Product understanding will drive the future of insurance
As product sales continue to be sold through independent channels, carriers are increasingly reliant on distributors to push a broader portfolio of product offerings. Increased reliance on third-party distributors is nothing new, but the implications go beyond product design and commissions.
The increased reliance on independent channels suggests that distributors have a greater role to play in educating the customer. That education is twofold:
- Education on product capability (e.g., how can long-term care hybrid products address caretaker challenges later in life)
- Education between products (e.g., how does a fixed indexed annuity product compare to a multiyear guaranteed annuity product and when might one be superior to the other)
Goal-based and needs-based planning is designed to tackle the first part of the education, while illustration tools are supposed to assist with the second component of that education goal. But there is a significant challenge in this space.
How do products get sold if distributors and customers are unaware or unable to articulate the value of those products in helping them achieve their goals?
Annuities are a great example. Annuities are complex products that both advisors and customers have a hard time defining, and that’s before riders and surrender charges are added into the conversation. If most customers and advisors do not know guaranteed lifetime income products exist, then how can there be any education or comparison against other products? This goes beyond a simple marketing campaign – this is a concerted effort to educate advisors and customers on addressing needs they do not know they need yet.
Carriers should see this as an opportunity to invest in distribution relationships and their customers. This education strategy has three legs:
- Identify customer needs
- Product education
- Product selection
Identify customer needs
Anticipating customer needs is not only a slogan for restaurants, and it goes beyond initial customer segmentation. Consider that approximately 61% of nonretired Generation Xers did not consider retirement as an urgent priority until they reached age 50 or later. That means any product focused on addressing retirement needs would likely not have been considered for any of the customers until they became 50 or older. Distributors can challenge this by thinking ahead, but advisors can only plan for what they know.
Carriers must begin the process by imagining what is coming next. One example of this is in addressing the so-called “sandwich generation” – those who are caring for aging parents as well as children. Anticipating what this generation will likely need (e.g., long-term care for themselves and parents, the ability to care for children, guaranteed lifetime income, etc.) positions the carrier to have the right products to address these needs.
Product education
Carriers must partner with distributors to develop plain speak products – a clear set of benefits that can be applied to these increasingly common life scenarios. The simplest way to do this is to expand the definition of goal-based planning. For example, does a customer want to live at home in the event they need to receive care? If so, there should be a product that directly addresses that need.
Put a different way, survey data shows that people respond better to “guaranteed lifetime income” than to the word “annuity,” even those words describe the same thing. Carriers should also leverage artificial intelligence to evolve their sales training to identify optimum product combinations and bundles to address increasingly complex sales scenarios to support distributors. Developing customer segments and personas is the beginning of this, but leveraging additional data points may reveal previously unrelated data points.
Product selection
This is the simplest leg of the education stool for carriers, because it requires advisors to have the ability to differentiate between products in the market and understand why one product is superior to another.
Even so, carriers must innovate their illustration tools and sales software to support advisors beyond simple product comparisons and instead focus on outcome comparisons. This will become increasingly important as the advisor field force continues to age out and younger, less experienced agents are forced into complex sales situations. Innovation in the sales tool space will be a useful tool for this transition.
While carriers should focus on distributor education, the education efforts should broadly target consumers as well. The most effective method to improve advisor knowledge is through repeated questions from consumers asking about a particular product. Additionally, consumer education efforts may result in developing relationships with customers outside of the sale, improving customer retention efforts. Carriers that invest in distributor relationships and consumer education will position themselves for greater retention in both arenas.
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