Top five things to watch for in the life insurance product space

In an era where other financial services have enhanced the buying process for consumers, the insurance industry has continued with a more burdensome and invasive underwriting process.  Current underwriting procedures and processes are a known pain point for consumers and represent an area ripe for change. 

Companies need to rely on the data and analytics available to them to develop a more streamlined underwriting process that is less invasive for the consumer.  They need to leverage electronic health records, prescription databases, credit information and other big data sources along with their familiarity with predictive underwriting techniques to offer more affordable simplified issue products, while still controlling their underwriting risk.

Underwriting enhancements is a crucial step for all life insurers that want to remain competitive. Those that choose not to adapt and make changes will be left behind.

(4) Changes to the advice model

In recent years, consumer expectations have changed and today’s consumers desire the best information available to make educated purchase decisions.   They seek much of this information through the digital space, specifically the Internet and social media.

The breadth of information now available on the Internet has created a consumer base that is now able to research and self-educate from many places they trust.   The knowledge obtained through this self-research becomes the driver behind the decision to shop for and purchase products. 

This is prevalent for retail products and financial services alike and will have a great influence on the advice model currently employed by the life insurance industry.   Consumers now desire the ability to find the best information available with an assurance that it is high-quality and reliable information — the shift is that this assurance no longer needs to come from a traditional agent.   

With this shift towards a self-educated consumer, agents are being used to confirm what the consumer already wants.  The role of agents will change as they serve as a confirmer of the information already obtained by the consumer and a facilitator of the purchase.

(5) Internet distribution

During the last two decades, the Internet economy has transformed industries and become a powerful driver of economic growth. There is no reason to believe it will not have the same effect on the life insurance industry.  Simpler products and processes, enhanced underwriting capabilities and changes in the advice model will all help support a shift toward the distribution of life products over the Internet. 

This distribution channel has been slow to gain traction, but generational differences create a need for life insurance companies to place strategic bets in this area so as not to lose access to a key consumer base.  Life insurance companies that build a brand amongst the younger generations now will situate themselves for future growth as the needs of these consumers increase with age.  Those companies that sit on the sidelines will watch their competitors or outside entrants take their market share.

Historically, the life insurance industry has been slow to change, but as dynamics continue to shift and consumers demand more from their financial service providers, insurance companies will need to embrace these changes or be left behind.

The views expressed herein are those of the authors and do not necessarily reflect the views of Ernst & Young LLP or the global EY organization.