Insurance Products

Selling Complex Products

The Opening Remarks column in the October 24-October 30 Bloomberg Businessweek, written by Joshua Green, is about the candidacy of Herbert Cain. The piece is titled Mine. Mine. Mine. While seemingly not related to insurance compliance, there was much of interest to me in the piece. One reason was its focus on Cain’s confidence that the power of will and positive thinking – and lots of marketing – will mean he can not only become the President, but that he can accomplish his Presidential goals. Similarly he posits that if we adopt his program, we too can accomplish our goals – it’s easy!

In our work, we review other people’s efforts to simplify and sell sometimes very complex insurance products. Selling life insurance and annuity products means confronting the same cultural phenomena that politicians have to grapple with: Americans seem to crave simple, easy solutions even to the most complex problems. Our country faces very complex economic challenges, but many of us want to believe that there is a simple solution – we just need to find it.

We as a people also want quick easy solutions to our personal financial challenges. Those selling complex insurance products have to face that mindset every day. We want there to be a way to overcome decades of spending and not saving, yet still have a financially secure retirement. We want to believe if we just do this one easy thing, everything will be better.

And that is why there is regulation of insurance advertising and other financial products. It is designed to protect us, individually and collectively, from our cultural desire to believe that there are easy answers to complicated problems.

Some of us believe that the government, here insurance regulators, should not be in the role of protecting us from ourselves in that way. The libertarian approach would be to let us be approached with easy answers to our financial problems, without restriction in content.

But the problem is that we, as a people, can’t bear the consequences of our own determined belief in easy answers. We will fall for it. We will put all of our money in financial products that are not suitable for us. We will look for an easy way out of our complicated problems. Collectively, we do it over and over again. Perhaps it doesn’t matter if we buy the latest gadget that we think will solve all our household problems, but when the issue is our financial future; there is also a social component.

We do, as a people, seem to believe in a basic safety net. We don’t want our parents and grandparents to suffer the consequences of bad financial decisions. When it is said that “we” want people to be responsible for making their own decisions without any paternalistic regulatory oversight, it is often with the belief that good people will make good, responsible and sometimes difficult decisions. Only “bad” people will make bad decisions. But time and time again, we have found that is not the case.

Herman Cain’s political success is one example, but there are many more, of our cultural willingness to buy a very simple answer to a very complex problem. On a recent conference call, a participant lamented that pizza shops on every corner are able to tout their pizza as “the world’s best pizza” but he could not say the same about the insurance product he was promoting.

Jonathan Klein of @Media, formerly head of CNN is quoted in the Bloomberg piece as saying about Cain: “If he’s able to perform, books, radio, television, Twitter and Facebook, even commerce – Glenn Beck sells gold – all of that will be wide-open to him. Its almost a can’t lose scenario. He’s already sold pizza. So why not everything else?”

Well, not insurance. And I for one think that is a good thing. To sell insurance, the law requires that one has to provide a full and complete explanation of these often-complex products. There are no easy answers when it comes to our financial well-being – either individually or for our country. I am glad to work in an industry that generally acknowledges this and struggles against the notion of quick easy solutions to complex problems. I remain hopeful that someday there will be a cultural shift and we as a people will embrace complexity and will stop looking for the easy, one-step solution. But I am not holding my breath. The next indicator may well be in the primary elections. Do those who offer platitudes really succeed over those who offer thoughtful, complicated proposals to the very challenging circumstances we face?