People who have financial fears are more than five times more likely to say they want to buy life insurance, according to new research by LIMRA. However, at the same time, that research also found that interest in buying life insurance is often overstated as affordability is a common reason why people ultimately choose not to buy.
“The financial fears that correlate with a motivation for buying are also a practical reason for not buying,” Jennifer Douglas, senior research director for LIMRA and LOMA, said.
“One might think someone who is scared about making ends meet wouldn’t be thinking about buying life insurance anytime soon, but nearly one in five of them are, compared to 3% of people with no financial fears. [But] even with the best of intentions, consumers tell us affordability is a major reason they don’t buy coverage they feel they need.”
Given the findings, LIMRA suggested financial advisors could best serve target markets by making an effort to understand the core financial fears consumers have and taking a holistic approach to address those concerns.
“Reaching the underserved market and closing the life insurance gap is something our industry struggles with,” Douglas noted.
She added, “Understanding and responding to these diverse fears enables financial professionals to adopt a holistic approach with tailored solutions.”
Fear driving consumer interest
LIMRA’s 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 “scares” 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, were more likely to be concerned about making ends meet. Respondents in their 40s and 50s were more likely to be concerned about retirement savings and preparedness.
In contrast, 3 in 10 respondents said nothing about their financial situation scares them. Respondents aged 60 and over were the most likely to give this response.
LIMRA found that respondents with financial fears were significantly more likely to express serious interest in buying life insurance within the next year.
“It won’t come as a surprise to advisors that fear may play a role in consumer interest in life insurance,” Douglas said. “We suspect its role is part motivation: 92% of those interested in buying life insurance in the next year told us about something about their financial situation that ‘scares’ them. However, it was almost never explicitly linked to the financial implications of their or a loved one’s death.”
Existing life insurance coverage did not play a major role in LIMRA’s findings. The study explicitly stated that the difference in life insurance interest between those with top-of-mind financial fears and those without is not because the latter group already has coverage.
Trust plays a major role
Understanding the financial concerns of their clientele will help financial advisors provide better tailored solutions and also build necessary trust, LIMRA’s study suggested.
“We certainly don’t want to promote the use of scare tactics or feeding into consumers’ fears, however it is important that consumers understand the risks of not having coverage,” Douglas said. “Moreover, it’s important for financial professionals to be cognizant of the array of consumer financial fears and attuned to the nuanced narratives that range from immediate survival concerns to long-term uncertainties, fears that span across wealth and circumstance.”
The importance of the relationship between advisors and clients was emphasized in LIMRA’s study. Douglas noted that the correlation between financial fears and interest in life insurance “likely says something about the people who value protection protects.”
LIMRA found that existing life insurance owners (73%) were more inclined than disinterested non-owners to express financial fears (62%). Similarly, people who work with a financial professional (70%) were more likely to report financial fears than those who had no interest in working with one (63%). Further, those who were interested in working with a financial professional were the most likely to share their greatest fear (77%).
The findings indicate consumers may be more willing to share their financial fears and concerns if they had a relationship with a financial professional they trust.
In an earlier study, LIMRA found the “ability to address all aspects of my financial situation” was the most important attribute for choosing to work with a financial professional for 45% of consumers. Consumers were also more likely to recommend advisors who they felt took more of a holistic approach to addressing their financial needs.
“Clients who describe their financial professionals as taking a very holistic approach appear the most likely to recommend them, while those who feel their financial professional takes more of a sales approach but perhaps doesn’t fully embrace this model appear the least likely,” Douglas said.
LIMRA is one of the largest American trade associations, representing more than 700 members. Its fourth quarter 2023 Consumer Sentiment Survey was conducted in October 2023.
Rayne Morgan is a Content Marketing Manager with PolicyAdvisor.com and a freelance journalist and copywriter.
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