With Americans underinsured by $15.3 trillion, according to a 2012 LIMRA report, aligning life insurance with varying needs and circumstances helps more people obtain the vital coverage they need.
That is essentially the logic behind some recent life insurance product enhancements at Prudential, according to a pair of company executives.
Stephen A. Roche (pictured at right), vice president of product solutions for Prudential’s Individual Life business, points out that LIMRA’s 2014 Insurance Barometer Survey shows a startling 8 in 10 consumers surveyed overestimate the cost of life insurance. “In reality, the cost of providing death benefit protection has dropped from where it was decades ago. Think about it, for many consumers, they can purchase a life insurance policy for less than what it costs for a daily cup of coffee,” Roche says.
He also points out that many industry organizations and carriers, including Prudential, have calculators, print and digital advertisements, and materials to educate consumers about the affordability of life insurance.
“I believe that some consumers use cost as an objection, when in reality, it isn’t cost that is the issue,” Roche says. “The reason I say this is that in a recent LIMRA study, 52% believe additional living expenses (internet, cable, cell phones) are more important than life insurance. So, we should continue to drive the message that protection for your family and business is affordable. But we also need the help of every financial advisor to make life insurance part of their discussions with clients. Clients will allocate the funds if they see life insurance as the foundation of their overall financial plan.”
Some relevant LIMRA statistics
- Two-thirds of U.S. households do not own individual life insurance
- 44% of those that don’t own it say they need it
- 25% of consumers say they are likely to buy in the next 12 months, but less than half of those consumers actually follow through
- More than 80% of the 2000+ people in the 2014 Insurance Barometer Survey overestimated the cost of life insurance
- 72% believe required costs of living get in the way of buying life insurance
- 52% believe additional living expenses (internet, cable, cell phones) are more important
From an industry perspective, Roche says a number of carriers have incorporated messaging about the cost into their TV, radio and print advertisements and marketing materials to try to educate and overcome the objection that “life insurance costs too much.”
For its part, Prudential’s Individual Life Insurance business also recently enhanced its PruLifeFounders Plus ULproduct in response to feedback asking for affordability and flexibility while allowing for a greater range of account options, according to Mark Hug, Executive Vice President, Product and Marketing at Prudential. Founders Plus is positioned as a good fit for those who need insurance but have yet to take action because they feel it is beyond their financial reach.
Curious as to how the product development process flows at a large carrier, Insurance Forums asked about how Prudential collects feedback on its products, and how that feedback can lead to new products or product enhancements.
“We collect valuable feedback that feeds our development strategy in a variety of ways including a combination of field interviews with our wholesalers and field agents, as well as independent financial advisors; through collaborative efforts with the product experts within our distribution partners; and from internal and external market research,” says Roche.
There were a couple of overarching buckets the feedback was organized into that directly impacted the enhancements, adds Roche, who is responsible for Prudential’s individual life product strategy, design and development processes.
“First, the need to simplify the product and make some of the features easier to understand,” Roche says. “Second was that there was a desire to be able to offer consumers more choice and flexibility in the potential performance value offered by the product.”
New to Founders Plus is the “Plus 100 Account” that credits interest based on 100% participation in the performance of the S&P 500 subject to a cap and floor, creating a broader range of interest crediting options that offer cash value growth potential in the policy. The Plus 100 Account complements the Plus 50 and Fixed Account options.
“The flexible nature of Founders Plus allows consumers to increase or decrease premium payments based on their financial needs and the product’s performance,” says Hug.
The BenefitAccess Rider, currently available on Founders Plus, is now also available on PruLife Index Advantage UL. The optional rider allows for the acceleration of the death benefit due to a chronic or terminal illness and has been well received in the marketplace, according to Hug. A unique aspect of the BenefitAccess Rider is that the benefit payments can be used for expenses unrelated to care like home modifications, income replacement, household chores or mortgage payments. “What sets this rider apart is the ability to address the financial strain from dealing with a chronic or terminal condition whether those expenses are medical or non-medical,” says Hug.
Additionally, Advantage UL may work as a potential supplemental source of retirement income by offering two interest crediting options (the Basic Interest Account and the Indexed Interest Account) that give the policy the potential to grow its cash value with protection in place against market-based downturns.
“While the trend towards a longer life in retirement is an exciting prospect, it can cause people to think differently about their finances,” said Hug. “Spending more time in retirement may mean more income is needed to maintain one’s lifestyle. At the same time, the reality of dealing with a chronic or terminal illness can quickly drain savings. The changes to these products aim to give people the options they need so they can focus on living rather than worrying about the future.”
The BenefitAccess Rider is not Long-Term Care (LTC) insurance and is not intended to replace LTC. The rider requires an additional premium and underwriting. The rider accelerates the life insurance death benefit and will reduce and may use up the death benefit. Some benefit payments may be subject to a fee. Other terms, conditions apply.
PruLife® Founders Plus and PruLife® Index Advantage UL are both issued by Pruco Life Insurance Company in all states except New York where, if available, they are issued by Pruco Life Insurance Company of New Jersey, subsidiaries of Prudential Financial, Inc, located in Newark, NJ. The PruLife Founders Plus UL policy form number is IULNLG-2014 or ICC14 IULNLG-2014 and the PruLife Index Advantage UL policy form number is IUL-2014 or ICC14 IUL-2014. The BenefitAccess rider form number is ICC13 VL 145 B2-2013 or VL 145 B2-2013 followed by a state code. Products are not available in all states. For more information on PruLife Founders Plus UL and PruLife Index Advantage UL, please visit http://lifeinsurance.prudential.com/view/page/iliconsumer/30388.