The Tilt To Financial Safety Varies By State


Does living in a state or area with a high financial safety ranking mean that insurance customers there tend to prefer products dripping with guarantees — such as fixed annuities, whole life insurance, guaranteed lifetime benefits, etc.?

In a recent study, researchers at Wallet Hub spotlighted some state-level financial safety factors that make this an intriguing topic for speculation.

The personal finance social media network had compared the overall safety of each state and the District of Columbia based on the percentage of population in various research categories. The data came from various government and non-government sources.

The findings indicate that the tilt toward safety varies by state.

Six of the 26 metrics used in the research fell into a category that the researchers dubbed “financial safety.” It turns out that the top-ranking states for this category are Massachusetts, New Hampshire and North Dakota. At the bottom are New Mexico, Nevada and Mississippi. The other states fall in between.

Although this is not insurance industry research, the metrics contributing to this category are strikingly similar to the consumer metrics that annuity and life insurance advisors assess on a regular basis. To wit, the metrics measured were the percentage of the state’s population that: spends more than one makes, has a rainy day fund, lives in an unbanked household, keeps an average annual consumer savings account, lacks health insurance and pays only the minimum on one’s credit card.

Advisors routinely consider such factors when deciding whether product and service recommendations are suitable for the client. They evaluate many other factors too. But the Wallet Hub findings present the financial safety factors in the context of state-level comparisons. The rankings that result might help illuminate discussions about safety and guarantees with clients.

For instance, it might open up discussion about how a state’s comparative financial safety tendencies might be impacting the client’s perspective on insurance products and strategies or on the client’s financial decision-making process.

Alternatively, could the same factors influence the advisor’s own approach to presenting guaranteed insurance products and strategies or discussing the relative merits of guarantees versus no-guarantees?

If the client’s financial safety profile differs dramatically from the state-level trends, how can the advisor use that information in guiding the client? Would a discussion of the state’s general financial profile help the client make decisions? If planning a marketing campaign, would it help to include the state’s overall financial security in the messaging?

And, if the client is planning to relocate to another state — following retirement, for example — what might be some safety-minded locations to mention? (The report provides a glimmer on that, by pointing to state-level rankings of overall safety quality, including safety on the road, at the workplace, in emergencies, in curbing crime, etc.)

In sum, the Wallet Hub report provides a different look at safety issues than what advisors normally see. However, this look is conducive to conversation around insurance guarantees and/or safety-oriented recommendations. For that reason alone, it’s worth a review.

There’s another reason too. Products offering the safety of guarantees are still hot. Take fixed annuities, for example. The industry sold over $22 billion of these products in first quarter alone. That’s an increase of nearly 51 percent from first quarter 2013, according to Beacon Research.


Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Connect with Linda →

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