People who have financial fears are more than five times more likely to say they want to buy life insurance, according to new LIMRA research. However, at the same time, that research also found that interest in buying life insurance is often overstated, with affordability being a common reason why people ultimately choose not to buy.
“Financial concerns related to purchasing motivation are also a practical reason not to purchase,” said Jennifer Douglas, senior research director at LIMRA and LOMA.
“You’d think someone who fears making ends meet wouldn’t consider buying life insurance anytime soon, but nearly one in five do, compared to 3% of people who don’t have financial fears. [But] Even with the best intentions, consumers tell us affordability is the main reason they don’t buy the coverage they need.”
In light of the findings, LIMRA suggested financial advisors can best serve target markets by making efforts to understand consumers’ key financial fears and taking a holistic approach to addressing those concerns.
“Reaching an underserved market and closing the life insurance gap is something our industry is struggling with,” Douglas noted.
He added: “Understanding and responding to these diverse fears enables financial professionals to take a comprehensive approach with tailored solutions.”
Fear driving consumer interest
LIMRA research surveyed 3,000 consumers aged 18-65+ to understand how financial stress affects purchasing decisions.
Seven in 10 respondents said something about their financial situation “scared” them. Four in 10 were concerned about making ends meet, and 26% were also concerned about savings and preparedness.
Younger respondents, in their 20s and 30s, are more likely to be concerned about making ends meet. Respondents in their 40s and 50s are more likely to be concerned about retirement savings and preparedness.
In contrast, 3 in 10 respondents said that nothing about their financial situation scares them. Respondents aged 60 and over were the most likely to answer this question.
LIMRA found that respondents with financial fears were significantly more likely to express serious interest in purchasing life insurance in the next year.
“It will come as no surprise to advisors that fear may play a role in consumer interest in life insurance,” Douglas said. “We suspect that its role is partly motivation. 92% of those interested in buying life insurance in the next year told us about something about their finances that “scares” them. However, it was almost never overtly linked to the financial consequences of their or a loved one’s death.”
Existing life insurance coverage did not play a major role in LIMRA’s findings. The study pointed out that the difference in life insurance rates between those with reasonable financial fears and those without was not due to the latter group already having coverage.
Confidence plays a big role
Understanding the financial concerns of their clients will help financial advisors provide more tailored solutions and also build the necessary trust, the LIMRA study suggested.
“We certainly don’t want to promote the use of scare tactics or feed consumer fears, but it’s important that consumers understand the risks of not having coverage,” Douglas said. “Furthermore, it is important for financial professionals to recognize the array of consumer financial fears and be attuned to the nuanced narratives that range from immediate survival concerns to long-term uncertainties, fears that extend to wealth and circumstances.”
The LIMRA study highlighted the importance of the relationship between advisers and clients. Douglas noted that the correlation between financial fears and interest in life insurance “probably says something about people who value protection.”
LIMRA found that active life insurance owners (73%) were more likely to express financial fear than non-interested non-owners (62%). Similarly, people who work with a financial professional (70%) are more likely to report financial fears than those who are not interested in working with one (63%). Furthermore, those interested in working with a financial professional were most likely to share their biggest fear (77%).
Research shows that consumers may be more willing to share their financial fears and concerns if they have a relationship with a financial professional they trust.
In an earlier study, LIMRA found that “the ability to address all aspects of my financial situation” was the most important attribute for 45% of consumers in choosing to work with a financial professional. Consumers were also more likely to recommend advisors who they believed took a more holistic approach to solving their financial needs.
“Clients who describe their financial professional as taking a very holistic approach are likely to recommend them, while those who feel their financial professional takes a more sales-oriented approach are less likely to fully embrace this model. “, – Douglas. said:
LIMRA is one of America’s largest trade associations, representing more than 700 members. The fourth quarter 2023 survey of consumer sentiment was conducted in October 2023.
Rayne Morgan is a content marketing manager at PolicyAdvisor.com and a freelance journalist and copywriter.
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