Many people place insurance into different categories of importance or necessity. For example, many may think that homeowners insurance and auto insurance are crucial, while dismissing the need to purchase health or life insurance. There are several reasons certain types of coverage may fall by the wayside, ranging from misperceptions about cost and access to a belief that it’s simply unnecessary. This is often the case when it comes to life insurance, as evidenced by a new study.
New research released by LIMRA found that most Americans have an insufficient understanding of life insurance, including how it works, different types that are available and cost. The company provided a life insurance IQ test to study participants to measure their level of knowledge about this coverage type, and found that 55 percent answered fewer than five of the 10 questions correctly. Only one-third passed the exam.
After examining the questions, the company was able to put together a profile of those who had higher life insurance IQs. For example, respondents that were older, had a higher education level, a higher level of investable assets and currently owned a life insurance policy were more likely to answer the questions correctly. The study also found that males were more likely than females to respond correctly. Attitudes about life insurance also played a role in a person’s IQ on the subject, with those who believe these policies to be important scoring higher percentages.
“In addition to identifying the aspects of life insurance that consumers understand and where consumers admit to being in the dark, the study also shed light on some widespread misperceptions,” said Jennifer Douglas, LIMRA associate research director for strategic and developmental research. “With life insurance ownership at an all-time low, it is important that the industry not only overcome consumers’ lack of knowledge about life insurance but address the misinformation that is out there confusing them and possibly having a negative impact on their image of the industry.”
Educating the masses
Life insurance marketing agencies have launched a number of campaigns in attempts to educate all demographics on the importance and cost-effectiveness of coverage. As the industry changes, it may become necessary to start adopting several new marketing approaches to ensure each channel is covered. For example, utilizing direct mail, email marketing and social media campaigns may be a stronger approach that may appeal to various ages, rather than sticking to a single marketing strategy.
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