Study Offers Ways to Close Life Insurance Coverage Gap

Life insurance coverage is at its lowest point in more than five decades, according to a research project undertaken by Genworth Financial and the University of Virginia.  

According to the 2011 Genworth LifeJacket Study, “7 Key Insights to Help Close the Coverage Gap,” almost half of Americans with household incomes between $50,000 and $250,000 do not have life insurance; those with insurance have only enough to cover 3.6 years of income.

Genworth developed the LifeJacket research project in collaboration with Dr. Gregory B. Fairchild, of the University of Virginia. According to the findings, Americans want to work with an agent or adviser to understand the role of life insurance in securing their families’ futures. Additionally, 40% of consumers do not believe they have enough life insurance to meet their families’ long-term needs. The study illustrates that financial professionals should change the way they approach their client base and break down the barriers that keep families from obtaining adequate coverage.

“While the industry has done an excellent job of offering products that meet the consumer needs, we now have the deep insight needed to bridge the coverage gap and bring consumers to the table – creating a more effective way of doing business,” said Anthony Vossenberg, senior vice president, Life and Annuities at Genworth. “This study provides advisers and agents with insights needed to educate consumers about their insurance needs and motivate them to secure their financial futures.”

More than 60% of those who currently own life insurance said they wanted to meet with their adviser at least once a year. However, of those who want that frequency of contact, only 38% indicate that they are actually receiving it.

Life transitions, such as marriage, purchase of a home or the birth of a child, are periods for reevaluation and reflection, says Genworth. However, the LifeJacket research revealed that the time between the "trigger event" and actual purchase varies widely, depending on the event. There is an opportunity for financial professionals to shorten the timeframe between life transitions and purchases by reestablishing connections and providing consumers greater control in the educational process.

The research also found that clients want an annual life insurance review that is fast and efficient, and those who receive one report having a stronger relationship with, and more trust in, their adviser. Seventy-seven percent of respondents indicated that they don't expect a lengthy annual review - an hour or less will do. Those who are receiving an annual life insurance review (47%) have the highest level of trust in their adviser.

Of those who own life insurance today, one-third purchased their policies more than 10 years ago, indicating the possibility that life insurance needs may have changed for a large population of consumers since initial purchase.

Almost all beneficiaries in the study (94%) indicated they needed additional life insurance coverage in order to maintain their standard of living. Forty-three percent of respondents have used life insurance income to pay outstanding debts/loans, even though only 33% intended to do so. Another 48% indicated insurance benefits are used to pay for basic living expenses, while only 32% expected to use it for such a purpose.

Over the course of 2010 and 2011, Genworth and Dr. Fairchild conducted a variety of quantitative and qualitative research studies. Genworth's customer insights team either interviewed participants or worked with outside research firms to develop, launch and interpret results for 240 participants (ages 18+) for qualitative research and 25,445 participants (ages 18+) in the quantitative research.