Many consumers don't know much about the most common insurance products marketed to help address their retirement savings and income needs, accentuating the challenge facing carriers and their agents as they struggle to connect with prospects, a survey by Deloitte's Center for Financial Services revealed.

For example, nearly 40 percent surveyed by Deloitte don't know anything about annuities or understand how they work, with the percentage even higher among younger respondents.

In addition, 25 percent either don't know about non-term life-insurance products — or if they are aware, don't know what these products can do to bolster retirement savings and income.

Deloitte's survey of nearly 4,500 consumers from a wide range of age and income groups found a basic lack of knowledge about retirement-related products to be one of five barriers preventing insurers and their intermediaries from more effectively reaching prospects.

Our prior blogs on this survey focused on the first two barriers — conflicting financial priorities, as well as a failure to communicate effectively with potential prospects, particularly via the workplace. (Our next two blogs will address mistrust of financial institutions and a “do it myself” mentality when it comes to financial planning that is all too prevalent among consumers.)

So, how might insurers and their agents and brokers overcome this product-knowledge barrier?

While most consumers may not need to know everything about the products they invest in for retirement, some familiarity is likely necessary to increase the buyer's comfort level to make investment decisions and commit to a plan to bolster their overall retirement security. The challenge is how financial-services providers can accomplish this.

One possibility is to reengineer or rebrand some existing products to provide greater transparency and clarity, so that consumers have a better idea how insurance can facilitate their retirement security.

This might help overcome the fact that of those surveyed who had been contacted by financial institutions in the last two years about retirement planning, 25 percent took no action based on these interactions because the products and services offered did not meet their needs.

For longstanding lines such as annuities and non-term life insurance, more aggressive campaigns to educate consumers about how the products work and what benefits they offer could draw more prospects over time. But consumers also might respond in greater numbers to more simplified, repackaged or even rebranded versions of these standard products.

In the spirit of holistic-retirement planning, it may be worthwhile to consider additional hybrid product designs that address multiple financial priorities, such as efforts to market combinations offering long-term care options within a life-insurance policy.

Also, a dynamic portfolio approach to product allocation that accounts for changes in life goals, risk aversion and life stage both in the asset accumulation and decumulation phases could be the next frontier.

Perhaps no one provider may be able to accommodate all of the various features sought by consumers because of each company's business focus and concentration on related capabilities. Thus, a potential way to overcome this problem might be to partner with other financial services firms offering complementary product lines.

For example, life and annuity providers could partner with health insurers to offer their retirement-related products via private health-insurance exchanges created to help consumers meet the coverage mandates under the Patient Protection and Affordable Care Act.

This opportunity is particularly intriguing because a significant percentage of survey respondents said saving to pay medical- and long-term-care expenses is a leading retirement goal. And it is particularly significant because Deloitte's survey found a large portion of respondents convinced that no matter how much they save, their healthcare-related expenses will overwhelm their retirement nest egg — which may in itself be a factor discouraging many individuals from trying to plan for retirement in the first place.

This is also where the value could be emphasized of working with an agent or broker, trained to offer comprehensive advice while coordinating products and services from multiple providers under a single, holistic financial plan. Insurance agents and broader financial planners could be invaluable when it comes to educating consumers about retirement-related products.

This knowledge barrier is no small matter, because if consumers aren't aware of all of the options at their disposal in planning for retirement, or don't comprehend how some of these products function, the chances of making sound choices for their retirement planning are likely to be reduced.

The same can be said of those who choose to “do-it-myself” when it comes to retirement planning without understanding what solutions are available in the market. But that barrier will be discussed later in this series.

In our next blog, we'll examine how financial institutions might overcome a fourth barrier discouraging or preventing many people from planning for retirement — a wide-ranging mistrust of insurance carriers and their intermediaries.

In the meantime, a full report on the survey results and their implications—“Meeting the Retirement Challenge: New Approaches and Solutions for the Financial Services Industry”—can be accessed with this link.

Special Reports /

Ignorance Is Not Bliss When it Comes to Retirement Products

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