In Search of the Industry’s Holy Grail:
Penetrating the Middle Market
Walter H. Zultowski, Ph.D.
WZ Research + Consulting, LLC
Brian Perlman, Ph.D., CLU, ChFC, FLMI
Mathew Greenwald & Associates, Inc.
Society of Actuaries Webinar
November 15, 2012
Sponsors and Project Oversight Group
• Marketing and Distribution Section
• Product Development Section
• Reinsurance Section
• Committee on Life Insurance Research
Adam Vanevenhoven,
Chairperson
Donna Megregian
Doug Bennett
Scott Sheefel
Jeffrey C. Harper
Michael Shumrak
Jeff Johnson
Ronora Stryker, SOA staff
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Past Research…
• Treats the market as an undifferentiated whole
• Asks very general questions
• Too much reliance on demographic segmentation
• Overlooks the role played by workplace access/buying
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Consequently, Past Research…
• Produces general findings diluted by mixing
subsegments of the market
• Produces superficial understanding of the market
• Provides very general direction for action:
– Provide more education
– Motivate agents to pursue the middle market
– Sell to the market online
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How this Research Effort is Different:
• A program of subsegment studies rather than a
single study
• A two-stage market segmentation approach
• Attitudinal/behavioral vs. demographic segmentation
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Phase 1: “Young Families”
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1,000 primary financial decision makers
Age: 25-40
Household income: $35,000 - $125,000
At least one dependent in the household
If no dependents, but have purchased life insurance
• 18 minute online survey, conducted by Matthew
Greenwald & Associates
• August 6 – 13, 2012
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Study Deliverables
• SOA Annual Meeting presentation
• Research report
• “White paper” (strategic implications)
• Webinar
• Articles, interviews, etc.
• Subsequent decision to be made regarding future
studies in the program
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Objectives
• Provide a new way of looking at the middle market
• Help marketers apply this information in their
business models (recognizing that different
companies may use this information differently)
• Help companies penetrate the middle market more
efficiently and effectively
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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 specific needs
• 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
• See little need for life insurance beyond age 55
• 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 agents
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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Attitudes Toward Life Insurance
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Overall, how important do you think it is for a
family to purchase life insurance?
41%
69%
Extremely important
36%
19%
43%
28%
Very important
48%
53%
15%
Somewhat important
2%
15%
27%
Not too/Not at all important
1%
0%
1%
1%
Total (n=1,000)
Planners (n=345)
Protectors (n=258)
Opportunistic Buyers (n=397)
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Please indicate how much you agree or disagree
with the following statements:
(Planners n=345, Protectors n=258, Opportunistic Buyers n=397)
Everyone with someone
depending on their
income should have
some form of life
insurance
Life insurance is an
integral part of a
person’s life long
planning
It is important to have life
insurance throughout
your life
Life insurance is as much
of a necessity as food,
shelter, and clothing
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Please indicate how much you agree or disagree
with the following statements:
(Planners n=345, Protectors n=258, Opportunistic Buyers n=397)
At your age, it is more
important to put money
toward retirement savings
than life insurance
The life insurance offered
by employers is sufficient
to meet your needs
Life insurance serves only
a temporary need until
such time as kids leave
the house or the mortgage
is paid off
There is little need for life
insurance past age 55 or
so
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How knowledgeable would you say you are about
the following?
(Planners n=345, Protectors n=258, Opportunistic Buyers n=397)
Auto insurance
Health insurance
Life insurance
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Please indicate how much you agree or disagree
with the following statements:
(Planners n=345, Protectors n=258, Opportunistic Buyers n=397)
Your most important goal
is to increase your
family’s financial security
If you or your immediate
family member ever
needed assistance, you
have close friends or
relatives who would be
willing and able to step in
and help
Being able to buy
whatever you want for
yourself and your family
makes you happy
It is your responsibility to
make sure that your
family has everything it
wants
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Life Insurance Purchase
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Where would you go to get information
regarding life insurance products and costs?
Multiple responses accepted
Online
A life insurance agent
Call the life insurance
company directly
A relative
A friend
Written material
A financial advisor other than
a life insurance agent
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To what extent was the following ever a reason
that motivated you to purchase life insurance?
(Planners n=345, Protectors n=258, Opportunistic Buyers n=397)
I simply thought I should
You were given the
opportunity at work
Birth of a child
As part of a financial plan
Getting married
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To what extent was the following ever a reason
that motivated you to purchase life insurance?
(Planners n=345, Protectors n=258, Opportunistic Buyers n=397)
A new job
Purchase of a home
Your spouse/partner or a
relative told you to do it
Your started feeling older
Someone you knew died
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Thinking about the most recent life insurance
policy you purchased, did you purchase it…?
(Filter: Has individual life insurance; Planners n=308, Protectors n=229, Opportunistic Buyers n=330)
At work
From an insurance agent
From a financial advisor other
than an insurance agent
By calling the company
directly
Online without working with an
agent
Through a bank
Through the mail
* <.5%
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How likely are you to purchase more life
insurance coverage in the near future?
(Filter: Has financial advisor and would like more coverage;
Total n=109, Planners n=44, Protectors n=24, Opportunistic Buyers n=41)
Very likely
Somewhat likely
Not too likely
Not at all likely
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Thinking about the next time you might purchase
life insurance, would you most likely purchase it?
From an insurance agent
At work
From a financial advisor other
than an insurance agent
Online
By calling the company directly
Through a bank
Through the mail
* <.5%
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Life Insurance Ownership
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What is the total amount of coverage or death benefit from
this life insurance and how much to you feel you should
have (In $1,000)?
(Filter: Has life insurance and reported amount, n=827; total reporting amount should have, n=924)
Average
Coverage
Average
amount
should have
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Which of the following best describes how you feel about
the total amount of life insurance coverage your household
currently has?
(Filter: Has financial advisor;
Total n=977, Planners n=338, Protectors n=251, Opportunistic Buyers n=338)
You have much/a little more
than you would like
You have the right amount
You have a little less than
you would like
You have much less than you
would like
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Putting This Research to Use
• Categorize prospects into the three market segments
• Can be 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 Research to Use (cont’d)
• 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 Research to Use (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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