Post the global financial crisis, the life insurance industry found itself on shaky ground. Efforts over the past decade have shifted towards consolidation and risk management, aiming to secure a stable financial foundation for the sector.
However, the evolving demographic trends, marked by an aging populace, have brought new challenges. Older policy structures, once deemed suitable based on past data models, now require insurers to find novel revenue streams.
The decreasing pool of potential life insurance customers has added to the industry’s concerns. Traditional life insurance, once deemed indispensable, now sees dwindling interest, especially among the younger generations.
This trend is evident in the U.S., where the number of households with life insurance policies is at its lowest in 50 years. Recent findings by LIMRA reveal that 38 million households lack any form of life insurance, and a scant 20% of millennials express interest in such policies.
Embracing Digital Transformation
For life insurance providers, the dilemma is clear: either compete intensively for the existing customer base or innovate and expand the market. The true challenge lies in engagement. While the importance of life insurance remains unchanged, the modes of information dissemination and product purchasing have seen a seismic shift, largely due to digital advancements.
Yet, the insurance industry, traditionally slow to adapt, missed out on a decade of innovation post-crisis. To reignite growth, insurers need to harness the potential of digital technologies across three key areas: marketing, policy design and sales, and customer retention.
Modern marketing strategies for insurers need a shift from relying solely on brokers to embracing the potential of direct-to-market approaches. Digital platforms, especially social media networks, offer an avenue to reach the younger, tech-savvy audience directly.
Research indicates a common misconception among this demographic that life insurance is prohibitively expensive—a notion easily dispelled through targeted digital campaigns.
In terms of policy design and sales, the present-day consumer demands quick and hassle-free transactions. Offering a variety of tailored policies can cater to niche demands, such as temporary coverage for specific high-risk activities.
Automated underwriting capabilities can expedite this process. Integrating these tools can shrink the policy creation time to mere minutes, aligning with the swift online purchasing habits prevalent today.
A New Customer-Centric Approach
Data and automation stand poised to revolutionize the insurer-customer relationship. Wearables and apps present an opportunity for insurers to gather real-time data from policyholders, aiding in crafting bespoke policies.
However, this vast data reservoir can also offer ‘Reciprocal Intelligence’—a way for insurers to share insightful, individualized health or habit data with their customers. This could translate into a more engaged and informed customer base, paving the way for customized policy offers and upselling.
The reshaping of the life insurance sector demands that insurance firms reimagine their organizational structure and culture. A top-down integration of tech-savviness is paramount. As the boundaries blur between traditional industries and tech giants, insurance firms too need to recognize their evolving identity. The successful insurer of the future would not just offer policies but would also excel as a tech-forward entity.
Such a shift necessitates strategic recruitments and collaborations. With a burgeoning InsurTech scene, partnerships could be the key to infusing the right technological expertise into traditional firms.
Life insurance’s relevance hasn’t diminished; it’s the approach that needs modernization. By leveraging technology, insurers have the potential to usher in a golden age for the industry, serving as both protectors and tech innovators. Firms that adapt will not only sustain but thrive, while those that resist change might find themselves left behind.
