A strategic advantage of the life insurance industry has always been the selling skills of its sales force. However, a recent large-scale study of consumers who shopped for life insurance indicates that financial advisors’ sales skills are slipping.
The average number of life insurance sales per agent has been declining for years. Many reasons have been offered for this decline. Most focus on the consumer—he is more interested in investment products, he wants to save for retirement, he is too busy, etc. No one considers that the sales skills of the life insurance agent or advisor could have deteriorated. But new research shows that poor sales skills are also a reason why financial advisors do not make as many life sales as they once did.
A little less time on product introductions will free up time for sales skills review and training.
LIMRA International recently completed a large-scale study of over 3,000 consumers who shopped for individual life insurance. The study looked at both those who bought life insurance and those who did not buy. The results confirm that face-to-face selling is the best way to get consumers to buy life insurance. However, though face-to-face selling is effective, the study found that sales reps have gotten rusty in their life insurance sales presentations. So what needs improving?
We all know that referrals are the best way to make sales. Given this fact, it is amazing that sales reps are not asking for them. Their sales presentations have gotten sloppy and they have forgotten to ask for referrals. Only 29 percent of the consumers in the survey said that their sales rep asked them for a referral. Twenty-eight percent of consumers would have given a referral if the sales rep had asked. That is virtually the same percent of customers that sales reps asked for referrals. If sales reps just ask for referrals at every sales presentation, they will double the number of referrals they get.
Consumers were asked what got them to shop for life insurance. Many things prompted them, but the most effective—which accounted for the highest percentage of consumers who were actually buying—were events that occurred in their lives. Consumers who started shopping for life insurance because they got married, bought a house or had a baby were the most likely to buy. Those contacted by an agent or advisor bought at a lower rate. Whatever approach talk sales reps are using, it is not particularly effective. Maybe they need to go back to working baby, marriage and mortgage leads if they want to sell more life insurance.
Sales reps’ skills have gotten rusty perhaps because they are focusing on accumulation products rather than life insurance. When they do get in front of a life insurance prospect, the rust really comes through. A sloppy sales presentation only confuses customers, and customers do not buy what they do not understand. As evidence of a rusty sales presentation, half or more of the consumers in the study said they had real difficulty in understanding how much life insurance to buy, the policy details and provisions, if they are getting their money’s worth from the product, and what type of insurance to buy. The study showed that nonbuyers had much more difficulty in understanding what they were considering buying than buyers.
The major advantage of dealing with a sales rep is he can help you understand what you are buying. Amazingly, the results indicate this did not happen. When consumers who had a face-to-face meeting with a sales rep were compared to those who did not, there was virtually no difference in the level of understanding. Consumers were just as confused about life insurance, regardless of whether or not they met face to face with an insurance sales rep.
What is going on in the face-to-face sales meeting that is causing consumers to be confused? Well, for one thing, sales reps are not spending enough time determining the prospects’ needs. More than one in four consumers did not think the sales rep took the time to understand their needs. About one in four felt the sales rep pressured them to buy. And one in five said that the sales rep did not describe the pluses and minuses of the policy they were considering buying. But the biggest fact was the sales rep was not able to establish a level of trust in the nonbuyers. The level of trust was twice as high among buyers as it was among nonbuyers.
Without being there during the sales presentation, one can only surmise that the sales presentation is less precise, shorter and sloppier than when the sales rep first learned it. Too many points are glossed over and the consumer is left confused.
One of the big advantages of this study was the ability to ask those who did not buy why they did not buy. One reason that came out loudly and clearly was the sales presentation was ineffective. About one in four nonbuyers said they did not buy because they were afraid of making the wrong decision, and another one in four said they did not buy because they did not know enough about the product. More than one in three did not buy because they could not decide on the policy or coverage to buy. An effective sales presentation should address all these objections.
Sales reps may also be making life insurance too complex. People know that life insurance helps protect their families and loved ones from loss of income in case of premature death and helps cover their burial and final expenses. Even the nonbuyers know this. Over three out of four nonbuyers said their household still needs life insurance coverage. These are prospects who know they need life insurance; yet the sales rep did not make an effective enough presentation to get them to buy.
How did we get this
How did the sales force get so rusty in selling life insurance? One reason might be illustration selling. A sales illustration was the most commonly mentioned tool used in a sales presentation. Sales illustrations are important, but don’t really focus the attention of the prospect on the value of life insurance for income replacement and final expenses. Perhaps the reason people did not understand and did not buy is because the presentation revolved only on the illustration.
Another reason is that there are now fewer field managers to go on sales calls with agents. Without a sales manager to remind them, how many experienced financial professionals rehearse their presentation before they see a prospect? How many review a checklist after a presentation to see if they covered all the important points? How many ask someone to come along on a call to critique their presentation? Without someone to coach and critique your sales skills, they will atrophy over time.
James O. Mitchel, Ph.D., CEBS, is vice president and head of LIMRA International's Markets Research Center. You can email him at email@example.com.