Spending habits during a recession

There is a study recently published by M&C Saatchi, a global advertising agency with headquarters in London. It puts consumers into categories based on their behavior and reaction to the recession.

I'll get to those categories in a minute, but I think it's important to first note that the premise of this study is that while we are all effected by the recession differently depending on where we live and the local economy there, we generally are reacting to the macro economy - as it's reported by mass media.

We are bombarded daily by dismal reports of national or even global economic downturns. We cannot help but let this color our thinking. Yet, things might actually not be so bad in the immediate area around us.

So, the study and the categories are generated by how we are reacting to macroeconomics.

‘Reacting to Recession' is the name of the study. It identifies and categorizes attitudes and behavior adopted by different groups of consumers. The study finds eight consumer types with distinct approaches to spending in this recession.

Each identified group has adopted an overall specific behavior to cope financially with the downturn.

Crash Dieters

Scrimpers

Abstainers

Balancers

Treaters

Justifiers

Ostriches

Vultures


A caveat before the descriptions: they're not based on socioeconomic status, meaning that you can be in the Crash Dieter...and a millionaire.

Crash Dieters are the largest segment, grabbing 26% of adults participating in the study. The group was so named because it aims to "shed pounds" from their weekly budget by identifying and cutting out all non-essential spending until things improve. Crash Dieters are a heavily cash orientated group. Debt clearly frightens them (or is unavailable to them). They live from week to week and when the money runs out they're forced to take quite drastic action.

Scrimpers made up 13% of the study population. Cutting spending is still a main reaction, but they want to maintain their lifestyle and are reluctant to make sacrifices. "Trade down" is more their philosophy than "cut out." Cheaper stores and private labels have become more important to them.

Abstainers, like their Scrimper brethren, don't plan to make any huge cuts in spending habits. About 15% of the population are Abstainers. "The big purchases can wait until the economy improves," is what they'll tell you.

Balancers is one of the smallest groups. Nearly one in 10 people in the study fit into this category, which doesn't want to compromise or make any changes to their pre-recession lifestyle. However, a monetary crisis for them, say a job loss, triggers abrupt behavior. There's no "trading down" - It's gone.

Just over 12% of the study population are Treaters. You could describe them as Crash Dieters who occasionally binge. Every once in a while, the frugality they have adopted to deal with the recession gets rewarded by the purchase of something they promised themselves they wouldn't get.

Another 12% are Justifiers. They'll spend, but they need to have a reason - and it's not price-sensitive. If it's a newer version of something they already have, they want it and convince themselves it's a wise expenditure.

Everybody knows what an Ostrich does when it confronts danger - supposedly - and this is the way 9% of the study population is reacting to the recession. They're simply ignoring it - either because they have sufficient means to do so or because they have been brought up to believe that large balances on credit cards is the accepted norm.

At 4%, the smallest category was given the name Vultures. They're thriving on the carnage caused by the recession. Prices on many things have plummeted. They're swooping in and purchasing all they can.

The study is ostensibly for the purpose of how to market to these groups during the recession; and these distinctive categories of behavior strongly show that there may be only one recession globally...but we certainly are not all reacting to it in the same way.

Obviously, the propensity to purchase life insurance products at this time by these categories presents the same types of obstacles and challenges as any other industry.

Do you recognize yourself in any of them?

Health Insurance Reform - What Do Doctors Think

Lindsey Tanner wrote an article entitled “Doctors signal they’ll work with Obama” published in the Associated Press discussing Obama's meeting with the American Medical Association (AMA).

The AMA is a group of doctors representing the nation. Traditionally, the AMA is conservative and have fought previous administrations' health care reform attempts. There was speculation that they were going to create an obstacle for Obama and his health insurance plan. But after Obama spoke to the doctors at their annual meeting in Chicago, the AMA signaled that they won't close the door on his health insurance proposal. Specifically, they are not against the part where public health insurance will compete with private insurers.

Obama's trip to Chicago for this meeting shows how much the President values the AMA's support. They would have liked a stronger endorsement, but this is a small battle in the large fight ahead for the Obama administration.

Auto Insurance Prices Drop in May

More and more Americans are trying to save money so it comes as good news that auto insurance rates dropped in May according to an article on IFAWebnews. The average rate was as low as $1871 in May, 2009. It got as high as $1950 in Sept, 2008.

It's a good time for lower auto insurance rates because industry experts say new auto sales will be increasing, potentially by 9%, in June over May. Dealers are trying to get 2009 cars off the lots to make room for the 2010 cars coming in. As buyers purchase new cars they will need to update their auto insurance policies and many will shop around. Because of the economy slump new car sales have been down. A pick up in car sales will have an impact on auto insurance. Having a new car may change your insurance rate so it's important to get a quote from numerous auto insurance companies to ensure you are getting the best deal.

Posted by Insurance Diva at 8:52 PM

Donegal Insurance Released Its 2009 First Quarter Earnings

On April 24, 2009 Donegal Insurance stated their 2009 first quarter earnings. The first quarter net income was $169,804 (.01 per share of Class A common stock on a diluted basis). The Company was expecting a lower net income for the First Quarter citing severe winter weather as well as an unusually high number of fire loss claims. Both of these factors adversely affected their net income 1st quarter, 2009.

Donegal Insurance is an insurance company with subsidiaries that provide personal & commercial property and casualty lines of insurance in 18 states in the US.

Health Care Spending Needs to be Lowered

A report was released today by President Obama's economic team stating that the growth in health care spending needs to be decreased from 6% to 4.5% to show huge benefits for the economy. Some of these benefits would include creating up to 500,000 new jobs and increasing the average family income by $2600 over the next 10 years. Cutting these health insurance costs and covering the 46 million people who are currently not insured would increase economic stability by about $100 billion per year.

This goal is incredibly aggressive and barely seems possible. Obama's economic advisers realize that decreasing spending by 1.5% will be very challenging, but if the goal can be attained it could mean a huge benefit for companies, families and the US economy, which is definitely needed. Health care spending right now accounts for 18% of gross domestic product and could be up to 34% by 2040 if reform does not take place. Obama also met with industry leaders recently who are pledging to find $2 trillion in health savings over 10 years. It is definitely a priority on Obama's agenda and he thinks reform is a must.

Arrogance in life insurance…

If today you search for the precise words “pinnacle life insurance” via Google… what do you think you’ll see?

You’ll see Pinnacle Life’s sponsored link, obviously.

But that’s not all. You’ll also see five New Zealand life insurance brokers and two life insurance companies advertising their wares. What they’ve done is simply to hook their adverts onto the search term “Pinnacle Life Insurance”. So while you’re searching for Pinnacle Life, they’re busy trying to get themselves noticed.

Is this a problem?

Well, it isn’t a problem for Pinnacle Life, because Pinnacle’s online process and great pricing are unmatched in NZ so the comparison is actually to Pinnacle Life’s advantage. Really… this is a NON-issue. And it’s quite common practice too.

So why are we blogging about this then? And where are we going with this?

Because around six weeks ago, Pinnacle Life was threatened with legal action by one of NZ’s larger insurance companies for daring to do the same thing. That insurance company goes by the name ‘TOWER’.

Not wanting to pick a fight, we at Pinnacle Life pulled the sponsored link and that we thought was the end of it.

Not so.

One of the sponsored links running alongside a Pinnacle Life Insurance search today is… you guessed it… TOWER Health & Life.

And so it was sheer indignation that has led us to write this blog.

TOWER provided several formal arguments as to why Pinnacle Life’s actions were legally and morally wrong. And then just weeks after making such a fuss and calling in their lawyers, TOWER go and do exactly the same thing!

Will Pinnacle Life call in the lawyers?

Of course not. That behaviour is more typical of your regular, old fashioned, overpriced life insurance company.