LIMRA Study: Needs Analysis is the Key to Life Insurance Sales

A recent study by LIMRA International, released in November of 2011, shows that two factors are powerful in influencing consumers’ decisions to buy life insurance.

1. Delivering a needs analysis to document an appropriate amount of coverage.

2. A professional’s recommendation of a specific amount of coverage to buy.

LIMRA says these factors are much more influential in motivating sales than focusing on different types of life insurance or carriers. For example, only 41% of consumers said they received a current needs analysis while shopping for insurance. But 73% of those consumers bought coverage and their average face amount was $423,000. Among consumers who did not receive a needs analysis, only 49% bought and the average face was $215,000.

For only about half of life insurance shoppers do professionals recommend a specific amount of coverage. According to LIMRA 70% of those shoppers buy, with an average face of $427,000. This compares to a 57% buy rate and $260,000 average face when no specific coverage recommendation is made. You can read LIMRA’s summary of study results here.

What’s the “moral of this story?” Fifteen or 20 years ago, it was a standard part of every new agent’s training to: 1) complete an objective needs analysis; and 2) make a recommendation on how much life insurance coverage is needed. Since then, we’ve seen agents migrate their sales approaches into explaining new types of insurance (e.g., variable life and indexed universal life), complex features such as secondary guarantees, and an expanding variety of riders and options. Some agents even claim that needs no longer matter because “life insurance is wants-based, not needs-based.”

As a result, many consumers are so confused they can’t move forward.

It’s time for life insurance companies and agents to get back to basics by focusing on defining needs and advocating how to meet them. Several techniques that agents are using to measure needs (multiple of salary, human life value, etc.) are acceptable and useful in closing sales for high face value, as long as consumers can understand them.

In summary, once again LIMRA’s research has shown the way. If you want to increase your life sales fast, get back to basics and emphasize needs.