The Wall Street Journal is reporting that apparently Life Insurance companies are, now, so severely, struggling with sales they have turned to the “middle class” in order to reverse this trend of downward sales as firms like MetLife are setting up shop in Wal-Marts across the country.
The campaign in one such Wal-Mart, in Roswell, GA, goes so far as to beg the “middle class” Wal-Mart walker-byers to “get life insurance today for only $5” and this is the exact reason why Life Insurance Companies are struggling with sales and will continue to do so as their thought leaders come up with ridiculous marketing campaigns like this one.
The very basic questions that should be asked before something so inane is even put into motion are: Why would a “middle class” Wal-Mart walker-byer need “$5” life insurance? What is the benefit of life insurance for this “middle-class” Wal-Mart walker-byer? Where is the sizzle that these “middle-class” Wal-Mart walker-byers are accustomed to seeing on the boob tube from firms pitching investing in the stock market?
And apparently, as reported by the Wall Street Journal, MetLife is getting the exact results it deserves as after 90 minutes of being at the MetLife kiosk “just two shoppers stopped to check out MetLife’s insurance offer. No one took a $5 card needed to activate the new coverage with a follow-up phone call”.
Granted 90 minutes isn’t a lifetime, but it is a good sample size of what to expect. Even a kid selling lemonade at a Diabetic convention would get the hint to leave after 60 minutes of nothing.
What is even more pathetic is the fact that other Life Insurance Companies are watching this spectacle unfold and instead of praying for its failure, like what competitors are supposed to do, they are actually rooting for the success of MetLife’s program.
The article states that “Even rival insurers are hoping for the best. “As an industry…we need to change these [sales] trends,” said Mark Hug, an executive vice president in Prudential Financial’s individual life-insurance unit”.
Sad, really just sad, that this is what Life Insurance has fallen too. It is very reminiscent of 10 years ago when Countrywide set up storefront offices in attempt to get the “middle-class” walker-byer who, at that time, was out shopping for tooth paste and a toilet brush to come into the store and borrow money.
The logic was idiotic in its stupidity really, as the geniuses who conjured up this marketing fiasco actually said to themselves that shoppers would see this storefront and say “You know what honey, I completely forgot, we have to get a mortgage today! I can’t believe I forgot that again! It really is a good thing that a storefront is here in this shopping plaza, because there is no reason why we should set up appointment to see a professional at their office in order to borrow a couple hundred thousand dollars.”
The results Countrywide received will be exactly the same for the Met, because the average “middle-class” Wal-Mart walker-byer is not going to look at their spouse at any time and utter “You know what, I was thinking, we need to protect ourselves in the event of our untimely death. You know what we otta do? We otta go down to Wal-Mart and by $5.00 life insurance’.
This is never going to be happen….EVER!
The only thing worse than this is the fact that the Life Insurance industry is sitting on a marketing niche that is practically bigger than anything that has ever happened in the history of US financial planning and it all comes directly from the Federal Government, but instead of focusing on that the Life Insurance industry as a whole would rather just go to Wal-Mart.
Believe or not, every single American, who plans on retiring, who wants to receive their Social Security benefits, lower their tax obligations and control all of their health costs must, and I will write it again more slowly for those astute Life Insurance Professionals, MUST own life insurance.
Yes, if you care about your retirement, your income, your taxes, your health and quite possibly the obligations that you may hand over to your children, you will take a hard look at how the Federal Government changed the rules of retirement and why you need to own Life Insurance, but don’t worry, even the life insurance professionals at MetLife and Mark Hug of Prudential could care less too (yes, I did communicate with Mr. Hug and there was no interest in learning more).
Here are the rules, set up by the Federal Government, ones that have been on the books for years, but no one has even attempted to plan around:
1. You have a mandatory expense in retirement which is called your health insurance and it’s been this way since 1993. In order for you to collect your Social Security you must enroll into Medicare when eligible or you forfeit all of your current, future and past benefits (don’t worry about paying it back though, the IRS will just take it from your children later with interest).
2. This expense is based on your income. Meaning the more income you have in retirement the higher your health costs will be. Amazingly, this rule was enacted in 2003 and implemented 7 years ago as Medicare created the Income Related Monthly Adjustment Amounts and, again, no one has yet to even to attempt to plan for this at MetLife or even Prudential, who, supposedly, according to a Director of Advanced Planning there knows all about this.
3. This expense is automatically deducted from your Social Security benefit. Thanks to regulations at Social Security and the Centers of Medicare/Medicaid Services the bulk of your health costs in retirement are deducted directly from any Social Security benefit you may receive and this includes those pesky surcharges due to your income being so high.
Keep in mind that according to the Social Security Board of Trustees the cost of living adjustments (COLA’s) for benefits are expected to be no higher than 2.8% for the foreseeable future.
Your problem with this: guess what Medicare has been inflating at for the last 47 years and is projected to inflate at?
7% according to the Medicare Board of Trustees Report, which means that even with the Hold Harmless Act you most likely will see your Social Security COLA’s consumed by your MANDATORY health costs.
Can you say you need another income source?
4. The income that is used to determine how much you pay for your health coverage is practically everything but……… (drum roll please)……life insurance! (Who would have thunk???)
Income as defined by Social Security is “everything on lines 37 and 8b of the IRS form 1040 or your adjusted gross income PLUS any tax exempt income”
This means those precious Traditional Tax Deferred Accounts like 401(k)’s and IRA’s as well as Dividends, including those from Municipalities as well any Wage and Social Security bene’s will be used against you when your health is on the line.
These wonderful accounts will also help lower any Social Security benefit you thought you were going to receive as well as driving up your overall tax rate. I know, this was all probably left out of the fine print at that Social Security seminar your financial advisor put on this year, huh?
But guess what isn’t used against you when your health is on the line? Surprisingly, all the things the financial industry either doesn’t sell you, bashes or convinces you to do the exact opposite of.
Yes, the solutions to controlling a big part of your health costs, which will also save a good portion of your Social Security benefit, while also lowering your tax obligation in retirement and still have the ability to generate that much needed income are Roth Accounts, very specific Annuities and Life Insurance.
It is absolutely mind blowing how an entire industry would rather sit in Wal-Mart than actually sell more of the product they own in order to help their clients solve the biggest problem they will face in retirement and one in which the Federal Government keeps reminding everyone about on a daily basis.
Get it? The Life Insurance industry would rather go broke than sell you the solution to this health funding mess. If this was put into a movie no one would believe it. If it was a novel it would be pure fiction, but as it stands today, I have no clue what to call it, other than beautiful as I sit here and cry.
The only saving grace in all of this is that at least those marketing on the “Securities” side of the financial industry fence, firms like Merrill Lynch, Goldman Sachs, T. Rowe Price and Morgan Stanley, have a solution to this issue through Roth Accounts and when they figure it out they will be more than ready to sell you the solution.
Keep in mind that the Roth Account will never be on par with Life Insurance and Annuities, since these two products can provide things like guarantees on rates of return as well as providing a stable flow of income in retirement and they, right now, also have a Trump Card, which is the ability to also help cover for any costs associated to Long-Term care.
But, does anyone want to bet how quickly the “Securities” side of the financial industry adapts and finds a solution to equal the Life Insurance industry, once they realize the opportunity?
My money is is on “well before the Life Industry even wakes up to this issue”, which is, unfortunately, very bad for investors.