The life insurance industry is arguably going through a period of unprecedented change. We can blame aging distribution systems, commoditization, shrinking margins and a growing underserved population for the things that don’t feel right to us. However, we’ve been acknowledging and talking about this for years, and none of these things has improved.
It is time to recognize that we may be facing a Napster Moment. This is when someone who has no business being in your business comes in and reinvents your business, putting you out of business. It is named for the company that created the digital music download, the invention that changed the music industry forever. While Napster ultimately failed, it created a clearing for Apple to own the space.
During the time just prior to this, the music industry was dealing with the challenge of protracted declining album sales. When a record industry executive from a major label was asked the question as to what they needed to do, he said, “We just need bigger hits.”
While the next Michael Jackson would certainly be helpful, that wasn’t the real issue. What the record industry failed to see is that people didn’t want to buy an entire album anymore. They wanted to choose songs. Now there is more music being sold today than ever before.
Today, the life insurance industry is responding similarly when asked about the problem of a growing underserved market. Oftentimes, our leaders say, “We just need a larger, younger group of agents.” While again, this would be helpful, it may not be getting at the real reason why life insurance ownership is at an all time low.
It might be helpful to look at another industry that could be facing a Napster Moment.
I was struck recently by an article appearing on the AP newswire in August, which was titled “Auto Industry: Young People Will Buy Cars Again.” In the article, executives at GM were asked why car sales were shrinking in the last 5 years in the 18-34 age group.
“Statistics show that as people age, they get jobs, get married and eventually have families and buy cars, [a GM executive] said. ‘It’s not because their preferences have changed. It’s because of their needs. The income isn’t there. The jobs aren’t there. They grow older, that changes.’”
In the same article, it was noted that the number of people in those age groups who are getting driver’s licenses is decreasing notably, a possible sign that younger people may be losing interest in cars because they have other means of being social, i.e., Facebook. Perhaps they feel that owning a car comes with too much responsibility, and they have many other options today, such as public transportation, ridesharing, and yes, parents who still drive them around.
Could the auto industry be looking at the wrong trend as to what is causing the decline? Could it be missing signals that would give it opportunities to innovate? Maybe people are less interested in cars than they are in rides. Perhaps the auto industry needs to expand the definition of their business as getting people where they want to go when they need to go, versus making cars. As outsiders, it is much easier for us to imagine that.
So how do we apply a different lens inside our own industry? Could we also be expecting the new generation to eventually buy life insurance, once their life-stage kicks into gear? Could we be missing bigger signals that would give an outsider an advantage? Has the ability to mobilize social networks become so powerful as to become a reasonable substitute for insurance? (See my last column, which dealt with crowd funding, on LifeHealthPro.com.)
Instead of falling into the same trap other industries have, I suggest we lean into the idea that something else could be at play. Want some inspiration? Check out the German company Friendsurance. It is not a carrier; it is a distributor finding ways to incorporate the power of social networks into insurance offerings. Napster Moment? Who knows. Something to learn about? Definitely!
Most importantly, what opens up if we define our business beyond just selling life insurance? Lifestyle continuity, perhaps? As always, ideas are welcome.
For more from Maria Ferrante-Schepis, see: