Three Macro Trends Reshaping Life Insurance

Three trends have begun to reshape the life insurance industry: the impact of the millennial market; the industry’s awakening to customer-centricity and digital experiences; and the power of big data.

(Big Wave, by George Makar.)

The goalposts for the life insurance industry are shifting, driven in part by the expectations of the next generation of customers who represent an enormous area of growth for new policies that will be issued over the next 25 years. While they will continue to be awoken to the need and importance of life insurance by the same traditional key life events—marriage, having children, family health scares—their expectations of how the industry will help them understand coverage options, and experience getting coverage in place is markedly different to their parents’ expectations and experiences.

The industry has made some gradual attempts to evolve the customer experience—with ideas like in-store life insurance kiosks coming to life—but has so far made little headway. As we get deeper into 2015, following are three important trends that are increasingly reshaping the life insurance industry: the impact of the millennial market and its expectations; the industry’s real awakening to customer-centricity and digital experiences; and the power of big data to make this all happen.

The Millennial Market

Millennials will be the most important customers for life insurers over the next 25 years. While they may be busy on Snapchat and various other social media channels, 39 percent of millennials say they will buy life insurance in the next year. Currently, millennials are significantly underinsured, but they show the highest level of concern, across all generations, for common financial planning issues including leaving their dependents in a difficult situation if they were to die prematurely, according to a LIMRA survey. The challenge for the industry, however, is providing this customer with the preferred digital-centric experience so they are more apt to take the plunge and purchase a policy.

Technology is arguably the biggest agent of change in play and millennials are all about it—83 percent sleep with their smartphones and 74 percent feel that new technology makes their lives easier. They are using technology to make all aspects of their life more convenient, from banking to investments. The reality is that the life insurance industry hasn’t kept pace with Millennials’ desire to conduct more of their business online. In its 2014 Insurance Panel Study, Gallup found that Millennials are more than twice as likely as all other generations to purchase their insurance policies online. However, the study also found that only 34 percent of those surveyed said they were “extremely satisfied” with the ease of navigating their insurer’s website and less than half of respondents were “extremely satisfied” with the services offered online.

(Related: New Online Agency Haven Life Offers Instant Term Life Purchase)

It should also be noted that the Millennial market is one of the least likely to be concerned with their online privacy—quelling concerns that Americans don’t want to fill out health or financial information online. A study by the USC Annenberg Center for the Digital Future found that compared to Internet users ages 35 and older, “larger percentages of Millennials report more enthusiasm about sharing their personal information with online businesses, more willingness to trade personal information in exchange for relevant advertising” and a “greater likelihood that they allow access to their personal data… as long as they receive concrete benefits in return.” In fact, the study found that a whopping 51 percent of them would provide personal information to a company in exchange for something in return.

The issue isn’t a lack of understanding or desire to purchase life insurance; rather, it’s a disconnect between the experience millennials expect, and what the industry currently provides. Recruiting younger agents to better relate to this younger audience is an important step but will not be enough. The answer lies in technology and innovation.

Waking up to Customer-Centricity and Digital Experiences

The current perception that life insurance products are complicated is a challenge the industry needs to address. Insurers understand that digital innovation is necessary to improve customer relationships, but what passes for digital experience in today’s life insurance industry is little more than online lead generation engines, which add limited consumer value. Against that backdrop, arguments about whether customers really want to buy or just shop for life insurance online are not productive. The need and expectation is clear: better digital experiences for insurance are warranted and players from both inside and outside the industry are exploring how to do just that.

The combination of the consistent increase in people who say they would buy life insurance online and the fact that consumers aged 18 to 34 spend more money online than any other age group, demonstrates the need for life insurance to become digital. Currently, many of the largest and well-known life insurers don’t offer a way for consumers to purchase a term life insurance policy entirely online. Those that do offer an online purchasing option, often sell a more expensive simplified issue policy—despite the data above supporting Millennials’ desire to accomplish all tasks online. To be successful, the new digital experience needs to come with simpler, easier to understand products and processes but also remain affordable for this cost-conscious and insurance adverse generation.

The Power of Big Data

The life insurance industry has always been driven by data. Today, there is more data available than ever before, not only from customers, but from suppliers, partners and social media. Emerging technologies, including fitness devices, may also play a role in the types of data that inform underwriting decisions.  The trend toward embracing wearable technology has already been adopted by life insurers. Additionally, on the application side, new underwriting capabilities will likely remove the need for other time-consuming parts of the life insurance process, such as taking a medical exam.

(Related: The Principal Speeds Life Insurance Underwriting to Within 48 Hours Without Labs)

The inherent challenge is how best to analyze this new data and make it usable and beneficial. By cracking that code, the data will not only play a key role in improving the customer experience for buying life insurance, but can also improve policy and underwriting decisions—increasing efficiency, speed and accuracy. We’ve seen how new tech-based platforms have been able to revolutionize other industries by culling quickly through big data (for example, the online investing market.) If the insurance industry can replicate this same model by integrating technology and data driven process improvements, insurers will be able to better understand their customers and be able to create more tailored experiences and products for them, streamlining the entire process. It will also help life insurance providers understand how to successfully drive more regular and meaningful interaction with customers, identifying new value opportunities beyond selling the core policy.

The life insurance must re-think the life insurance purchasing experience, and focus on better suiting the needs and preferences of today’s new class of insurance buyers. This means leveraging back-end data to accelerate and improve the application and approval process. The companies that embrace and create a digital purchasing experience will see that a new life insurance customer has been brought to the table.

Yaron Ben-Zvi // Yaron Ben-Zvi is the co-founder and CEO of Haven Life. He is responsible for the overall vision of the company and for delivering a next generation customer experience in the life insurance industry. Ben-Zvi has a background in financial services startups, having founded two others before Haven Life. Prior to that, he served as a key team member for BuzzMetrics, which later became part of The Nielsen Company. Ben-Zvi graduated from the University of Pennsylvania with an MBA in marketing and received his BA from Wesleyan University.

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