Though most Americans agree on the importance of obtaining adequate life insurance, less than half of U.S. adults have an individual life insurance policy to secure their families futures, according to statements made by The American Council of Life Insurers (ACLI) and the National Association of Insurance and Financial Advisors (NAIFA).

There seems to be no one reason why many Americans remain un/under-insured when it comes to life insurance. Rather, there are several factors at play, and blame can be placed at the feet of both those selling life insurance products, and those who should be buying these products.

Consumer attitudes play a large part. According to statements released in March by Bob Kerzner, president and CEO of LIMRA, consumers purchasing life insurance are similar to contestants on game shows who have to make big decisions involving a lot of money. We see the contestants sweating out their decision, wishing they had more time to choose, torn about the risk of losing what theyve gained, yet excited that they could win more, Kerzner said. Believe it or not, people experience the same things when it comes to buying life insurance " or making any big financial decision. Its just not on national TV, and its not nearly as dramatic. Sadly, many people just put off making any decision, sometimes until its too late.

Kerzner attributes consumers indecision to behavioral economics, a blend of psychology and economics. Behavioral economics tells us that when people say they cant afford life insurance, even when they admit they dont have enough, theres more to it than a straight budget calculation, Kerzner said. The negative feelings of losing the premium for more insurance are often a lot stronger than the positive feelings of buying the needed protection.

Besides behavioral economics, other more traditional factors are at work with respect to consumers feelings towards life insurance. Not surprisingly, one is simply procrastination. In consumer surveys conducted by LIMRA in 2004, 44 percent of American households indicated that they believed they needed more life insurance. However, when citing reasons for not purchasing additional coverage, 50 percent responded that procrastination was a reason.

In the same survey, 43 percent cited worry about making the wrong decision " an indication of the behavioral economics that Kerzner referenced, but also a sign of the lack of information that consumers have regarding life insurance. Here, the industry needs to find effective ways to educate its potential client base in order to reduce the number of underserved Americans.

Agents Focusing on Mass Affluent

Francine Jacoby, CLU, ChFC, a life insurance agent with The Jacoby Agency, Inc. in Indianapolis, Ind., and a 32-year Million Dollar Round Table (MDRT) member, stated that many Americans remain underserved by the industry simply because agents cannot afford to serve them. Life insurance agents, she said, earn approximately what their client base earns, and so in the case of less affluent clients, the premiums and commissions are too low.

Rondol Davidson, a 19-year MDRT member, also said that agents tend to focus primarily on the mass affluent. Agents today, he noted, are going upstream to find clients. Part of the problem, he said, is that the life insurance companies themselves do not market to less affluent customers. From an agents perspective, Davidson said, If you cant find a product, you cant sell. He did indicate that some companies do offer products geared towards this underserved market.

Jacoby said that a solution to this dilemma may lie through workplace marketing. On an individual basis, she explained, agents are hesitant to take on less affluent clients. However, the key could be to deliver packages to this clientele in volume. She noted that a problem with this line of thought, though, is the difficulty in tailoring the packages to fit individual needs. She also said that, when dealing with clients who are on a strict budget, the first thing to go is life insurance.

Lack of Reliable Information Hurting Consumers

Jacoby also explained that many of the underserved are not just those who are less affluent. Many who are considered middle market are also falling between the cracks. One reason, said Jacoby, is that these people believe that they can take care of all of their life insurance needs over the Internet. However, she indicated that consumers who choose this route may not understand how much life insurance they really need, and oftentimes, they end up being severely under-insured.

Davidson agreed, noting that people are just not savvy enough when it comes to life insurance to go on the Internet and take care of all of their needs.

ACLI and NAIFA have listed a core reason for this lack of education among Americans with respect to life insurance. The associations pointed to the decline in the number of career agents who can educate Americans on the value of life insurance products and services. Since 1975, they noted, the number of new life agent recruits has declined by 46 percent, and the average age of a life agent today exceeds 55 years old.

Life insurance agents are on the front lines of helping Americans face growing challenges to financial protection and retirement security, saidNAIFA CEO David F. Woods, CLU, ChFC, LUTCF. If fewer agents are available to deliver these services, then fewer Americans will receive the guidance necessary to meet the financial security needs for themselves and their families.

Industry Solutions

In response, ACLI and NAIFA are calling for legislative, regulatory and administrative changes that support uniformity, efficiency, and the growth of a career agent field force. Their plan includes:

Full implementation of the NAIC Producer Licensing Model Act in the states. The act governs the qualifications and procedures for the licensing of insurance producers;

A uniform licensing structure that includes the option of obtaining a life only or a combined life and health license. Today, three states do not allow for a life only option;

Procedures that allow for seamless transition of resident licenses for agents who relocate to another state;

Development of uniform testing standards and educational materials.

The industry has taken up other initiatives to try to educate consumers about life insurance. Both Jacoby and Davidson pointed to Life Insurance Awareness Month, held in September. During this month, Davidson said, the industry shares stories trumpeting the importance of life insurance, and engages in a strong advertising campaign through many different media outlets. Davidson noted that in the month that follows this campaign, there is a noticeable increase in the purchase of life insurance.

Long Road Ahead

Still, Davidson acknowledges that more needs to be done to provide coverage to the tremendous amount of consumers who are not insured or are under-insured. Jacoby agreed, stating that providing education in schools could go a long way towards successfully informing more Americans.

Jacoby also indicated that agents need to be aggressive. Life insurance, she said, has never been [a sector] where people call you. You have to go out and get them.

In a call to arms to agents, LIMRAs Kerzner echoed that sentiment. If people dont understand our product, they wont buy it. So we need to spend more time with people, to help them answer the questions of how much insurance they need, and what kind to buy. We need to help them see how life insurance fits into their total financial plan.