NEW YORK - Most rich people have life insurance, and most poor people can't afford it, so policyholder-starved insurers are homing in on the middle market.
Among the reasons that new policyholders are being sought is to make up for lost revenue caused by lower premiums. Premiums for term and whole-life insurance are expected to drop by an average of 4% next year, according to a study released last week by the Insurance Information Institute in New York.
New York Life Insurance Co. and Guardian Life Insurance Company of America, also of New York, and Hartford Life Insurance Co. in Simsbury, Conn., unveiled new products for the middle market this month.
Other insurers and their trade associations this month are attempting to penetrate this market better through advertising and celebrity endorsements as part of Life Insurance Awareness Month. For example, State Farm Life Insurance Co. in Bloomington, Ill., signed on "Everybody Loves Raymond" actress Doris Roberts to publicize the need for middle-class women to make sure their husbands have sufficient coverage.
In addition, Conning Research and Consulting Inc. in Hartford, Conn., this month released a study concluding that marketing failures by insurers have been the root cause of underpenetration of the middle market, which it defined as households with between $35,000 and $88,000 in annual income.
"The unintended consequence of this marketing was to make it inefficient for the sales force to penetrate the middle market," said George McKeon, senior life analyst at Conning.
Due to commission structures and other incentives to bring in wealthy clients, agents "moved upscale," because they made more money writing a small amount of higher-limit policies, compared with a large amount of lower-limit policies, the study noted.
New York Life has developed what it claims is the first policy that covers all family members - spouses or domestic partners, along with their children - under one term life plan.
"Our pitch to agents is that there are 58 million households in the middle market that are underinsured or have no insurance," said Scott Berlin, senior vice president of New York Life's individual-life department.
"Middle-market families don't have a lot of disposable income and often don't raise limits as the family grows," he added.
With the new policy, limits can be increased over time - up to $500,000 per adult - without the expense of issuing an additional policy or the burden of proving good health, and for the same premium rates at which the policy initially was issued.
One of the major complaints that New York Life was hearing from those in the middle market is that they were unsure of the type of insurance to buy and how high their limits should be, according to Mr. Berlin.
"This policy can grow as their means and needs change, and gives them the option to convert to permanent coverage," he said.
Guardian's new policy is whole-life insurance that makes premiums more affordable by taking advantage of improved mortality rates. The insurance is "paid up at age 121" instead of the age of 100 used by other rating plans.
The actuarial result is that policyholders can pay premiums that used to be charged to people about seven years younger.
"Agents are targeting middle-market clients who may have procrastinated about buying
permanent coverage, because it was too expensive," said Robert Lehmert, vice president of life marketing services for Guardian.
The Hartford's initiative is directed at small-business owners in the middle market, according to John Vaccaro, the company's chief marketing officer. The program, which was launched last week, is a "tool kit" that provides the ability to use life insurance as collateral for a business loan, for coverage of key employees and for succession planning, he said.
"We've found that middle-
market households have life insurance limits of about three times their annual salary," said Damon Bates, assistant vice president of New York-based MetLife Inc. The company is trying to get them to carry a limit equal to their "human-life value," which quantifies all a policyholder's contributions to the family, added Mr. Bates, who works in MetLife's Boston office.
Human-life value is considerably more than three times salary, he added, though he didn't specify how much more, saying it is a calculation that varies considerably with an individual's circumstances.
Among the middle-market sales initiatives found by Conning to have succeeded at some insurers were work site group marketing, selling through banks and using pre-
qualified leads from data mining.