Monday, November 7, 2016

Insurance Buyers, Static or Metamorphic

My 10 year old son is in homeschool.  His best and favorite subject is Science (mine too).  He and my wife get to do all kinds of cool science classes and experiments.  I am not very involved in the lessons except when I overhear what they’re working on and feel compelled to interject with a very important theory of my own.  Typically, I find that my speculation is undervalued by the two of them.  

Earlier today, I heard the words, “Static” and “Metamorphic” in reference to earth science.  I thought about how these two words are perfect to describe people who buy stuff.  We have addressed the idea that consumers buy differently now than they did in the past, but I want to talk quickly about the rate of change.  

First off, the Insurance industry is very slow moving, kind of like a three toed sloth.  For decades, the same type of sales training has been used for these 2 reasons.  The products have been fairly consistent over long stretches of time and people have consistently fallen for the same sales pitches.

But, there has been a change.  Did people get smarter all of a sudden?  No.  They did not.  They used an information gathering tool that became available.  It used to be that if you needed information on life insurance, you reached out to an agent.  If he gave you a queasy feeling and if you wanted a second opinion on life insurance, you reached out to another agent.  At some point though, you had to buy or you would have invested too much time shopping to justify the savings you may have achieved.  In other words, a person is only willing to dedicate a specific amount of time to learning about a particular good or service before deciding to buy it or not.

About, 15 years ago, people were still getting their first look at life insurance products through the agent but then seeking validation of their queasy feelings through the internet.  Even when internet speeds were that slow, you could now figure out that you were being pitched something that sucked… and you didn’t have to burn time getting in front of another agent.

Fast forward to today.  In just 15 short years, the captive/career agent system for life insurance is crumbling.  Career agents are being laid off because consumers are too well informed to buy from them.  Even those who still work for life insurance companies are often allowed to sell other companies’ products because if they do not, the consumer will just buy the best priced product somewhere else.  The carriers are being forced to innovate.  They are finally using online applications and are closing offices because no one walks in any more.

Neck ties are being sent to GoodWill for greatly overestimated tax deduction values.  The best, most talented agents of today are independent.  They are smarter about the industry and product, yet much more casual.  They address the need and help the client buy the right thing instead of selling the merit of a one size fits all product.  I think i may have been one of the very first life insurance salesman to abandon slacks for jeans.  

The flow of information in the last 15 years has made a metamorphic change, which has been the catalyst for changes in the whole industry.  The need for life insurance has remained static.  And this may surprise you but the client has really only made a minor change in the way he or she buys.  

In general, people want the same thing they always wanted.  They want to take care of their families.  They want to understand what they are buying.  They want to buy it at the right price.  And all things being equal, they prefer to buy from a person.  But, old methods of selling will feel more and more uncomfortable to the client.  I believe those methods will eventually be abandoned by the industry.