According to LIMRA, over 40 percent of US households don’t have life insurance, and over half of those that do are currently underinsured for their needs. This well known problem leaves millions of Americans at risk, particularly families with dependents. It also presents a significant problem for the life insurance industry, which is confronted with a significant question: how does the life insurance industry close the insurance gap?
In order to address the problem, it’s important to dive into why this gap exists in the first place.
What needs to change to connect with today’s life insurance customers?
Life insurance products have historically been seen as an essential part of a financial portfolio. In an industry that has remained remarkably consistent throughout the course of its history, the question isn’t so much what has changed about life insurance that makes it seem less important or relevant, it’s what hasn’t changed.
Industry standards, like a lengthy onboarding process, a medical check up, and tiresome applications, are barriers to entry for today’s consumers. It’s not always a question of willingness either, as some portions of the population would find this time consuming process impossible or incompatible with their everyday lives. This issue isn’t unique to life insurance, but the highly personal nature of the product makes it a bit trickier to innovate than other insurance sectors, like P&C. But tricky doesn’t mean impossible, and in order to close the insurance gap, the industry needs to address its existing barriers to entry.
Some companies have found their own unique solutions to the problem. Insurtech Fabric sells its life insurance products through its digital platform and has an extremely high success rate, with over 70 percent of users purchasing life insurance within 10 minutes. Their approach combines a specific target market, new parents, with an easy to use, value driven platform that offers a wide range of free services outside of the core life insurance product.
While successful for a startup like Fabric, this approach is less feasible for large, incumbent life insurers. However, there are plenty of ways for insurers to begin bridging the gap between them and the underinsured population.
Addressing the misconceptions about life insurance
With over 40 percent of the US population lacking any form of life insurance, and nearly 50 percent of millennials completely overestimating the cost of life insurance, there are clearly a few misconceptions about life insurance in today’s market. Most of them are stemming from a simple lack of clear communication.
Today’s consumers don’t view life insurance as relevant to them, or they perceive the process of attaining it as a barrier. The burden then falls on the industry to fix this. Today’s consumers are radically different than yesterday’s. They expect the purchasing process to be digital, non-invasive, and convenient. They want to get a quote in minutes, not weeks.
With the amount of data available to today’s insurers, there’s no excuse for not deeply understanding the needs of your potential customers before approaching them with a product. How, when, and what product you present when approaching prospective consumers should reflect a careful product development process that’s centered around the needs of the customer. It’s also important that an insurer has the analytical capability to analyze the results of their efforts to communicate with customers, otherwise they risk a wasteful process of trial and error.
The place to begin addressing the underinsurance issue in life insurance is in the product development process. With the use of advanced analytical tools, and available consumer data, life insurers can create products that not only are relevant to consumers, but feel relevant as well.
Life insurance hasn’t become a less valuable product, but for today’s consumer, perception is reality. By addressing consumer pain points throughout the development, pricing, and distribution of the products they bring to market, and continuing to monitor what does and doesn’t work, life insurers can redefine themselves as well as the broader industry.
The final piece of the puzzle is communication. Digital channels provide a unique opportunity to communicate with your customers and address their needs without being intrusive or requiring too much of their time. Whether it’s through AI chatbots or good old fashioned customer representatives, being available for your existing customers as well as your new ones is vital.
Closing the insurance gap is going to require a shift in life insurers’ mindset in addition to their communication tools. It’s also going to force insurers to become more intentional during product development and across their decision making processes, leveraging the data they have to bring products to market that are relevant and demonstrate clear value to potential customers.