Life Insurance's 'New Normal' Is a Major Opportunity for Modern Financial Advisors

As financial advisors sort through the aftermath of the pandemic, they will find that life insurance has been completely transformed.

At the beginning of 2020, distributing life insurance was an arduous task — requiring multiple, often in-person meetings, awkward conversations on gory details of medical history, followed by time-consuming medical exams and paper applications.

Opening just one new policy would take a few months or more.

Today, advisors and their clients are positioned to benefit from the "new normal" of the life insurance industry: Kitchen table conversations have evolved into videoconferences.

Paper applications have shifted to digital forms.

Invasive medical exams can often be replaced with automated underwriting based on predictive models.

The pandemic has also fueled record-setting demand for life insurance.

In 2021, sales grew by 20% from the year prior, according to the trade organization LIMRA, topping levels not seen since the early 1980s.

However, financial advisors often rely on a constellation of legacy technology solutions which have slowed their ability to adjust to these digital ways of conducting business.

These outdated solutions aren't keeping up with the current uptick in demand. One of our core beliefs at Modern Life is that it will require a rethink of current solutions and a digitally native tech stack to enable advisors to best take advantage of this new landscape.

New Technology is Making Life Insurance Easier (Finally!)

New technologies are helping advisors on two fronts.

First, carrier appetite for accelerated underwriting — based on predictive models instead of medical exams to make decisions — has dramatically expanded in recent years.

Today, many Americans no longer need an extensive medical exam to take out a policy. Many carriers offer up to $2 million or more of death benefit on an accelerated basis, which is four times more than what was typically available just a few years ago.

It's simple math that adds up to a less-invasive and more comfortable client experience.

Meanwhile, for clients who don't qualify for accelerated review and underwriting, increased adoption and access to electronic medical records helps expedite the time consuming process of retrieving medical records for underwriting.

Second, digital applications and e-signatures have streamlined what is often one of the most cumbersome parts of the process.

A paper life insurance application can be 50 pages or more and its complexity can be daunting.

Roughly half of all paper applications are sent back by carriers due to clerical errors or inconsistencies, which causes delays and client frustration.

Digital applications ensure that all the right information is included the first time.

They also reduce manual rekeying by underwriters, leading to faster decisions and fewer transcription errors.

Digitization is here to stay, according to researchers.

"Many of the pandemic pivots we've seen over the last two years are likely to stick," according to Elaine Tumicki, vice president of insurance research at LIMRA. "Alternative sources of underwriting data, accelerated and automated underwriting, e-apps, e-signatures and all the other practices are not going away," she added.

For good reason the life insurance industry is responding to increasing demand for client-friendly experiences that embrace financial advisors.

Demand Isn't Just About COVID-19

The sales records set last year by the life insurance industry weren't just a reaction to the pandemic.

A convergence of factors, from the adoption of increasingly sophisticated financial planning techniques to the potential for tax changes on the horizon in light of recent very high budget deficits, is reshaping life insurance demand.

Fortunately, savvy advisors are well positioned to benefit.

Advisors and their clients are already comfortable with financial planning software, even as it stretches into more complex topics such as estate planning.

Naturally, long-term planning and tax conversations delve into protective products like life insurance, which can be used beyond income protection to, say, equalize an inheritance or provide a charitable donation for a worthy cause.

We believe that advisors who embrace the simplicity and expediency of recent technology advancements, while still providing deep expertise, will be the winners of the post-pandemic era.

Advisors should be wary of technology that was developed to replace, not complement, their expertise.

Each client has a unique financial planning need and medical history.

Clients expect advisors to tailor solutions to their needs, find high-value solutions, and have clear explanations for complex topics.

Technology should empower advisors and augment advisor expertise, to be able to access data and get decisions quickly, especially for products as complex and consequential as life insurance.

A 'New Normal' For Life Insurance

Advisors aren't alone in adjusting to a "new normal." Old approaches to life insurance are no longer effective, efficient or — in many cases — comfortable.

Carriers have fully embraced the need to adapt to this rapidly evolving, digital-first landscape in order to deliver more efficient advisor and client experiences.

"The top three goals companies reported for their programs are reducing the time it takes to issue policies, meeting consumer expectations and increasing applicant satisfaction," according to the LIMRA report "Automated and Accelerated Underwriting Life Insurance Company Practices in 2021."

"Many customers find the traditional underwriting process to be too slow and invasive," the report's authors noted.

"Some companies have chosen to address this by speeding up the process and reducing the requirements for applicants."

In fact, Modern Life was inspired by my own experience of buying life insurance for my family.

The months-long process of securing coverage — from scheduling an in-person medical exam to filling out more than 50 pages of paper applications — shocked and humbled me.

As frustrating as my experience was, I came away energized by the potential to leverage technology, data and design, to dramatically transform the buying and selling experience.

The life insurance has changed more in the last few years than at any point in its 150 year history.

All of these changes involve new technologies and new approaches to underwriting and distributing life insurance.

Equipped with the right tools, modern advisors are well-positioned to flourish in this "new normal."

Michael Konialian is the co-founder and CEO of Modern Life, a life insurance brokerage that started up in 2021 and came out of stealth mode in 2022.