Some thoughts on how tech can help insurance brands arrest the decline in Life insurance cover in the US market, by Bob Gaydos, CEO at Pendella Technologies.
Ask anyone who works in the life insurance sector, and they’ll tell you that the last few years have been difficult, to say the least. Life insurance appears to have lost its appeal in the U.S., where coverage has fallen from 77 percent of households in 1989 to just 50 percent in 2022.
Worse yet, those who do have life insurance are primarily reliant on group policies through their employers. Group policies generally do not provide the same level of coverage as individual policies, and group policies don’t transfer when employees leave their jobs.
There are many theories for this decline in life insurance ownership, though the most commonly cited factors are a shift in economic trends, changes in customer buying behavior, and the disappearance of door-to-door insurance salespeople. Furthermore, the availability of low-cost insurance online means that there’s more pressure on agents to provide competitive pricing or risk losing clients to online comparison sites.
So, what can insurance agents do to reverse this decline? The obvious answer is that they need to find ways to reach new individual life insurance customers, many of which have very different motivations and buying habits from those of previous generations. Fortunately, there may be a solution in the form of new tech tools that are already changing the face of the insurance industry.
How technology can help
As in many industries today, technology is dramatically transforming life insurance. What’s emerged is a wealth of tools that can help agents connect with and understand their customers in previously unimaginable ways.
For example, insurers are increasingly using big data and artificial intelligence (AI) to create highly detailed customer profiles. These profiles can provide a window into a customer’s motivations, life plans, and socioeconomic status, allowing insurers to market particular policies to a specific clientele.
For instance, young customers in their early-to-mid 20s are more likely to be interested in package deals that include travel coverage or specific policies for remote workers. It’s personalization like this that most modern customers, whatever their demographic, are looking for in a life insurance policy.
Other benefits of big data and AI include the ability to complete the underwriting process with much greater speed than ever before. Underwriting can take weeks using traditional methods, but can now be completed in minutes thanks to predictive AI analysis that can assess a customer’s mortality risk. The same applies to claims processing, which can now be fully automated through blockchain-enabled smart contracts that activate a policy once certain conditions have been met, e.g., a policyholder providing digital medical documents.
All these tech benefits, beyond making the underwriting process a lot more streamlined and efficient, also free up time for agents to focus on providing a more personalized customer experience.
In a lot of ways, tech is leading to an evolution in the role of the insurance agent. Rather than having to devote time to putting together a custom life insurance plan, the agent can leave that to the AI algorithm and instead give full attention to customers by answering questions, getting to know them better, and making them feel valued.
Tapping into social media
While tech can make the insurance issuance process a lot smoother and more targeted, that still won’t do much good for insurers if their target customers aren’t aware of the need for an individual life insurance policy.
A staggering 58 percent of millennials admitted that they’d skipped out on employer-provided life insurance because they didn’t know enough about policies and the amount of coverage they would need. What’s more, one survey found that over 50 percent of Americans overestimate the annual cost of life insurance by as much as 300 percent, despite the fact that the average cost of a life insurance premium per U.S. household is less than $100 a month. These troubling stats show that there is a clear education gap that needs to be addressed before the next generation of policyholders can even begin to look at what’s available in the life insurance market.
To overcome this educational gap, insurers need to devise strategies for educating potential customers and the best way to do that is by tapping into the power of social media. Just about everyone today uses social media, and for many people it’s their primary news source. But to effectively reach these people, it’s not enough to simply pay for an ad that promotes your services, you need to invest in content that educates customers first before selling to them.
As such, an insurer’s social media presence needs to be primarily focused on serving as a guide to the insurance market, informing people on how life insurance works and why it’s necessary. Demystifying industry jargon should also be a priority as many people don’t understand terms like “actual cash value” or “replacement cost coverage.” Once you’ve established yourself as a specialist, you can then focus on conversion sales.
Final thoughts
By adopting a strategy that combines big data and AI, along with a focused social media strategy, insurers can tap into a new customer base and position their organizations for a more data-driven future.
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