Are life insurance companies ready for the next phase of the digital age?
As we enter 2018, the life insurance industry is still in a downturn. According to the MIB Life Index, which tracks nearly 90% of life insurance application activity in US and Canada, 2017 ended down 1.8%. 2018 is currently down 4.4% YTD and is 3.5% lower than that of December 2017, according to Wink.
In addition to lower overall sales, the life insurance industry is beginning to feel some waves coming from insuretech startups. JLT Re has reported that, since 2012 over $7 billion of funding has been raised via 600 deals. About 9% of insuretech startups are looking to disrupt life insurance distribution. Distribution is ripe for disruption, given that consumers are growing increasingly comfortable with shopping online.
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The coming change will revolve around how consumers are buying life insurance. For companies looking to maintain and possibly grow sales through this downturn, Insuretech companies are a welcomed ally.
How are people currently buying life insurance?
According to the 2016 Insurance Barometer Study by LIMRA, 51% of people would prefer to buy life insurance in person. About one in five people prefer to apply for life insurance online, citing the ability to research, comparison shop and avoid pressure as their reasons.
Given the current hype around insuretech, some may be surprised by these numbers. To industry veterans, however, these numbers likely line up with what would be expected, given the current makeup of distribution. Over the next five years, as demand for online solutions grow, companies will become increasingly competent at removing the barriers that make online shoppers wary of buying life insurance without an agent.
The same LIMRA study reports that the top five major reasons people prefer to buy life insurance online are as follows:
- Convenience.
- Ability to Research.
- Speed.
- Ability to Compare.
- Less Pressure.
One key observation is that consumers prefer person-to-person support when buying life insurance, so one can assume that online sales supplemented with human support will be key as the market transitions.
Where is the market heading?
There is a strong push towards online sales, either direct from the carrier, or through insuretech companies. Most life insurance companies have some form of accelerated underwriting in place to help streamline the sales process and avoid medical exams for qualified applicants.
One trend that is becoming more commonplace is the use of data to better determine the underwriting risk of applicants. The companies that are able to make the best use of data to streamline the buying process for consumers will be the ones that jump ahead in 2018 and beyond.
Here's how Bill Gates put it:
The most meaningful way to differentiate your company from your competitors, the best way to put distance between you and the crowd is to do an outstanding job with information. How you gather, manage and use information will determine whether you win or lose.
What can carriers and insuretech companies do to get more consumers buying online?
