Communicating Life Insurance Effectively

The commercial for New York Life, which is part of an advertising campaign to get consumers to associate the company with the good things in life rather than the insurance it sells, is just one example of how an insurer is trying to solve a difficult problem: how to market a product that reminds people of their own mortality.

 

“That’s not an easy subject for people to talk about,” said Todd Fancher, president of the American Family Life Insurance Company. “You’re really talking about buying death insurance.”

 

Life insurance companies must overcome other significant barriers. Life insurance, for one, is optional, and most people do not think about buying it until marriage, the birth of a child or another significant event. When it comes time to make a decision, insurance’s complexity and people’s misperceptions about how much they need and what it costs can drive people away.

 

“What’s interesting about life insurance is that we know that most people value it,” said Todd A. Silverhart, director of insurance research at Limra, an insurance trade organization. “But we also know that there’s a lot of confusion in consumers’ minds in how to go about buying it, how much they need, who to buy it from.”

 

Over the last several decades, the percentage of households in the United States that own life insurance has fallen. Seventy percent of American households now own life insurance, down from 83 percent in the 1970s, according to Limra.

 

Anek Belbase, a researcher at the Center for Retirement Research at Boston College who helped conduct a recent study on life insurance purchase decisions, said people generally shied away from making the difficult financial calculations required to determine how much life insurance they needed. He said they resorted instead to mental shortcuts when budgeting for life insurance, which could distort how much coverage they thought they should buy.

 

For instance, people tend to think about how much money their family will need to pay off big future liabilities like a mortgage, but few consider how much life insurance they will need to replace their monthly income. As a result, he said, people often miscalculate how much insurance they need.

 

Mr. Silverhart of Limra said that for a 20-year, $250,000 term life insurance policy, about 80 percent of consumers overestimated the annual cost, making it seem less affordable.

 

Howard Kunreuther, a professor at the Wharton School of the University of Pennsylvania who studies insurance and behavioral economics and who has written a book on the subject, said another barrier to selling any kind of insurance was that people thought of it as an investment rather than a protective measure.

 

“The hardest thing to convince people on an insurance policy is that the best return on a policy is no return at all,” he said. “The whole idea is to try to convince people that insurance is a form of protection.”

 

But that kind of thinking can make life insurance a tough sell. Why buy protection now for an event that is uncomfortable to think about anyway?

 

To break down some of these barriers, companies are trying new marketing approaches to reach consumers more directly and make the buying process easier. In 2013, MetLife set up kiosks in Walmart locations in South Carolina and Georgia where customers could buy the first month of a life insurance policy for $5. The pilot program ended in 2015.

 

Protective Life has worked with Costco Wholesale to offer life insurance to the retailer’s members. Massachusetts Mutual Life Insurance Company started the Society of Grownups to promote financial literacy, with a location in Brookline, Mass., where people can meet with a financial adviser or attend a class.

 

“It is really about building relationships with customers,” said Telisa Yancy, vice president for marketing for American Family Insurance, which tries to connect with local communities through civic groups and religious organizations.

 

Some companies also try to persuade consumers to buy life insurance through advertising campaigns that deliberately have nothing to do with mortality.

 

In addition to its recent commercial featuring babies learning to walk, New York Life also has ads that depict parents doing things with their children, like riding roller coasters. American Family Insurance recently introduced an ad showing the football player J. J. Watt and the basketball player Kevin Durant, who go around encouraging various people, including a nurse and a runner.

 

There have also been missteps. Nationwide Insurance, for instance, ran an ad during the Super Bowl last year to promote a program to make homes safer that featured a young boy lamenting the things he would never be able to do because he had died in a preventable accident. The ad was criticized as being too dark.

 

Maybe worse, few marketing efforts by life insurance companies are memorable.