Selling Life Insurance Online: A Look Back Over 10 Years

Podcast: Play in new window | Download

The Insurance Pro Blog is now 10 years old.  It was July 2011 when I sat down and officially launched the site, which was an idea I had rolling around in my head for a couple of years.  While I do find the practice of celebrating certain anniversaries most likely tied to the basis of our numbering system a bit odd, it is time to acknowledge that we've been at this for a while and there are a few consistent themes we observed throughout the last decade.  For those seeking to accomplish something similar or just looking for a little more insight into our world, we wanted to share some key lessons learned since wandering out onto the internet to talk about life insurance.

The Mutual Claims Doesn't Really Hold Water

The old mutual insurance company claims that they are best positioned to deliver value to the policy owner because they vest ownership in the company with said policy owner is iffy at best.  While there are certain legal imperatives any insurer that issues participating life insurance must follow, I have no empirical evidence to support the idea that mutual insurers do in fact do better by their clients than non-mutuals–and believe me, I've waded through piles of data testing this claim.

The truth is, both company structures excel and fail at doing great things consistently.  I don't mean to suggest that for certain people or situations one is better than the other.  I mean there is little consistency and some companies do a great job while others do a poor one.  Knowing which ones will be good and which ones won't isn't always apparent, so there is an element of caveat emptor at play.  That being said, one of the advantages of being around for the time we have allows us to gather pretty significant data on where the good and bad lie.  Mistakes we made earlier on, we won't repeat.  And it's rarely been the case–so far in our experience–that a good company becomes a bad one and vice versa.

Second Opinions Seekers Rarely Seek a Second Opinion

Those who buy first and ask questions later sometimes regret their decisions.  When it comes to life insurance, they often begin looking into the decision they made six to eighteen months after purchase.  This often lands them on our website where they take the opportunity to reach out to us and ask if we'd be willing to review their policy and give them our thoughts.

The interesting trend we discovered with the majority of these people is that they are really looking for someone to tell them, “it's okay; you made the right decision.”  Sadly, we don't get to say that very often.

And having to deliver this not-so-great news, we're often met with pushback as these individuals attempt to explain away the truth with some meaningless marketing jibberish or other intellectually bankrupt notion they desperately want to be true.  This became such a huge drain on our time that we began charging for such reviews a few years ago.

Life Insurance Industry Slow to Adopt Modern Technology

This one is a bit of an open secret for long-time readers of this blog or listeners to our podcast.  The life insurance industry appears stuck in a world where it's the early 90's and it can't get out of its own way when it comes to systematizing its processes.  While improvements did come over the past few years, COVID certainly forced the industry's hand a bit–we still have painful–somewhat humorous–pain points that pop up all too often.

Selling life insurance over the internet was definitely against the grain in 2011.  And surprisingly, it's still more against the grain than you'd imagine 10 years later.  We've put a lot of time and money into developing our own systems to facilitate the process and the life insurance industry as a whole has been little help in coordinating those efforts.

Way Too Many Insurance Agents/Marketers Overcomplicate Life Insurance

While life insurance is a robust and versatile financial tool, it's not the secret solution to all the world's problems.  It's also not something that should take 10 weeks of one-on-one meetings to develop a new religion of financial thinking to justify owning it.  This confuses people and does more harm than good.

Life insurance is a great place to store cash at a rate far better than a bank savings account, CD, or money market fund.  It also provides a stellar way to create retirement income.  It boasts several impressive tax benefits.  And let's not forget the death benefit part.  That's it.  There's nothing else to be said beyond looking at a specific individual's circumstances and figuring how–if at all–life insurance makes his/her life better.

Standard Risk Class Means Normally Healthy; Preferred Means Superior Health

Okay, here is some internal bitterness, but I can't even begin to recount the number of times I've argued through this one.  Standard is not bad.  It means you are normally healthy for your age.  Preferred and Preferred Plus mean that you are in superior health for your age.  Now, I know we all like to think of ourselves as above-average in every possible category, but we aren't.

I blame some of the confusion on this on other financial media that always brings up health and life insurance underwriting in a very cursory way looking something like, “if you're healthy, you'll save money on your life insurance premiums.”  This often infers that if you are capable of climbing the stairs without being winded, you must be in excellent shape and worthy of the preferred plus category.  This is not the case.

Even those who regularly exercise and follow a healthy diet are standard in more situations than you'd think. There are many aspects of health that are difficult to control.  Life insurers have spent a lot of time and money routing out the various signals they can use to evaluate just how healthy someone is.  You may think to yourself, “sure I have this diagnosis, but I'm otherwise perfectly healthy and I feel fine.”  But the fact that the diagnosis exists, speaks to a possible signal that you aren't in superior health and as such are not qualified for preferred plus status.

Lastly, I want to note that there is no standardization for what makes an insurance company categorize someone standard versus preferred plus.  Sometimes, this is a game of semantics, and preferred with one company may be considerably better than preferred plus at another company.

There Are Way More People Putting Way More Money into Life Insurance Policies Than You'd Think

Cash-value life insurance is largely a niche asset management provider within the life insurance industry.  I know some people oppose using life insurance for this purpose.  They've made their feeling known–though rarely well thought out and explained–on other websites for just as long as we've been around.

Buy despite this, people continue to open up life insurance policies for this very reason and life insurers appear to continue to grow the number of these policies outstanding year-over-year.  We personally manage policies with millions of dollars in premiums flowing into them every year and we're a sliver of the overall pie.

What's most interesting, perhaps, is the number of people placing hundreds of thousands of dollars into these policy types every year.  It's far more than you'd think.  We work with many people doing exactly this and are super happy that life insurance is part of their financial plan.  Whole life insurance and universal life insurance have faced an onslaught of opposition for decades.  And despite those opposing views, they continue to find lots of people who want to put lots of money towards them.