Life insurance has always fascinated me. Not the policies, but the challenges of stimulating consumer demand now for a benefit way off in the future.
Tom Fishburne, in this latest “Moments of Truth” Marketoon, highlights the frustrated insurance executive seeking consumer intelligence from social media monitoring. I love Tom’s choice of the life insurance industry for this cartoon because it opens up tough questions about what it really takes to motivate consumers and, by association, the sources we rely on for insight.
A Peek into Life Insurance
According to industry sources, sales of life insurance have been steadily declining for over two decades. Six million households—10 percent of families with children under 18—have no life insurance protection at all. A lot has changed during this time period to help explain this: changing population, boomers paying off mortgages and reliance on other financial products like 401(k)s. But these observable changes don’t explain the entire decline.
According to The Center for Cultural Studies & Analysis, a think tank that helps industries solve the cultural riddles that impact consumer demand, buying life insurance was an “operating assumption” of the World War II generation. This was then passed on to their children, the huge Baby Boom population.
A recent paper issued by The Center says the following: “It is clear that potential consumers are no longer intuitively thinking about life insurance the way their parents and grandparents did. They are not predisposed to assume the value of life insurance. Meaning: they have to be convinced.”
In their report, Human Factors, The Center points out how the insurance industry uses its websites to deploy “reason.” This “reason” primarily takes the guise of articles with titles such as “The Five Worst Reasons for Not Buying Life Insurance.” “Five Silly Excuses for Not Buying Life Insurance.” And so on. The fact is, life insurance makes loads of sense when you think about it. You pay a small premium over the years to protect your family from expenses, income loss and financial duress. The “math” makes sense.
Beyond “Making Sense”– Emotion
We now know that if you light up the limbic system (the brain’s emotional center), then the logical brain will do its thing to validate the decision you want to make. We’ve also learned from Prospect Theory, the Nobel Prize-winning economic study of Kahneman and Tversky, that we humans don’t make decisions based on linear units of self-serving value as suggested by earlier “rational-based” economic theories. We are emotional. And, we act most strongly—even irrationally—to avert loss.
So what’s so hard about selling life insurance?
The real truth is that the emotions which lie in the subconscious drive our actions. We can’t supply consumers who have resisted buying life insurance with enough “reasons” to buy. They have to want it. Insurance companies and their industry organizations can’t just rationalize, they must “motivate.”
Perhaps industry associations should focus on the fundamentals of loss-aversion while individual insurance companies build emotional connections that tap into consumers’ real-life motivations. As researchers, we have to use the research that will reveal the emotional connections that most drive purchase in our industries, such as insurance. The right intelligence can better focus campaigns to motivate consumers to want insurance rather than just why they should.
Then, the “reasons to buy” will start to make sense.
For a copy of Human Factors, The Slow Death of Life Insurance, email [email protected]. There will be no unsolicited follow-up e-mails.