Asset retention: riding the great wealth transfer wave

Evolve your insurance business model with asset retention in mind to bolster business and meet the needs of insureds.

In brief

• As we approach the greatest wealth transfer we’ve ever seen, carriers must be proactive to both deliver on their promises to insureds and support business growth.
• Asset retention offers valuable opportunities to provide beneficiaries with excellent, tailored experiences that best meet their unique needs.
• To effectively incorporate asset retention practices, life insurers must educate their employees, raise consumer awareness and embrace innovative tech solutions.

An estimated 73 million baby boomers will celebrate their 65^th birthday by 2030. As this generation reaches retirement — and then end of life — we’re fast approaching the greatest wealth transfer the United States has ever seen.

In fact, 2021 saw record-breaking highs in U.S. life insurance and annuity benefits with nearly $200 billion distributed to families and retirees — and that’s just the beginning.

Approximately 57% of those 65 and older own life insurance, which could represent as much as 30% of your total policy holders. With the impending pressure that puts on carriers, the question is: Are you ready?

Every life insurer prepares for catastrophe — that’s the nature of the beast. It’s common practice to plan and budget for worst-case scenarios, but soon this won’t be enough. Life insurers are already feeling the strain of paying out constantly and as time goes on this will only increase.

And yet, there is a way to soften this blow, reduce hemorrhaging and, most importantly, keep your promise to insureds and their descendants. The key to riding the wealth transfer wave? Incorporate asset retention into your plans.

Asset retention is a win-win for insureds, carriers and beneficiaries

The best way to approach asset retention is to keep the commitments we make to insureds top of mind — that their loved ones will be protected and taken care of after their passing. Asset retention is about making good on that promise beyond just cutting a check. It recognizes that we can go further for our clients and our businesses by advising beneficiaries on how to best use their benefits as continuation of that promise we made to the insured on day one.

By guiding beneficiaries to solutions that are ideally suited for their needs, such as moving their inheritance into an annuity or a whole life policy, we help them see beyond the assumption that a lump sum payout is the only and best option. Even if just a small percentage of surviving family members acquire new policies, the positive repercussions of retaining just 1% of these payouts would be enormously felt by carriers and beneficiaries alike.

We often think of asset retention as purely bottom-line motivated. But incorporating this practice into our regular processes benefits so much more than revenue.

Imagine this scenario:

Jane’s last surviving parent passed away and the carrier writes her a check. She’s grieving and not thinking clearly, and she uses the money on a series of overseas trips she always wanted to take. Jane lives it up for the moment, but a few short years later her health takes a turn and now she’s scrambling to pay for the unexpected in-home care services she needs, and she’s faced with the choice of having to borrow money from her kids or move in with them. If only her carrier had helped her see the benefits of optimizing her payout in a whole life policy with a long-term care rider.

Now imagine another scenario, where the client benefits from a different approach:

June’s husband was the breadwinner and still working full time when he suddenly passed away. Their home is paid off and aside from her small car payment she has no significant debt, though her son and daughter are finishing college and starting their careers. Instead of just processing the payout, her claims representative sees an opportunity to guide her to a better solution and suggests dividing up the funds. The kids can benefit from having money now, so they each receive a lump sum to cover student loans or set aside for a down payment on a home. The professional advises June to consider putting the remaining funds into an immediate annuity, so she has steady, reliable income for the rest of her life. She’s relieved. The thought of figuring out how to budget that money to last for the rest of her life is overwhelming.

Asset retention gives us a chance to better deliver on the promise we make to our insureds to take care of their loved ones after they’re gone. Here are three noteworthy benefits for carriers:

• It generates a policy that creates new revenue for the carrier while retaining assets
• It offers a creative and effective way to follow through on the commitment to the insured and provides an excellent, tailored experience for the beneficiary
• It creates potential to gain new customers

What can life insurance carriers do to engage asset retention?

There are a lot of upsides to adopting asset retention as a core practice, though it’s not going to be easy. This pivot to offer broader and more comprehensive options for the client involves a perspective-shift for carriers, producers and claims professionals while simultaneously infusing more sophisticated and intuitive tech that can enable the process.

The way forward is three-fold:

1. Train claims professionals
Claims representatives must be equipped with the right knowledge, an empathic approach and strong skillset to elicit key details from clients and make sound recommendations. These professionals need to employ a warm, consultative approach and be willing to truly understand what each client needs.

2. Raise consumer awareness and expectations
It’s crucial that we educate the public about all the benefits of life insurance beyond a one-time payout. Agents need to transform from being perceived as salespeople to trusted advisors. People need to understand that life insurers can help you optimize your benefits to best meet your needs. We’re playing the long game here and this awareness shift takes time.

3. Propel tech to the next level
Smart tech is pivotal to successful, scalable asset retention. Data and analytics can instantaneously give claims professionals tailored, viable options they can advise an individual on. Once the solution is identified, the tech also needs to efficiently handle the outcome. The system needs the capability to handle dividing payouts between multiple beneficiaries while also transitioning a portion of funds into an annuity or other policy while accounting for tax implications and various state reporting considerations. Tech solutions must be holistic for businesses to assimilate asset retention into a seamless customer experience.

In conclusion

Insureds obtain life insurance so their loved ones are taken care of in the future. Until now, we’ve always accepted that the best form of protection is a lump sum payout distributed to the beneficiaries upon the insured person’s passing. With asset retention incorporated into our model, we can do better and more to achieve the goal the insured person set out for us in the first place, and our businesses will reap the benefits.