The Role of the Agent in Medicare Supplement Sales
Issue: June 2015 | L/H General Industry, Critical Illness, Disability, Life, Medicare Supplement | Download PDF | English By Stacy Varney
Medicare enrollment is on the rise, and it shows no signs of slowing. Consider this: It is projected that the 65+ population will double in size by 2030 when it will reach 71.5 million, and by 2050 it will be over 86 million.1 With this growth in Medicare buyers, no one should be surprised that an increasing number of consumers are looking for supplemental coverage to bridge the gaps left by Medicare.
The need to effectively educate and engage consumers has never been greater. At the end of last year, we conducted consumer research to learn more about how the senior population navigates the health insurance decision-making process, and what level of engagement exists between them and insurance agents.
This research was a follow-up to a qualitative consumer study we conducted in 2013 that evaluated Medicare Supplement insurance buyers and non-buyers (see more details at end of article). For the recent study, our researchers tested some initial findings from the 2013 research in which we categorized buyers as “Info-Takers” or “Info-Seekers.”
Topics we explored through this latest study included consumer engagement with agents and the role the agent plays in the decision-making process, the health insurance education process, and when and how consumers evaluate their coverage options. In this article, we discuss what we found to be some of the most useful takeaways.
Conducted in December 2014, our research targeted two distinct groups of consumers:
- 65-year-olds (950 participants)
- 66–75-year-olds (800 participants)
Participants were obtained through a national survey panel. Responses were collected via telephone and online and were weighted based on Internet usage levels and leveraging Pew Research statistics. All participants were U.S. residents and had health insurance coverage beyond Medicare Part A and/or Part B, with additional coverage of either Medicare Advantage or Medicare Supplement insurance.
Key Survey Findings
Agents’ Influence on the Plan Selection Process
Nearly 60% of consumers surveyed shared that they received assistance from a professional. Surprisingly, 56% had already made their decision on whether or not to enroll in Medicare prior to receiving assistance from a professional. However, many may have selected a different option after meeting with the agent.
For those that received assistance with the decision-making process, fewer than 20% of them were contacted without having any prior conversation with that agent. The majority - nearly 40% - selected an agent based on a recommendation from a family member or friend. Referrals also came from former employers, physicians or financial planners.
Only about 20% of consumers said they connected with their agent by responding to an advertisement or mailer. This was an interesting finding considering the deluge of marketing materials sent to consumers upon turning age 65.
In our 2013 consumer study, we found that individuals received so many marketing mailers about Medicare Supplement insurance options that they only paid attention to the first few received and then tossed the majority of them in the trash without reading them.
When deciding which health insurance option to select, 31% of participants reported wanting a high degree of assistance from a professional. Those that sought support were looking for help in a variety of areas including:
- Researching the plan options
- Making the selection
- Identifying what companies are available for selection
- Choosing from the companies presented
- Completing the enrollment process
About 30% of consumers said they looked for considerable or high-level assistance across all of these areas. [See Exhibit A]
Exhibit A. Percentage Reporting They Desire Considerable or High Level of Assistance in Selecting a Medicare Supplement Plan
Source: Gen Re, 2014
Unfortunately, nearly a third of consumers that indicated they were seeking a high degree of assistance did not end up working with a professional at all. These individuals either didn’t know where to turn for help, or chose to seek advice from family or friends rather than a professional. Individuals with this profile would therefore be excellent candidates for outreach by agents as they aren’t receiving the level of assistance they seem to desire.
Agents’ Influence on Buying Decisions
Our data shows that the majority of the time agents clearly influence consumers’ buying decisions regarding a Medicare Supplement plan.
For example, among the cohort of consumers who felt they needed a lot of direction/advice on which plan to select (and for whom an agent made a recommendation 72% of the time), they reported going with that plan nearly 95% of the time. Those consumers went with that plan 94% of the time. Even with those individuals who felt they already knew or had a strong idea about which plan they wanted, agents made recommendations 60% of the time, and once again, the recommended plan was selected the majority (88%) of the time.
The same holds true when selecting which company to choose for purchasing Medicare Supplement insurance coverage. Consumers who felt they needed a lot of direction/advice were offered a recommendation 62% of the time, and they selected the company recommended 92% of the time. For those who felt they already knew or had a strong idea of which company they would select, agents gave a recommendation just under 50% of the time, and the consumers opted for that choice 93% of the time. [See Exhibit B]
Exhibit B. Influence of Agent Recommendation When Selecting a Company for Medicare Supplement Insurance
Source: Gen Re, 2014
We dug deeper into the agent influence data and found a difference between when the consumer initiated contact after receiving an advertisement and when the agent initiated contact. When consumers initiated the contact with the agent, they opted for the carrier with the lowest cost option more often than when they had received a referral or if the agent had contacted them directly. We also learned that when the consumer was referred to the agent, which occurred most often, the majority of the time (nearly 60%) these individuals selected the company with a reasonably priced option, but not the lowest. [See Exhibit C]
This could indicate that consumers who initiated contact with the agent had already done research on which plan they wanted, and had determined their best options from the various companies available.
Exhibit C. How the Selected Insurance Company Compared to Other Companies Offering Medicare Supplement Plans
Source: Gen Re, 2014
Another significant result we found was that when consumers had received no previous assistance at all from an agent, they were far more likely to select a company they’ve used before. About half of participants indicated this, and another 45% reported they selected a company that they were aware of but had never used. Interestingly, when an agent provided assistance, consumers were more likely to select a previously unknown company.
Customer Communication Preferences
Among those that met with a professional, over 65% had a one-on-one meeting. While consumers appear to prefer in-person contact, agents seem to be missing opportunities during those meetings to advise their clients on other insurance products that may be of interest. In fact nearly 80% of respondents shared that they do not work with the agent to purchase any other product.
In addition, nearly half (46%) of consumers reported that their health insurance agent had not kept in contact with them once they sold the policy. However, when asked how often consumers wanted to be in touch with their agents, the majority (46%) said at their policy anniversary date. About a third reported wanting to be contacted with important updates.
Very few, only 12%, said they never wanted to be contacted. Even for those who had kept in contact, over 50% of consumers, not their agents, initiated the contact with the agent at their first anniversary date. [See Exhibit D]
Exhibit D. Preferred Level of Contact With Original Agent
Source: Gen Re, 2014
Of those that prefer to have an ongoing relationship with their agent, nearly 70% said they prefer contact by telephone or email. Apparently, this is an area where agents are not meeting their customers’ needs.
We also asked participants ages 66–75 if they had changed their Medicare Supplement plan selections or switched companies since they originally purchased their coverage. We were surprised by their responses - less than 30% had made a change to their coverage since turning 65 and selecting Medicare. The older segment of this group (those ages 71–75) were more likely than the younger group (65–70) to have done so.
Even more surprising was that the consumers, not agents, had initiated this switch - nearly 60% of the time. According to our findings, agents initiated the switch less than 10% of the time. While consumers appear to be driving these decisions to switch companies, agents definitely can help them understand how they compare.
Consumers clearly value recommendations provided by agents concerning Medicare Supplement plans, regardless of whether they initiated the contact with the agent or not. They prefer to have an ongoing relationship with the agent and are looking for the agent to stay connected with a phone call or email at the anniversary date, or with important updates to share.
Referrals from family members, friends, physicians and financial advisors are the more common ways that consumers get connected to agents. Therefore, we believe that maintaining strong relationships with consumers after the initial sale is the best way for agents to secure new business opportunities.
While agents do not appear to drive consumers’ decisions to switch plans or companies, when consumers are considering if they want to make a change, agents are helpful in comparing the options. When making a decision to switch, consumers were more likely to choose a lower cost option.
Another way agents help consumers to make decisions is to introduce them to companies that are not familiar to them. The likelihood of consumers selecting an unfamiliar company for coverage increases if an agent makes the recommendation. We will share other findings from this survey in the coming weeks in blog posts and webinars.
Findings Compared to 2013 Study
Our latest quantitative study supports a variety of findings from our initial consumer research on seniors. For example, some consumers, also known as “Info-Seekers,” are far more likely to follow a do-it-yourself approach when researching health insurance options after age 65. These individuals will drive the decision-making process but still value agents’ recommendations.
We saw a strong tendency for these individuals to be healthy, and healthier consumers are less likely to desire a high level of agent assistance.
Overall, agent involvement in the decision-making process is valued when consumers are selecting which plan and which company for purchasing their coverage, and they are less likely than unhealthy consumers to review their health insurance options every year. The data also indicates that this group of consumers received a higher level of formal education and has higher household incomes.
- CSG Actuarial
For more articles in this publication, view the Table of Contents.