Conning: Life Insurers Right in the Middle of a Big Opportunity

The recession and the economic malaise that has accompanied it have been well documented. Current economic conditions undoubtedly have an impact on the ability to sell life insurance; when families and individuals are in fiscal distress, discretionary spending is one of the first things to get cut. The report makes note of the commission potential when selling to upper-income customers and the allure that agents have to content with to migrate their sales practices towards them to the detriment and isolation of the middle market. Pricing discrepancies in terms of what is affordable for the middle market as well as the intricate and many times esoteric nature of the product can further detach middle market customers during the sales process.

Going forward, Conning contends that life insurers should take a page from property and casualty insurers playbook and begin to implement the use of predictive modeling. The hope is that predictive modeling will streamline the underwriting process, making it much faster and less invasive for the customer. The process has also proven to be less expensive and more accurate than the traditional underwriting process.

Social media will also have to be utilized to close the coverage gap in the middle market. The report indicates that life insurers will have to revamp the manner in which they use social media migrating from using it as just another venue to post material developed initially for other media to a primary channel for selling their products.

Conning maintains that the internet will most likely be the most effective tool to reach the middle market. Younger people who are in the early stages of their careers thus leaving them lower on the economic ladder and therefore more likely to fall within the parameters of the middle market are prime users of social media making it the most effective platform for life insurers to use to close the coverage gap there.

"Over the past five years the missed opportunity in the middle market for life insurers has grown significantly and our latest estimate is that it has reached $10.2 trillion. The financial crisis and recession had far-reaching effects on income, asset values and debt levels, all of which combined to drive the increased size of this missed opportunity. In addition, the rising cost of healthcare, especially in the middle market, may be an emerging, largely unrecognized need for life insurance planning. The question now is whether insurers can harness available new technologies to actually meet this burgeoning need," said Terence Martin, director of Conning Research and Consulting.