Putting Market Segmentation to Work
In the Middle Market
Walter H. Zultowski, Ph.D.
WZ Research + Consulting, LLC
SOA Life & Annuity Symposium
May 6, 2013
Demonstration Project Segmenting the Middle Market
• Supported by the Marketing and Distribution, Product
Development, and Reinsurance Sections, and the
Committee on Life Insurance Research
• Completed in Second Half, 2012
• Detailed reports available on the SOA website
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Different from most middle market
segmentation approaches
• Attitudinal/behavioral vs. demographic/lifestage
segmentation
• Goes beyond needs identification to what and how the
middle market wants to buy when it comes to life
insurance
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Middle Market Definition: “Young Families”
• Age: 25-40
• Household Income: $35,000 - $125,000
• At least one dependent in the household
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Segmentation Results
Protectors
Opportunistic
Buyers
26%
39%
35%
Planners
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Understanding the Segments
Opportunistic Buyers (39%)
• Not a strong belief in life insurance
• Buy because it was made available to them
• Have less coverage; less confident in adequacy of
coverage
• Least likely to be planning for the future
• Least likely to seek advice of an agent or advisor
• Less likely to have children
• Often buy at their place of work
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Understanding the Segments (cont’d)
Planners (35%)
• Most likely to appreciate the lifetime value of life
insurance
• More likely to buy as a part of a financial plan
• More likely to buy for “general peace of mind,” or
because it’s the “right thing to do”
• Value the role of the agent
• Somewhat more likely to be female
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Understanding the Segments (cont’d)
Protectors (26%)
• Buy based on a need rather than a strong belief in
the product
• Purchases typically life event driven, most likely the
birth of a child
• Need for life insurance is temporary, rather than a
part of a lifelong plan
• More likely to buy term
• More likely to buy based on affordability
• Somewhat more likely to be male
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Understanding the Segments (cont’d)
The segments are similar in terms of:
• Income, education, employment status
• Health status and mortality expectations
• Perceptions of adequacy of life insurance coverage
• General views of agent
Protectors:
• Somewhat older
• More likely to be married/in a civil union
• More likely to have children
• More likely to describe themselves as “upper middle
class”
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Putting This Segmentation Approach to Work:
• Categorize prospects into three segments based on
answers to 9 questions
(can be found on the SOA website)
Accomplished by:
– Agents asking questions in a fact finder
– Call center reps asking the questions
– Prospects answering the questions on a website
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Putting This Segmentation Approach to Work
• Develop different marketing approaches for different
segments. Can extend to:
– Different website “landing pages” based on one’s
segment
– Different sales presentations by agents
– Different scripts used by call center reps
– Different direct mail letters
– Different products emphasized with different
segments
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Putting This Segmentation Approach to Work
(cont’d)
• The fundamental concept:
– To use this information to improve the efficiency and
effectiveness of one’s marketing efforts
– Applications will vary depending on a company’s
target market(s), product set, and overall marketing
strategy
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Examples
“Opportunistic Buyers”
• Emphasize general education about the value of/need for life
insurance
• Promote price and value instead of conducting a needs analysis
• Encourage workplace buying, disturb them about its “portability”
• Don’t view workplace purchase as an end in itself, seek
opportunities to make additional sales to workplace buyers over
time
• Attempt to identify future major life events, at which time they may
“morph” into another segment
• In developing leads for agents, leave them off the list
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Examples (cont’d)
“Planners”
• Don’t emphasize the purchase of life insurance in response to major
life events, instead emphasize the role life insurance can play over
one’s lifetime
• Emphasize the emotional side of the sale – e.g., “peace of mind” and
the “right thing to do”
• Use needs analysis tools, and sell life insurance within the context of
one’s total financial picture
• Discuss a program of planned term conversions as their incomes and
assets grow
• Reinvigorate product concepts – e.g., graded premium life and
guaranteed insurability options
• Given no additional information about a female prospect, assume she
is a “Planner”
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Examples (cont’d)
“Protectors”
• Don’t discuss needs analysis and the value of life insurance over
one’s lifetime
• Emphasize the value of life insurance in providing income protection
in response to major life events
• Be vigilant for future “non-traditional” life events -- e.g., divorce, job
change, death of a parent
• Disturb them with the idea that many in their ‘50’s and’60’s today
are finding their life insurance coverage expiring before their need
for income protection has passed
• Consider new product designs – e.g., “term to age X” with an option
to renew for X number of years on a guaranteed issue basis
• Given no additional information about a male prospect, assume he
is a “Protector”
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Next Stage:
• Use “big data” analytics to predict membership in the
segments
• Avoids the need to ask the 9 questions
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