People Respond to Emotions

Our last post talked about the record-level number of Americans who are underinsured. Despite the fact that more than 80 percent of Americans believe life insurance is valuable, more than half of U.S. households don’t have enough life insurance. How does our industry — in particular producers — reach these consumers?

A 2012 LIMRA report, Using Behavioral Economics to Sell, offered a great example on how people make financial decisions.

“Years ago there were Airline Trip Insurance machines in airports offering life insurance for your airline trip at a cost of 25¢ for each $7,500 of coverage. Companies sold a lot of insurance this way, as the public ventured into the unfamiliar world of air travel. Many were afraid of flying and gladly purchased the insurance. In economic terms, this is a high price for just a few hours of term insurance; yet economics failed to stop fearful passengers. However, by the 1970s and 1980s people no longer bought flight insurance. The economics stayed the same, so why did sales dwindle to almost nothing?

Behavioral Economics explains this change in purchase behavior. It recognizes that emotions play an important part in the decision to buy the insurance; and that, over time, emotions change. When air travel insurance was popular, not only were people afraid that the airplane might crash, but they also worried what would happen if they did not buy the coverage. The insurance gave them peace of mind. As people’s fear of flying diminished, they no longer had a strong emotional reason to buy the insurance. The economic value of the insurance did not change, but the emotional component of the decision no longer existed.”

LIMRA’s Trustworthy Selling incorporates behavioral economic tenets into producer training – helping producers understand and leverage the emotional side of buying life insurance. The program offers LIMRA’s consumer and industry research with field-tested sales skills and buyer psychology. Results from producers who took the course have been remarkable.

For experienced producers (average 8.5 years):

✔ 31 percent increase in new clients acquired
✔ 27 percent increase in policies sold
✔ 18 percent increase in average monthly premium

We also found that first-year producers have experienced benefits from the course:

✔ 12 percent increase in new clients acquired
✔ 52 percent increase in case size
✔ 51 percent increase in average monthly premium

For more information, please visit: Trustworthy Selling.