May 9, 2012
We’ve all too often heard these assertions: Insurance is not bought, it’s sold. People don’t plan to fail, they fail to plan. We have a financially illiterate society.
The upshot of these familiar sayings is that in the financial services world, individuals need to be practically forced into understanding even simple concepts. This is an implicit put down of consumers, and in reality, it’s an explicit indictment of us.
We know consumers will go to great lengths to research buying a cell phone, a coffee pot or a microwave oven, but they avoid researching financial products like the plague. Imagine how few consumers spend time researching a critical illness product, a health insurance plan, disability plan or life plan. And yet the coffee pot or cell phone costs a fraction of the amount entrusted to the financial products we sell.
Perhaps it all starts with our desire to be entertained and pampered. Financial products don’t offer instant gratification. In fact, they generally only deliver value in situations that are either boring or disturbing. Who wants to think about disturbing events such as poor health, critical illnesses, disabilities and premature death? And saving money for the future is boring—you have to save for years and years to have enough to live on comfortably.
Additionally, when a television personality or politician happens to address any of these financial items, it seems to be their mission to make the financial services business look bad. Often, they cast us in the light of our failure to provide benefits to everyone—even those who sat in multiple employee meetings and failed to purchase the voluntary benefits that could have replaced the missing income, paid the uncovered bills and so on.
It’s frustrating, but what do we see when we look in the mirror? In the voluntary benefits arena, we have choices of methods to use in the enrollment process: group meetings, one-on-one sessions, computer systems and IVR systems. We pay a lot of attention to choice of enrollment methods.
But one area we haven’t adequately addressed is helping employees understand the risk/reward of the various products. This is especially true when it comes to disability (income protection) insurance.
I have tried using many variations of this theme: How long can you maintain your standard living without a paycheck? For most, the answer is “not long.” This is an essential message. Yet in study after study, when employees are asked to rank benefit products, they consistently rank dental (low risk/low reward) and vision (low risk, low reward) over disability protection (high risk/high reward).
Since most of us also sell dental and vision coverage, we’re understandably hesitant to challenge employees to understand this risk/reward relationship. But is this hesitancy in the best interest of our clients? Shouldn’t we point out that you can skip dental coverage and still pay your bills, including the dentist, but if you decline disability coverage you can’t pay your bills at all—at least not for long.
Overcoming illiteracy requires engaging employees in understanding the risks and rewards of various benefit plan options. As in the dental/disability example above, it needs to go beyond “here’s a product to consider” into better understanding—and less illiteracy.