Advocis conference update: Overcoming insurance

(May 28, 2004) Maybe it’s the story of the man who blew himself off his own toilet when he dropped a lit cigarette into its turpentine-saturated waters or perhaps it’s the tale of the couple whose car went missing and was returned a day later along with an appreciative note and some free concert tickets — a show they end up enjoying while their house gets completely ransacked. Chances are, you’ve heard more than one “urban legend” and have probably told more than one, too.

The way Rick Forchuk sees it, there is a connection between these entertaining but false folk narratives and the (hopefully true) narratives advisors tell when working with insurance prospects. “You can demonstrate as much evidence as you wish to a prospect to support the position of the product or service you’re recommending, but if somebody in the mailroom who had a brother whose uncle bought one of these once and it didn’t work out, you’re basically screwed,” said Forchuk, the Vancouver-based director of sales and distribution, Western Canada, for Empire Financial Group. “It doesn’t matter how much you’ve got, this other third or fourth party person seems to have huge credibility.”

As part of a breakout session at the Advocis 2004 national conference in Calgary, Forchuk highlighted five of the more popular insurance-related urban legends and dispensed some advice and talking points to counter these myths.

Urban legend #1: Cheapest is best

Using the analogy of buying a car seat for a new baby, Forchuk posed the rhetorical question of whether the least expensive seat would be the best and the safest option.

“In no field of business endeavour does cheapest equal best except in this urban legend that involves life insurance where people seem to think … that if something is cheap, then it must be good,” said Forchuk, pointing to advice that first appeared on the Consumers’ Association of Canada’s Web site encouraging individuals to shop around for the lowest price on insurance products.

“I’m not opposed to shopping around, I’m opposed to equating cheap with best,” added Forchuk.

Urban legend #2: Don’t overbuy

Quoting an article that appeared in The Globe and Mail in January 2000, Forchuk commented on a general consumer perception that advisors are out to sell more insurance than is actually required by their clients. To Forchuk, it’s the same as buying a child a pair of shoes — they may be a little big to start, but eventually they will fit perfectly.

“If you’re a younger person or one with a business that’s thriving and growing, as things change and grow and develop, we want to give you something you can grow into,” said Forchuk. “The great thing about life insurance products is you’re never going to be this age again — it’s never going to cost you this amount again. All we know for sure is it’s going to cost you more as you get older.”

Urban legend #3: “Single people don’t need life insurance because they don’t yet have liabilities. You only insure a liability.” — The Wealthy Barber

Forchuk rejected this reasoning outright, telling the story of an unfortunate student at the University of British Columbia who hit a tree while skiing in the U.S. and died later in hospital, leaving his parents with a $60,000 medical bill.

Forchuk claimed that single people tend to leave the “biggest messes” for their survivors to clean up and stressed the importance of hammering this point home with prospects who are unattached. He added that he recommends a minimum $100,000 of coverage for single clients, and that $200,000 is not unreasonable.

Urban legend #4: Double-income households with no kids don’t need insurance

Forchuk simply asks his double income, no kids clients how their standard of living would be affected if their household income was suddenly cut by 50%.

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“One of the things we need to help them understand is that even though they have two good incomes and benefits, wouldn’t it be appropriate to give the person who survives two or three years to get used to managing financially without the other person?”

Urban legend #5: The CPP is in trouble

Even though it is a persuasive selling point for some advisors, this myth is simply not true, said Forchuk.

“The Canada Pension Plan is fully funded and completely sound for at least the next 75 years and financial advisors are being asked to help change the misconception,” the speaker noted. “Now it might shoot a little bit of a hole in one of our sales presentations, but at this point it’s just not true.”

Filed by John Craig, john.craig@advisor.rogers.com.

05/28/04

John Craig