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Study: Life insurance industry has a communication problem

By Maryalene LaPonsie on July 18th, 2014

When it comes to buying life insurance, many consumers describe the process as frustrating, confusing and overwhelming.

That's according to industry group LIMRA, which conducted a joint survey with consulting firm Maddox Douglas. The survey discovered terminology used by life insurance companies could be derailing the purchases of as many as 19 million consumers who believe insurance is valuable but who haven't made it through the shopping process yet.

Consumers confused about life insurance terms

At the heart of the problem may be the words life insurance companies use in their marketing materials.

"The words, images and messages used to explain financial products don't seem realistic or relatable to many of these consumers," said Scott Kallenbach, research director of LIMRA Strategic Research, in a written statement.

At least two-thirds or more of survey respondents did not feel confident they understood the meaning of these words.

  • Rider
  • Guarantees
  • Living benefit
  • Annuity
  • Underwriting

In addition, despite the popularity of whole life policies, nearly three in four respondents did not feel confident they understood the meaning of permanent life insurance.

Whole life is a common form of permanent life insurance, which is so named because the coverage is permanent so long as premiums are paid. Meanwhile, term life is not permanent and offers coverage for a set number of years.

6 elements of authentic communication

LIMRA and Maddox Douglas say the survey results point to a need for life insurance companies and brokers to revamp how they communicate with consumers.

"Authentic communication is much more than a revamping of marketing materials and ad campaigns," said Maria Ferrante-Schepis, managing principal for Insurance and Financial Services Innovation at Maddock Douglas, in written comments. "It is a major innovation opportunity if internalized by the entire culture of an insurance company."

The groups recommend companies and brokers make sure the following six elements are part of their communications with customers, whether that is answering questions about affordable life insurance options or providing life insurance quotes.

  • Easy to understand
  • Down to earth
  • Memorable
  • Positive
  • Credible
  • Relevant

While companies and brokers work on improving how well they convey the details of insurance plans, consumers may want to review websites intended to improve knowledge of insurance products. In addition to reading the articles here at CompuQuotes.com, consumers may want to visit Insure U, a informational site maintained by the National Association of Insurance Commissioners.

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