Theory: Why Don’t Life Insurance Companies Promote How Great Life Insurance Is?
- David H. Kinder, RFC®, ChFC®, CLU®
- Aug 22, 2019
- 4 min read
Updated: Jan 18, 2023
Becoming a professional life insurance agent is one of the hardest careers to embark upon. It really shouldn’t be, but it is.
One reason is the perception that life insurance is always a “cost”, rather than a strategic asset. Another reason is the public perceptions of insurance agents being “high pressure” agents, using ‘guilt’ to get you to buy a policy that you may feel that you don’t want because they have to earn commissions. (“Commission breath” is very strong and very ugly with these types.)
And the last major obstacle, is the public perception of the value of life insurance in general. If I were to walk up to you and say “Hi, I’m David Kinder and I’m a life insurance agent”… your prior experience with life insurance and insurance agents would come to mind to see if I would be a person to work with… or not. And more often than not, the value of what I sell (life insurance) would become the dominant thought of my value proposition, rather than how it could really help you.
And why is this? Because generally, the public doesn’t know what they don’t know.
Let’s go back in time to the mid-1980’s. Now, I have only *heard* about this, because I was under the age of 10 at this time. But it’s important to understand some history here.
In 1985 – Senator Bob Packwood held up Metropolitan Life’s ad in Congress that was printed in the Wall Street Journal. All the companies did this back then.
Essentially the ad said: “Give us $100,000 one time, and we’re going to give you INCOME TAX-FREE for the rest of your life – that’s right: never pay a time worth of taxes for the rest of your life - $8,000 a year, and because it’s life insurance, there’s also a tax-free death benefit. One contribution, no taxes… ever!”
And who else reads the Wall Street Journal besides investors? Congress.
Senator Bob Packwood held up this ad and said, “THIS has nothing to do with widows and orphans. This has nothing to do with the sanctity of the cash value build up inside a life insurance policy. This is an INVESTMENT… and we’re going to tax it as such.”
This led to three new tax law changes that we affectionately call TAMRA, TEFRA, and DEFRA. That’s Tax Equity and Fiscal Responsibility Act of 1982, the Deficit Reduction Act of 1984, and the Technical and Miscellaneous Revenue Act of 1988.
Here’s a more detailed article for reference on these three acts and what they each did:
And that’s the last time the United States Government affected the taxation rules regarding life insurance.
Now, today’s large company ads in the Wall Street Journal… they talk about their dividend performance of how “great” the company is… rather than what their products can do for people.
Companies no longer talk about the ‘miracle’ of life insurance and they don’t necessarily teach their agent force on how to talk about it.
Why is that? I have a theory.
Self-Preservation.
In order to not draw any more attention to themselves and this industry, they keep these great benefits “under wraps” so they don’t draw any further attention to themselves and our industry.
Go to any life insurance carrier’s website, and you’ll see WHAT they have, but you won’t see any specific reasons WHY to buy it – aside from standard things like “guaranteed level premiums, guaranteed cash values, and guaranteed death benefit”.
Ho hum.
I also bet that there’s something else in the law (that I can’t prove) that restricts life insurance companies from marketing the full nature of these benefits directly to the public.
I remember being with a prominent agent many years ago with a large insurance company. He had contacted the advanced internal sales desk to essentially ask, “Why doesn’t the insurance company promote these benefits to help make our job easier?”
The answer was something along the lines of, “If consumers mismanage their policies, they might not have the protection they need for their beneficiaries.”
THAT answer has to do with the sanctity of cash value life insurance and keeping a reserve for the given death benefit. THAT is in-line with what these companies learned from the tax law changes – and feeds my idea that it’s purely in the interests of industry and company self-preservation.
By not talking about it, the industry is preserving itself… but gives rise to others ignorant views of how these policies work.
There are numerous “financial entertainers” who are on television and the radio who promote only purchasing term life insurance. Why? Because they don’t understand WHY people should want to buy a policy that’s “more expensive”. (They also have other non-insurance sponsors, so they want to continue to have those sponsors ongoing financial support, but I digress.)
Which now requires the “burden of proof” to be on the agent.
There aren’t any official company brochures that outline everything you can REALLY do with a life insurance policy.
Why not? Because, I believe, the government doesn’t really want it that well known. (Again, I can’t prove it, but it certainly fits the narrative.)
Why doesn’t the government want you to know? Because they want to hold your wealth hostage by the tax code in qualified retirement plans… even though the exact same tax code would let you have massive cash flow not even required to file a tax return… if more people actually knew about it. And considering the mess our country's finances are in, they're not about to change that narrative any time soon - no matter which political party is in power:
It sure does make it harder for the agent to convey the values of life insurance – even and especially for “Life Insurance Awareness Month” every September.
Quality Agents Must Be Creative, But Compliant
Many insurance agents, to improve their ‘game’ and to learn how to communicate these benefits of these policies, they go to many extensive training sessions and often purchase complex software in their quest to find ways to communicate these benefits.
Why do we have to do this? Because, I believe, the Government doesn’t want the word to get out, and the companies are in “self-preservation” mode. They know the benefits, but they don’t teach it directly.
As I’ve read Bryan Bloom, CPA and author of “Confessions of a CPA” book series wrote: “Those who get it... do it.”
So, it’s my job, as a professional agent, to promote these benefits… because the companies won’t… and the United States Government certainly won’t.
