Fear of ‘selling’ contributing to lapse rates

Don Trapnell, Director of Synchron, one of Australia’s largest non-institutionally owned licensee by adviser numbers, believes political correctness is contributing to life insurance lapse rates and is therefore playing a significant part in making the current life insurance model unsustainable.

“One of the major reasons for lapse rates appears to be that clients fail to fully appreciate the emotional reasoning behind keeping a policy in tact,” Mr Trapnell says, “And the reason they do not appreciate it is due to the fact that advisers are now reluctant to explain these reasons because they do not want to be seen to be selling. Given the unacceptably high level of under-insurance in Australia, this is simply not good enough.”

Mr Trapnell says if a risk adviser can effectively explain to the client the emotional reasons for keeping a life insurance policy in place, that emotional tie will stay with the client long after the client walks out of the meeting.

“Life insurance cannot be bought, it must be sold,” he says. “It is an emotional rather than a logical purchase. When looked at logically, when clients purchase a life insurance policy they pay premiums for something they can never enjoy. What they are paying for is protection for their family – and that’s an emotional purchase.”

Mr Trapnell is concerned that political correctness has bred a new generation of risk advisers, some of whom appear to believe the only way to convince their clients of the need for life insurance is with facts and figures. “Although it is vital for younger advisers to have technical knowledge, they also need to be mentored by more experienced advisers who have been through a period where ‘sales’ was not a dirty word,” he says. “Looking at RG146, there isn’t one section that teaches sales skills. There is no acknowledgment that in the area of risk, it is appropriate to introduce emotion into the conversation.”

Mr Trapnell argues that more experienced advisers learned sales skills that benefit their clients now, and those along the way. “We need newer advisers to learn those skills again,” he says. “The pendulum of political correctness has swung too far and the reasoning behind the whole purpose of life insurance has swung with it.”