING has seen an enormous spike in individual term life sales, Between 2005 and 2007, the company went from 17,000 to 83,000 term policies sold, said Alan Lurty, senior vice president.
Lurty said ING put forth a concentrated effort to make its size work for it, servicing and selling efficiently by moving large numbers of term policies.
“If you’re only selling 10,000 policies a year, it’s hard to rely on term,” he said. “Some of our competition – worthy competitors – say, ‘that’s not our marketplace.'”
Catherine Theroux, a spokeswoman with LIMRA, said more carriers have turned to middle-market sales in the past couple years, largely because they’ve realized that they’re missing out on a large chunk of the available market, she said. Also, “the affluent market seems to be very saturated – you’re competing for the same segment.”
That’s lead to more companies examining how to best make contact with the middle market.
Much of the distance between insurance professionals and middle-class targets comes from how customers view life insurance generally, Theroux said. Often, they don’t understand life insurance products, and they view agents with suspicion.
“They had this idea of someone glad-handing you and pushing to you do something you didn’t want,” she said. “It was a perception problem.”
Prudential Life has tried to promote products that entice customers by making the process simpler. The company touts its success thus far: In 2006, the company sold $148 million in term sales, according to LIMRA. The next year, that number was $212 million.
Joan Cleveland, senior vice president of business development, said Prudential now offers an online program that simplifies the application process, even presents a grid that shows how much policies will cost the customer. Cleveland said the new product was prompted by the LIMRA study that showed such vast numbers of underinsured middle-class Americans.
Delphine Soucie, director of individual life bank channel for The Hartford, said her company’s term sales are up 16 percent in the first quarter of 2008 versus the same pe-riod last year. Soucie said The Hartford has worked particularly with banks to move the policies, and created a shortened application that, instead of requiring 12-14 pages of information, is a half-page long.
But the company doesn’t end its work at a term sale – oftentimes, term policies serve as an entry-level product of sorts. When the customer accumulates more wealth or becomes savvier about the products available, the carrier and agent can then sell the policyholder more expensive, “up-market” products, she said.
