Why is it so difficult to get people interested in life insurance?

[TonyINPFM]

Life insurance and other protection insurances are more popular in the states that the UK.

Being a Financial Adviser giving free advice on protection insurances i have found that people just don't want to know. They don't understand the importance of preparing your family financially if something should happen to you.

Is it that people are self programmed to avoid talking about illness and death?
The world of financial management still has a bad name?
Its too expensive in the current economic climate?

 

[marcusg2]

I have a good friend who is also an insurance agent. The fact is that money is so tight now that anything that isn't an imediate need gets dismissed very easily. It isn't about saving the family should a bad event happen - it's about putting food on the table tonight - and then tomorrow night.
I'm watching retailers bleed seriously at present - a flat screen TV was about $5000 when they first came out, rapidly they went below $2000 after a year or two - and now they are less than $500 - can't even give them away.
That's because all the early adopters have one and the rest simply can't afford the investment.

 

[Consistency]

Why is it so difficult to get people interested in life insurance?

From what I can see we are in a double dip recession and people are struggling to pay their rent, keep food on the table, clothe themselves and their families etc. Living for today is hard enough and life insurance is one of those expenses that can be done without to get through the day.

 

[maestro123]

becous they think that it is a fraud

Gammuto Violins

 

[Digger]

Ones mortality isn't the sunniest subject over which to hand money over for - some feel it's tempting fate.

 

[Steve Sellers]

Life insurance and other protection insurances are more popular in the states that the UK.

Being a Financial Adviser giving free advice on protection insurances i have found that people just don't want to know. They don't understand the importance of preparing your family financially if something should happen to you.

Is it that people are self programmed to avoid talking about illness and death?
The world of financial management still has a bad name?
Its too expensive in the current economic climate?

I write wills and young people just don't want to know. "What do I need a Will for". Ironically young people need a will most because more often than not they will have minor children.

People just don't think about that kind of thing until it is too late, some people think it is tempting fate. I think as far as insurance is concerned most people now see it as a con. I had my home insurance renewal come through this week, it had gone up! Hoe can insurance go up when I haven't made a claim.....a quick confused.com search and I found it another £30 cheaper than my current premium.

That is for simple stuff, finances on death are a whole lot more complex and most people would rather stick their heads in the sand.

 

[Dogsbody]

I think most people understand the importance of preparing for eventualities that may befall them, but if they are that knowledgeable they probably don't trust Insurance Companies.

My endownment policy for a mortgage taken out in 1983 just didn't do what was promised - I'll be kind and use the word promised, as guaranteed never appeared in writing but certainly was the term used - and I was never able to take the world cruise that was 'promised' and it didn't even pay off the sum insured. And I think I came out of it better than some as my policy got the benefit of early gains which many didn't.

There were/are many other issues that will not be forgotten - critical illness insurance which doesn't pay out because of some very minor small print, equity release which leave massive bills, etc, etc, etc.

Unless it is a legal requirement I WILL NOT touch an insurance company for any product, especially if there is any other way of covering the requirement, be that savings, investments, pensions.

The banks may be the current target, but they are very cosy bedfellows with insurance companies when it comes to ripping off the man-in-the-street at every opportunity. Many products offered these days are overly complex, seeming just so the customer is oblivious to the profit balance weighed in the providers benefit. Was it the Yorkshire Building Society recently offered a very basic, passbook operated savings account? Due to its transparency and simplicity it is their most popular account I believe. Since when have banks or Insurance companies been transparent or simplistic. Not recently I'm sure.

Rant over!

That's why I think you may find things a little slow!

 

[fisicx]

And there are so many get out clauses written into the policy that if you actually fall ill they never pay out as expected.

So basically they only want healthy people whose risk of getting ill is very low so that they can take your money and not have to pay out.

Insurance brokers, used car salesmen, estate agents, solicitors, bankers and politicians. All lower than whale doodoo.

 

[Steve Sellers]

Insurance brokers, used car salesmen, estate agents, solicitors, bankers and politicians. All lower than whale doodoo.

Don't forget SEO "experts" also selling fools gold.

 

[tony84]

From what I can see we are in a double dip recession and people are struggling to pay their rent, keep food on the table, clothe themselves and their families etc. Living for today is hard enough and life insurance is one of those expenses that can be done without to get through the day.

So then 1 person passes away or is made redundant and the whole problem gets twice as bad overnight - as well as financially struggling they then have to find money for a funeral, take time off work, someone to look after kids etc.
Im not having a go, i know this is how the majority of the population view insurance.

And there are so many get out clauses written into the policy that if you actually fall ill they never pay out as expected.

Life Insurance paid out on around 98.2% of claims in 2010.
Critical Illness paid out on around 89.9% of claims in the same year.
Thats according to the ABI (Association of British Insurers).

Life insurance pays out if you die, the only time they would refuse to payout is if you lied on your application - by lie that means when asked the health questions if you miss out something that they find it hard to believe you would have forgotten about. If it was something more minor you didnt mention and instead it would have incurred a rating on the premiums then they would usually make a partial payout.

Its a misconception that life insurance doesnt payout...it does.

 

[Doodle-Noodle]

Why is it so difficult to get people interested in life insurance? ..... because its difficult to get excited about (and want to spend your money on) something that will only become a benefit once you're dead.
And even then, there could be complications/get-out clauses/exemptions etc that mean they WON'T pay out to your loved ones and you won't be able to do anything about it because you're dead. So why bother.
Spend it now, have a good time and s*d the consequences.

 

[Chris Ashdown]

Also the true cost of buying insurance, the average small say accountant/book-keeper will probably make say £40,000 or less per year for that they will have their own overheads like office phone etc

Financial services take a major part of the first years payments or charge you a massive single payment for a three or four hour chunk of work

The costs seem well out of proportion to what they do and to protect us small nieve innocents we cannot even go into a insurance company and buy the policy direct and cut out the middle men

Having worked in the life insurance business there is nothing complicated in buying the product, and if you are capable of buying car insurance over the internet you should be able and experienced to buy your own financial products online with the exceptions of the complicated ones with high risk

So would you sell me life insurance or a investment package for say 4 times the average hourly rate say £20.00 so in total £80 to £100 all in and no commission

 

[tony84]

Financial services take a major part of the first years payments or charge you a massive single payment for a three or four hour chunk of work

The costs seem well out of proportion to what they do and to protect us small nieve innocents we cannot even go into a insurance company and buy the policy direct and cut out the middle men

Having worked in the life insurance business there is nothing complicated in buying the product, and if you are capable of buying car insurance over the internet you should be able and experienced to buy your own financial products online with the exceptions of the complicated ones with high risk

Protection (life insurance) doesnt work like that. I sell a policy, my commission is based on the premium. I get paid that a week or so after we set the policy up. If you cancel the policy in the first 4 years then my commission gets clawed back or part of. Its not the same as investments/pensions.

Also, what your saying at best is wrong at worst you could be costing someone thousands.
The average person hasnt heard of trusts, this is something that ensures any payout does not get included with the whole probate process and potentially IHT. Life Insurance as standard isnt placed in trust, this is something that is free and for the majority of people is advisable.

You pay a very small percentage more (maybe £1-2 a month) to get a fully advised service. If it turns out you dont get a payout, you are under insured, over insured and you do it yourself you have no recourse - it falls on your head for setting it up wrong. with an advisor it falls on their head and i have seen claims against advisors being upheld for making mistakes.

 

Don't forget SEO "experts" also selling fools gold.

40 million quids worth of cars sold last year.

some fool.

Anything to do with finacial services is based on the promise of a pot of gold.

 

[Dogsbody]

Life Insurance paid out on around 98.2% of claims in 2010.
Critical Illness paid out on around 89.9% of claims in the same year.
Thats according to the ABI (Association of British Insurers).

Even those figures do not reassure in my opinion.

1.8% of dead people weren't really dead, they were just pretending??!.

10% chance of your critical illness policy not paying out, after you had paid in a substantial sum in premiums. Just when you need it most.

Ok, we don't know the facts as why they didn't pay out, but surely thats boardering on fraud. And percentages don't give an indication of how many people were affected, often severely.

That's why I won't touch an insurance company.

 

[tony84]

Even those figures do not reassure in my opinion.

1.8% of dead people weren't really dead, they were just pretending??!.

10% chance of your critical illness policy not paying out, after you had paid in a substantial sum in premiums. Just when you need it most.

Ok, we don't know the facts as why they didn't pay out, but surely thats boardering on fraud. And percentages don't give an indication of how many people were affected, often severely.

That's why I won't touch an insurance company.

Well, if you apply for life insurance and had (for example) cancer but decided not to declare it. Then when a claim is made - it will get declined.
Also a true example, someone made a claim on a life insurance policy despite the policy finishing 3 years prior to the person dieing - both of those examples still go down as declined claims.

I have an even better example for critical illness, someone tried to claim a broken arm was a critical illness - and that has to go down as a non paid claim. But a decent chunk of that 10% is because people are stupid and think its better not to declare illnesses despite it being in their medical notes - so of course insurers will not pay out.

One thing that isnt mentioned though, is if the insurer would never have paid out (ie because of illnesses not declared) they would usually refund all of the premiums paid.

The only time you would lose out 100% is if you had critical illness cover only and say died because you were hit by a bus. If you had life cover included then you would still get a pay out.

I think 90% of payouts is actually pretty good.
Everyone is different though. All i say in appointments is let me explain what it does and the benefits, ill answer any questions - if you want it then great, if not then thats also fine.

 

[Perfect Windows]

If you're posting this because you want to get people interested in life insurance (rather than just as a whimsical question), then I suggest you read "How to Sell against Competition" by John Fenton. In there it gives a pitch used by an insurance salesman that is simple and which I can't see failing to work. It's not short, so I'm not going to post it - fork out three quid on Amazon for a secondhand copy. It's only one page of the book but if you are selling life insurance it'll pay for itself a hundredfold, probably far more.

The core point is that you need to get people really to put themselves in a position where they deal with the realities of what would happen if their partner died.

Hope this helps.

Vin

 

[Perfect Windows]

As an add-on - bear in mind that I read the book about 20 years ago and I still remember the detail of the suggested way of discussing it.

 

[Steve Sellers]

Life insurance is a funny thing though....In a way it is gambling(well any insurance is)....

To take that point forward - it is not a certainty that you will get burgled or your house will burn down, there is a chance though.....but death is a certainty. Surely the insurance companies have to 'fiddle' it somehow, after all the house ALWAYS wins.

 

[Matt1959]

I hope those who are deriding life insurance and dont have it as consquence have seeked the advice of the people they would leave behind if they die! That is of course if dying leaves dependants skint and not able to cope financially. Meself, I have been paying for a couple of cheap policies for years now. I hardly notice the premiums going out and I rest easy that my family are provided for should I die. No one has mentioned that taking cover when young means very low premiums for the duration although I ackowledge inflation will eat away and they may need to be topped up later.

Critical illness cover etc is a different ball game as I think then yes, other things come into play whereby insurers can wriggle out of paying and of course the premiums are far far higher.

 

[tony84]

Surely the insurance companies have to 'fiddle' it somehow, after all the house ALWAYS wins.

When you pay the premiums, they use this money to invest in the stock market. This is where they earn their money.

 

[MikeJ]

Life insurance is a funny thing though....In a way it is gambling(well any insurance is)....

To take that point forward - it is not a certainty that you will get burgled or your house will burn down, there is a chance though.....but death is a certainty. Surely the insurance companies have to 'fiddle' it somehow, after all the house ALWAYS wins.

Depends when you die.

If you die within a year of taking the policy, then the insurance co. loses. If you die 70 years later, then they win.

 

[Steve Sellers]

When you pay the premiums, they use this money to invest in the stock market. This is where they earn their money.

I appreciate that Tony, and it's why I am dead against such products and pensions because what happens not if the stock market goes pop, but when it goes pop?.....anyone fancy an endowment mortgage?

Depends when you die.

If you die within a year of taking the policy, then the insurance co. loses. If you die 70 years later, then they win.

True, but in any form of gambling some of the punters will win, it's how they keep you hooked.

Of course the wisest thing to do would be to take the money each month and gamble it in the stock market oneself. More control, and less of the money going in bonuses to these fund managers.

 

[MikeJ]

True, on average you'd be better off.

As a rule, I only take insurance on things I can't afford to replace, and insurance I'm legally required to take out.

So, the car's insured. The house is insured. And my life's insured, though that's to allow the company to buy me out.

I have a standard reply of "don't be bl**dy ridiculous" to people that offer me insurance on electrical goods I'm buying. Once got offered insurance on a kettle!

 

[tony84]

You have the FSCS (Financial services compensation scheme) to fall back on upto 90% i believe of any lost money - my understanding is that would be the premiums rather than the actual insured amount, unless they went bust at a time you were due a payout from a claim?? I would need to double check that though but im fairly sure thats correct. However you would probably find that another insurer would buy the back book of clients and carry on the cover.

At the end of the day its insurance - it is a bet.

I dont take out contents insurance (risk im taking), i dont take out life cover (i have no kids and my gf is still young enough to move on if i popped it), i dont take out CI (no paticulr reason)....but i do take out PHI/Income Protection because i have a need for it - if i cant work, i have no income but my bills will still be falling on the mat each month.

Everyone is different, there are people that wouldnt touch income protection and people who wouldnt live without contents insurance. So long as you have had a think about it and aware of the consequences of not having it, i think thats all anyone can ask.

 

[Steve Sellers]

As a rule, I only take insurance on things I can't afford to replace, and insurance I'm legally required to take out.

Sort of agree. Only I don't insure stuff I can't afford to replace but more the high risk of theft/damage. It's weighing up cost vs risk of loss for me. So not having insurance is also a gamble in my mind.

You have the FSCS (Financial services compensation scheme) to fall back on upto 90% i believe of any lost money - my understanding is that would be the premiums rather than the actual insured amount, unless they went bust at a time you were due a payout from a claim?? I would need to double check that though but im fairly sure thats correct. However you would probably find that another insurer would buy the back book of clients and carry on the cover.

But insurers insure themselves directly from the market! If the market explodes who is insuring the people who insure the insurers, the government? How is that paid for except by the government devaluing the currency and printing money? It's a never ending con, because the whole markets are risk based. I'm no economist so I don’t see anyway round it in a free market economy, maybe there are better systems....social insurance....communism?

 

[tony84]

That is true, the company i used to work for only covered about 30% of any claim. the rest were underwritten by someone like Swiss re or similar.

The problem is, someone has to underwrite it.

I dont want to tempt fate with the whole banking issue, but a lot has changed. There are rules coming in called Solvency II and Solvency III whereby insurers have to ensure they have enough capital in their bank account should they have to pay out on xx% of the amount theyre covering. Thats increasing once solvency III comes in but i forget what to - its not an interesting read but its quite high.

Although i think this is a whole different topic that could be opening up

Having spent some time as an account manager ive spoken to advisors who have clients who have had payouts. I also spent a week in our claims department and hearing people in tears desperate for the money and then crying out of happiness a few days later made me realise the importance... and thats one reason why i do sell protection and not just mortgages.

Also when i left the life office, they were in talks with the FSA and govt about doing some joint campaign promoting protection as the more people who have it means there is a lesser reliance on the govt benefits system.

 

[TonyINPFM]

WOW i never expected such a big discussion on a little question. I think Tony84 has covered everything i would have said.

I think education is the biggest flaw. People just don't know anything about it and think its a waste of time. I have had a few clients that absolutely refused to talk about protection insurance and says its all a load of c**p but insured their contents. When talking to them in depth and asking them why they are in a hurry to insure their tv than providing for their family on death, they get tongue tied. They begin to realise how stupid they are to put objects in front of family.

There is a risk like all insurances. But the market has changed. Its cheaper than people realise, and many companies truly do have a excellent claims record.

As far as charges etc. Things are changing dramaticly with legislation. Most IFAs will have to charge high hourly rates to safe guard against them over selling for commission. I personally am a FA and earn by giving quality free advice and being paid commission. As Tony84 said clients are protected by the FSA and the fact that if we sell bad advice you as a client can claim against us and we have to pay back commision.

 

[fisicx]

It's not the insurance itself. I don't have a problem with critical illness it's just that mine has been cancelled because I now have type 2 diabetes.

I'm not on pills, take injections or have any long term prognosis that it will get worse. In fact I'm healither now because my diet has improved. But the **** from the brokers just looked at his list and said I was now high risk and they were no longer prepared to insure me.

BTW: my TV isn't insured either.

 

[tony84]

It's not the insurance itself. I don't have a problem with critical illness it's just that mine has been cancelled because I now have type 2 diabetes.

I'm not on pills, take injections or have any long term prognosis that it will get worse. In fact I'm healither now because my diet has improved. But the **** from the brokers just looked at his list and said I was now high risk and they were no longer prepared to insure me.

BTW: my TV isn't insured either.

Did you cancel your policy after being diagnosed with Diabetes? You dont have to cancel your policy because your diagnosed with something. You would have been better off keeping the policy in place because to replace it now will cost a fair bit.

Its not impossible to get insurance with diabetes, its just that it can be quite expensive in comparison to someone who isnt diabetic. A lot will depend on your height/weight and Hba1c readings.

 

[TonyINPFM]

It's not the insurance itself. I don't have a problem with critical illness it's just that mine has been cancelled because I now have type 2 diabetes.

I'm not on pills, take injections or have any long term prognosis that it will get worse. In fact I'm healither now because my diet has improved. But the **** from the brokers just looked at his list and said I was now high risk and they were no longer prepared to insure me.

BTW: my TV isn't insured either.

In reply to your post. I completely understand your frustration with life insurance when it comes to diabetes. I am an Insulin dependant (type1) diabetic and know where you are coming from.

I have contacted 1 of the providers i deal with today and discussed in detail how they handle diabetic cases.

I am happy they are able to cover diabetics of all types depending on their HbA1C and height weight etc. Possibly at higher premiums however

 

[fisicx]

No, I didn't cancel anything. It was when I went to renew my mortgage and the broker told me they would no longer cover me.

This is the whole problem with the illness cover insurance. If you get ill and try to renew or change a policy then you just get turfed out.

Even the stats that show high percentage of payouts don't tell the truth. Many of those who claimed will not receive the full amount because of changes in their condition. I know because it happend to my friend. He became ill and during the medical they noted he was overweight. Because he hadn't looked after himself (in their eyes) the payout was much lower than expected.

 

[tony84]

@Fiscix - im not saying your wrong but what your saying was either a long time ago, or he hasnt told you the whole truth.

Life insurance is underwritten at application stage. Therefore they charge you premiums based on the time when you take the policy out. If as a fit healthy young man who doesnt smoke or have pizzas, kebabs etc and goes to the gym often and take out a life insurance policy then the very next day you start eating take aways, drink copious amounts of alcohol and take up smoking and put on 10 stone...it doesnt matter, the underwriting has been done and yoru policy is in force.

If you decide to take out extra cover after you have changed your diet and started smoking then the new part of the cover will no doubt be at a higher premium but not the existing one.

The only exclusions you MIGHT find are:
- Suicide (but even that is very rare).
- Failure to follow medical advice - ie if your told to take beta blockers and dont, then have a heart attack - but again thats quite rare too. Note that i said heart attack...if you died because of something unrelated eg cancer or run over - it would still pay out.
- Taking part in illegal activities - so all those metal thieves, if one has an electric shock whilst robbing cable, they might not get a payout. - But again not all insurers have this exclusion.

There are others but in the main they are quite rare. Atleast from the bigger insurers.

This is exactly my point - education... or lack of. People has misconceptions. Yes there will be people getting partial payouts and yes there will be people not getting anything at all but this is the whole purpose of going via a broker. You get advice, you can ask questions and not go off hear say from the bloke down the pub, uncle whoever or your friends.

My mate rewired his garage, it doesnt make him an electrician and it doesnt mean if i need some electrical work doing i would call him. I would call a professional out.

Im very knowledgable on protection (without wanting to sound big headed, but i spent 3 years at a life office and a year being an advisor) and im always happy to answer questions - whether it results in a sale or not. But dont go off what people have said, go off the facts.

 

[TonyINPFM]

Tony84 is 100% correct.

I have just come off the phone with a fellow broker that advertises on the diabetic.co.uk website. I actually found out that they use all the providers i do and i assume any other FA does, the problem stems from only a small amount cover pre-existing conditions.

They gave me some facts about premiums and it is found that they use the following criteria. Tony84 will no doubt recognise this.

Your premium is calculated using
HbA1C
Height
Weight
Age
Length of time since diagnosis. (the sooner you get insurance the cheaper)
Diabetic related symptoms such as eyes, kidneys

The rest is calculated on any other conditions. Once the policy is in place and especially if you go for guaranteed premiums, there should be no further problems. Only at renewal should they take any further action.

 

[Big Pete]

Only Insure what needs legally insuring,, the rest is a waste of space ,,

Insurance Companies are the dregs of the world , with so many clauses and paragraphs a snake would have trouble sliding through the fine print..

Life insurance now that`s the biggest laugh going , so you pay for others to benefit ?? yea right now that sounds like a great idea If your family and friends are so poor they need your life insurance money to bury you, then they are in a sorry mess for sure , and do not deserve any payout ..
And when your dead and gone to the other side , do you really care what happens ? unlikely as your dead right ..

The money i have wasted on insurance over the years is mind blowing and on 3 claims , 1 was settled well by "Royal Insurance" 300 quid or so with NO hassles ,but then i paid them 300 quid a year for years and years , so who was the winner and the mug ??

The other 2 both required legal action to get any payout from them and both ended with a partial settlement the robbing snakes

 

[tony84]

Life insurance now that`s the biggest laugh going , so you pay for others to benefit ?? yea right now that sounds like a great idea If your family and friends are so poor they need your life insurance money to bury you, then they are in a sorry mess for sure , and do not deserve any payout ..
And when your dead and gone to the other side , do you really care what happens ? unlikely as your dead right ..

So all those people who have kids and a stay at home partner and rely on one persons income or where one partner brings in significantly more than the other shouldnt have life insurance because they will be dead so "who cares what happens once im gone?"

So you think the person who passes away should think well ill be dead so im not really bothered what happens to my partner and kids?

If i have kids, ill be making sure there is some life insurance in place - maybe not for hundreds of thousands but enough to give my gf a bit of a break with the finances at a time when i would imagine she would be grieving over me and not wanting to worry about bills etc.

Everyone is different, if your in a financially stable position then great, you may not need it. But not everyone is.

 

[Big Pete]

So all those people who have kids and a stay at home partner and rely on one persons income or where one partner brings in significantly more than the other shouldnt have life insurance because they will be dead so "who cares what happens once im gone?"

So you think the person who passes away should think well ill be dead so im not really bothered what happens to my partner and kids?

If i have kids, ill be making sure there is some life insurance in place - maybe not for hundreds of thousands but enough to give my gf a bit of a break with the finances at a time when i would imagine she would be grieving over me and not wanting to worry about bills etc.

Everyone is different, if your in a financially stable position then great, you may not need it. But not everyone is.

Thats what the welfare state is for , why you pay your taxes and NI contributions etc etc, Insurance on the mortgage is ok , so that covers that , Your girlfriend would not grieve to long she would find another guy easy enough and you would be buried and well out of her thoughts , Indeed if she has kids and no father anymore she will make loads and get a better house maybe , as she gets more bonus points and the Government prefer giving money to single parents. so quit worrying

 

[tony84]

Nobody could get over me being gone - im that loved by everyone who knows me

You may be entitled to bereavement allowance if your over 45 and not brining up kids. It could be as low as £30 (give or take) if your 45 and goes upto around £100 a week if your over 55 but it can affect other benefits (Those figures are off memory so they may be slightly out). My gf also isnt one to claim, she lost her job and refused to claim for 2 months until she found another job.

People like to think the state provides but its getting harder and harder (which i personally think is a good thing - the amount of spongers i see - living in manchester and all that ). I dont always suggest people take out the full amount of cover they need/can afford. But a little is better than nothing.

As ive said on this thread i think, i have PHI (income protection insurance) for £1000 a month incase im unable to work. I could insure myself for more like double that, but i know £1000 a month would keep my head above the water. I dont go after selling anything and everything for a quick buck, i sell what i think people need.

 

I think I prefer to have my money under my control,rather than giving it to the bookies.

Old chinese proverb.2012

 

[TonyINPFM]

Big Pete i think that maybe you are not as close to your family as many others.

I definitely speak to people that want to allow their family a stable quality of life for several years after death.

sirearl we all let others control our money per say. As for being bookies that is the wrong analogy i think. The odds of you dying is a certainty. I would think of it as a savings scheme for your family.