Decoding theMiddle Market

Walter H. Zultowski, Ph.D. WZ Research + Consulting, LLC

Society of Actuaries Annual Meeting October 15, 2012

Limitations of Past Research…

• Treats the market as an undifferentiated whole

• Asks very general questions

• Too much reliance on demographic segmentation

• Overlooks the role played by workplace access/purchasing

• Enamored with online buying behavior

2

Consequently, Past Research…

• Produces general findings diluted by mixing

subsegments of the market

• Produces superficial understanding of the market

• Provides very general direction for action:

– Provide more education

– Motivate agents to pursue the middle market

– Sell to the market online

3

How the MaD Research Effort is Different:

• A program of subsegment studies rather than a

single study

• A two-stage market segmentation approach

• Attitudinal/behavioral vs demographic segmentation

4

Phase 1: “Young Families”

• 1,000 primary financial decision makers• Age: 25-40• Household income: $35,000 - $125,000• At least one dependent in the household• If no dependents, but have purchased life insurance

• 18 minute online survey, conducted by Matthew Greenwald & Associates

• August 6 – 13, 2012

5

Study Deliverables

• SOA Annual Meeting presentation

• Research report (findings)

• “White paper” (strategic implications)

• Webinar (November 15th)

• Articles, interviews, etc.

• Subsequent decision to be made regarding future

studies in the program

6

Objectives

• Provide a new way of looking at the middle market

• Help marketers apply this information in their business models (recognizing that different companies may use the information differently)

• Help companies penetrate the middle market more

efficiently and effectively

Planners

ProtectorsOpportunistic

Buyers

35%

39%

26%

Segmentation Results

8

Understanding the Segments

• Buy because it was offered to them, not because they believe in it

• Have less coverage; less confident in adequacy of coverage

• Least likely to be planning for the future• Least likely to seek advice of an agent or advisor• Less likely to have children• Often buy at their place of work

9

Opportunistic Buyers (39%)

Understanding the Segments (cont’d)

• Most likely to appreciate the lifetime value of life insurance

• More likely to buy as a part of a financial plan• More likely to buy for “general peace of mind,” or

because it’s the “right thing to do”• Value the role of the agent• Somewhat more likely to be female

10

Planners (35%)

Understanding the Segments (cont’d)

• Buy based on specific needs• Purchases typically life-event driven (e.g., birth of a

child, marriage, home purchase)• Need for life insurance is temporary, rather than a

part of a lifelong plan• More likely to buy term• More likely to buy based on affordability• Somewhat more likely to be male

11

Protectors (26%)

Understanding the Segments (cont’d)

• Income, education, employment status• Health status and mortality expectations• Perceptions of adequacy of life insurance coverage• General views of agent

12

The segments are similar in terms of:

• Somewhat older• More likely to be married/in a civil union• More likely to have children• More likely to describe themselves as “upper middle

class”

Protectors:

Attitudes Toward Life Insurance

41%

43%

15%

1%

69%

28%

2%

0%

36%

48%

15%

1%

19%

53%

27%

1%

Total (n=1,000)Planners (n=345)Protectors (n=258)Opportunistic Buyers (n=397)

Very important

Extremely important

Not too/Not at all important

Somewhat important

Overall, how important do you think it is for a family to purchase life insurance?

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Please indicate how much you agree or disagree with the following statement:

Everyone with someone depending on their

income should have some form of life

insurance

It is important to have life insurance throughout

your life

Life insurance is an integral part of a person’s life long

planning

Life insurance is as much of a necessity as food,

shelter, and clothing

(Planners n=345, Protectors n=258, Opportunistic Buyers n=397)

15

Life insurance serves only a temporary need until

such time as kids leave the house or the mortgage

is paid off

The life insurance offered by employers is sufficient

to meet your needs

There is little need for life insurance past age 55 or

so

At your age, it is more important to put money

toward retirement savings than life insurance

Please indicate how much you agree or disagree with the following statement:

(Planners n=345, Protectors n=258, Opportunistic Buyers n=397)

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Life Insurance Purchase

Where would you go to get information regarding life insurance products and costs?

Multiple responses accepted

Online

A relative

A friend

A financial advisor other than a life insurance agent

A life insurance agent

Call the life insurance company directly

Written material

18

To what extent was the following ever a reason that motivated you to purchase life insurance?

I simply thought I should

Getting married

You were given the opportunity at work

Birth of a child

As part of a financial plan

(Planners n=345, Protectors n=258, Opportunistic Buyers n=397)

19

(Planners n=345, Protectors n=258, Opportunistic Buyers n=397)

Your spouse/partner or a relative told you to do it

A new job

Purchase of a home

Your started feeling older

Someone you knew died

20

To what extent was the following ever a reason that motivated you to purchase life insurance?

Thinking about the most recent life insurance policy you purchased, did you purchase it…?

(Filter: Has individual life insurance; Planners n=308, Protectors n=229, Opportunistic Buyers n=330)

At work

Online without working with an agent

Through the mail

From an insurance agent

From a financial advisor other than an insurance agent

Through a bank

By calling the company directly

* <.5% 21

How likely are you to purchase more life insurance coverage in the near future?

(Filter: Has financial advisor and would like more coverage; Total n=109, Planners n=44, Protectors n=24, Opportunistic Buyers n=41)

Very likely

Not too likely

Not at all likely

Somewhat likely

22

Thinking about the next time you might purchase life insurance, would you most likely purchase it?

From an insurance agent

By calling the company directly

Through the mail

At work

From a financial advisor other than an insurance agent

Through a bank

Online

* <.5% 23

Life Insurance Ownership

What is the total amount of coverage or death benefit from this life insurance and how much to you feel you should have (In $1,000)?

(Filter: Has life insurance and reported amount, n=827; total reporting amount should have, n=924)

AverageCoverage

Averageamount

should have

25

Which of the following best describes how you feel about the total amount of life insurance coverage your household currently has?

(Filter: Has financial advisor; Total n=977, Planners n=338, Protectors n=251, Opportunistic Buyers n=338)

You have much/a little more than you would like

You have a little less than you would like

You have much less than you would like

You have the right amount

26

Objectives

• Provide a new way of looking at the middle market

• Help marketers apply this information in their business models (recognizing that different companies may use the information differently)

• Help companies penetrate the middle market more

efficiently and effectively

(We'd like to hear your comments and observations)

860-471-3692 | www.wzresearch.com