The Major Reason People Do Not Buy Insurance is Not Cost


futureIt's easy to believe that people avoid make certain purchases because of their cost. But this is too simplistic as the consumer always weighs the cost relative to perceived value. And perceived value is often an emotional perception.  People make decisions emotionally and there are a couple things we know for sure about typical human behavior:

1.  The emotion of fear trumps all other emotions for its motivational power.  Here's proof. Among Americans, 76% live paycheck to paycheck meaning that once they pay their bills and have mitigated the fear of having their car repossessed, being foreclosed on, or being evicted, they stop earning.  Just keeping the wolf at bay is what motivates Americans to earn up to a specific level.  Given that fear runs American's actions and financial preferences, you would think life insurance to be an easy sale.  But this preference to assuage this fear is offset by the next emotion.

2.  Americans prefer immediate to deferred gratification.  If that were not the case, everyone would have the purchase of life insurance at the top of their "must have" list.  Rather, Americans opt for having the latest smart phone, a cool BMW or vacationing in the latest trendy hot spot as their top purchase priorities which have them feel good right now.  People pay large amounts for goods and services that have them feel good right now. You are familiar with the concept of present values and discount rates.  Americans generally assign very high discount rates to future events and thus, these events have little present value for them.

The fact that fear is such a powerful motivator bodes well for the sale of insurance products as the products mitigate the fear of a catastrophic event.  On the other hand, the fact that people prefer to spend their money on items that give pleasure today makes insurance a hard sale.

But what if we could alter the communication about insurance so that the payoff was something experienced in the present, a purchase that would provide some immediate benefit?  What if the payoff could be presented as a current payoff rather than something that will occur "someday."  I can think of two ways to accomplish the perception of insurance having payoff in the present.  You are likely to think of others.

  1. If you are an insurance agent and need to communicate the value of disability or life insurance, you cannot talk about a future hypothetical event as that will be discounted by the prospect as insignificant. Death and disability are perceived as events so far into the future that they have no present value as previously stated.  But if you place that event in the present by showing your prospect newspaper article after newspaper article of people who left for work one morning and never made it home because they were killed or injured, you place the catastrophe in the present.  After showing a multitude of such stories from the newspaper (show the actual clippings - at least a dozen with photos) ask your prospect, "Do you think Mr. Jones knew he was going to be killed on October 5 when he woke up in the morning?  How do you know what will happen to you the rest of today?"
  2. Along the same lines, you can display on your laptop some vignettes from "Emergency ER" episodes showing people being wheeled into the emergency room.  Again, you can ask your prospect, "Do you think Mr. Jones knew he was going to lose his legs when he woke up that morning?  How do you know what will happen to you the rest of today?"

You already have fear on your side in making an insurance sale.  Now you just need to adjust your communication to have a perceived payoff in the present.  Note that this payoff is a perceived payoff and does not need to be an actual financial event.

What perceived payoffs can you think of to frame the purchase of life insurance as having a current benefit?

More on this topic on how agents can modify their communication:

Fixing Sales Skills



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