Fear, it seems, helps people to buy life insurance. Hope may have a part to play as well. Hope that insurance can help them when things go wrong, but the hope is not needed unless first, there is fear.
So it should come as no surprise that insurance appears to sell well in a recession, and less well, the corollary would be, when things are booming.
That's how we read the robust performances of life company sales in New Zealand. Risk sales are booming in the UK too. You can check out the news here Link.
What's more, there was more business sold with fewer complaints - perhaps the old foot in the door insurance salesman's reputation is dramatically improved in relation to his once mighty banking colleagues. Money Marketing said:
This underlines the view that has the personal lines insurance business as countercyclical. This, in turn, also explains in part the disappointing growth rates experienced by life insurers during the long boom in the broader economy which came to an end, effectively, at the end of 2007.
It was interesting to see some of the segments.
Income protection sales were up strongly - protect your income in a recession, that makes sense - whole of life sales were up very strongly - which is harder to explain, and calls into question the natural assumption of budget sensitivity. Critical illness sales were down, and term life with critical illness down likewise - but maybe some of this decline is explained as clients choosing more extensive coverage offered by income protection and whole of life cover.
It may suggest that consumers look again at the value provided by whole of life cover. The value of a steady premium compared to the constant rises associated with term life which inevitably leads at some point to reducing or cancelling cover.
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