Press Room (Recent Articles)

Reaching the Middle Market
L. John Pearson, CLU
Chairman, President and Chief Executive Officer The Baltimore Life Companies

When it comes to financial security, middle-income Americans are engaging in risky behavior. The vast majority of this market – commonly defined as households with income between $25,000-$100,000 – is under served and under insured. To those of us who have devoted our careers to life insurance, it’s troubling to learn that about two thirds of heads of households report that they do not have any, or enough, life insurance coverage for themselves or their spouse, according to a LIMRA International study.

Time, Topic & Trust Interfere with Sales
So why would a segment of the population with so much to gain from life insurance be willing to live without this safety net? LIMRA research and our own experience at Baltimore Life tell us that there are many obstacles to selling to middle-income Americans.

For some individuals, it’s as simple as time. Everyone has lengthy “to do” lists and few can get everything done. Researching and selecting life insurance often makes these lists, but items with more pressing deadlines usually take priority. Then there are the subject matters associated with life insurance – mortality and finances. They just aren’t topics people like to think about, even when they do have the time. Also, when they finally take steps to learn more, they easily become overwhelmed by the unlimited information presented online and in marketing materials.

And with agent recruitment and retention at an all-time low in our industry, companies are having difficulty building the types of relationships necessary for converting middle-income prospects to policyholders. Having a trusted advisor is critical for this market.

What’s An Agent To Do?
Baltimore Life has adopted LIMRA’s BEST approach (Build relationship, Educate, Simplify and Trust) to client management and selling. While the components of this approach are already widely known, they bear repeating. They are, after all, the key to serving the middle-income market.

While each agent has his or her own unique ways for carrying out this approach, I offer a few ideas used successfully by Baltimore Life.

Build relationships: Middle-income consumers want to know their life insurance agents. One of the best ways for an agent to network and raise his or her profile with others is through community involvement. We encourage all Baltimore Life employees to volunteer and have created several programs that provide additional opportunities for agents to interact with their community and its leaders. One of those programs is our Community Grants Program that awards grants to nonprofit organizations selected by our local offices. We are grateful for the many communities Baltimore Life calls home, and believe wholeheartedly in our responsibility as a community-based company to help those where our employees live and work.

Educate consumers: Our industry is full of jargon that’s rarely understood by consumers. We train our agents to offer their prospects and clients a comprehensive needs analysis. With a personalized needs analysis, the consumers obtain a good understanding of his or her financial situation and how life insurance can be used to address such issues as immediate cash needs and loss of income.

Simplify learning and shopping process: We are committed to making all of our sales and marketing materials “consumer friendly”. When consumers understand the life insurance and annuity products available to them, they are more comfortable making buying decisions when the need is there. Worksite marketing is another way Baltimore Life makes the shopping process easier. Our career agents often work with small businesses to arrange on-site meetings for their employees. These businesses are not responsible for funding the insurance; they just offer employees an opportunity to learn more about life insurance and gain easy access to an agent.

Earn consumers’ trust: There are no shortcuts to earning trust. Agents must demonstrate time and again that they are listening to prospects and clients and responding in ways that meet consumers’ needs. Follow-up and follow-through are also critical to building long-term relationships. We train our agents using a referred leads system that provides them with the opportunity to obtain referrals so they can more effectively build their business in the local communities.

What’s A Company To Do?
In the case of Baltimore Life, we recently changed the way we were designing and selling products for the middle-income market so that they better match its needs and allow agents to compete more effectively in their marketplaces.

During the last two years, Baltimore Life has achieved notable sales increases in the middle-income market. Without question, this growth can be attributed to a new market segmentation business strategy we rolled out in 2005. Our approach and results are detailed later in the article, but first it’s necessary to explain our distribution model.

Dual Distribution Model
Since our founding 125 years ago, Baltimore Life has focused on the middle market. We currently serve this market through two sales divisions – Career Agency Sales and Independent Sales. In keeping with our focus on being a community-based company, the majority of career agents live and work in small towns across Maryland and Pennsylvania. They also serve parts of eastern Ohio, Delaware, New Jersey and West Virginia. They know their communities well and are involved in everything from local business clubs to little league teams. In the Independent Sales division, we work with a select group of national marketing partners and their contracted agents who also focus on the middle market, but who broaden our reach across the country.

This dual distribution model allows us to leverage common assets and resources while building two financially viable sales divisions. Our Career Agency Sales group provides a solid base of production that supports the company, while Independent Sales seeks the market opportunities that can provide significant growth on a national level. Our dual distribution model provides us with steady growth on a regional level, while minimizing the fluctuations that can result from new products, new geographies and new partnerships nationally.

Segmenting the Middle Market
In early 2004, Baltimore Life took stock of how our products were developed and sold as part of a larger strategic planning initiative. What came from those discussions was a commitment to develop a new “needs-based” product development process – based on facts, not anecdotes – to better serve the middle market.

Our Process & Our Focus
We carefully analyzed the demographics of our in-force policyholders, supplemented with input from an outside research company. We also looked at the demographic characteristics of communities where we have a career agency. We then compared all of this information against 42 market sub-segments outlined by the researcher and eventually honed in on four market segments for Baltimore Life: young families, established families, pre-retireds and moderate retireds.

Young Families represent almost 10 percent of households in the United States. These single and two-parent household heads are between the ages of 18-34 and have children under the age of 18 at home. Their income ranges from $25,000 to $75,000, with a median income of $50,000.

Established Families represent some 18 percent of households in the United States. As a group, these families are in their peak earning years. Their household income ranges between $30,000 and $100,000 – with the average around $60,000. The heads of household are generally between the ages of 35-54. They have children under and over the age of 18 and may be empty nesters.

Pre-Retireds represent nearly six percent of households in the United States. This group generally consists of empty nesters born during World War II. Aged 55-64, they have household incomes ranging between $35,000 and $75,000 with an average of $38,000.

Moderate Retireds include about 10 percent of the households in the United States and are the fastest growing market segment. With a minimum age of 65, this group has moderate household incomes ranging from $15,000 to $50,000. They are also likely to have accumulated cash and other assets.

We then conducted focus groups of career agents and managers to determine the needs of all four target markets (disability protection, cash accumulation/emergency fund, final expense coverage, debt protection, liquidity and long-term care coverage) and how insurance can address their needs. That process resulted in a chart called the Needs Intensity Continuum. We compared our product portfolio at the time to the Continuum and identified our product development needs and priorities.

Overhauled Marketing Materials
We also revised our sales materials to be segment specific rather than product specific and revised our marketing programs to meet the needs of each market.

Stepped Up Recruiting
Baltimore Life’s aggressive recruiting and enhanced training efforts have paid off with the addition of several outstanding managers and agents to our team. And our industry has taken notice. The Insurance & Financial Communicators Association honored our recruiting program in 2006 as a national leader. We have also seen significant growth through our national marketing partners who work with our Independent Sales division.

Results
Initial results tell us we’re on the right track. Overall sales in the last two years have shown double-digit growth. This year, continuous premium life insurance sales results are more than 30% ahead of last year. And, in 2006, we produced 119% of our continuous premium life sales plan.

What’s Next?
The middle market will remain a challenge for all of us in 2008 and beyond. But, the fact remains that it is a market for whom life insurance can make a significant difference. Finding ways to build relationships, educate consumers, simplify the message and build trust are critical for reaching more Americans.

Baltimore Life also will continue to evaluate new opportunities, new partnerships and new products that support our efforts to better reach and serve the middle market regionally with our Career Agency system and nationally with our Independent Marketing partners.

---

L. John Pearson joined The Baltimore Life Companies in 1995. He currently serves on the board of the Forum 500 of the American Council of Life Insurers and is its chair elect. Previously, he served on the boards of the American Council of Life Insurers (ACLI), the Life Insurers Council (LIC), the Life Office Management Association (LOMA) and the Life Insurance Marketing Research Association (LIMRA). Additionally, he chaired the board of the Medical Information Bureau (MIB). He is involved in a variety of community organizations in the Greater Baltimore area, including the United Way, YMCA and Junior Achievement. He also chairs the Regional Cabinet for his alma mater Dickinson College.