Ask more than 50 industry leaders for their thoughts on the life insurance market, and you’re bound to get a wide range of answers. But if there’s one thing on which many of them agree, it’s that change is coming. We’re not talking small product tweaks here; we’re talking industry-shaking revolution. In an age when technology is advancing rapidly and consumers demand immediate, customized attention, this is necessary. It’s also pretty exciting.
A LIMRA study conducted last fall asked a diverse mix of life insurance executives, distributors, reinsurers and other financial leaders this question: Do you believe an outside source like Google or Amazon will be a disruptive force in the life insurance market in the next five years? Fifty-seven percent said yes. Moreover, a 2013 LIMRA study revealed that 21 percent of middle market consumers would be willing to buy life insurance online from a non-traditional source such as Google or Amazon.
All of this points to the fact that insurance may very well be on the verge of becoming a whole lot sexier. Andreessen Horowitz recently included insurance on a list of the 16 tech trends it’s most excited about for 2015. The scope of opportunity is huge, and companies outside the industry are starting to notice. But that doesn’t mean these newcomers will corner the market. It may very well be the stalwarts of the industry who capitalize on all this potential and deliver the products consumers need, in the way they need them.
Why is the market ripe for disruption now? Here are five reasons.
1. Consumers need life insurance, but aren’t buying enough of it.
Here’s a success story: At the end of 2014, consumers had more confidence in life insurers than they had at the start of the year. A LIMRA study published in November noted that three-quarters of consumers said they had at least some confidence in life insurers, an increase of 6 percentage points from early 2014.
Does higher confidence mean more sales? Not necessarily. In the first three quarters of 2014, individual life insurance premium fell one percent and policy count dropped three percent. People need life insurance, but they don’t always buy it. This is due to a number of obstacles — procrastination, affordability, prioritizing other expenses — but on some level, it is also because the sales process is not as streamlined as it could be. Therein lies the challenge, and the opportunity.
2. People are starved for time.
Americans are the busiest people in the world, working longer hours and taking less time off than any other industrialized nation. Moreover, we are distracted, constantly juggling not only work and home life but dozens of messages from marketers bidding for our time. Scott Kallenbach, Research Director at LIMRA names this overwhelming busyness as one of the major factors precipitating change in the life industry. The old model of sitting down face-to-face at the kitchen table simply won’t work for today’s consumers, Kallenbach says. Giving up an hour or more of time in the evening or on a weekend is simply too great a sacrifice for today’s consumers to make. As a result, insurers and advisors must make buying life insurance simple, quick and intuitive.
3. We all want to engage differently.
This chronic busyness means that consumers are looking to engage on the go, whenever they have a spare moment. They want their insurance research and purchasing to fit seamlessly into their day, the way ordering a book from Amazon or a grocery delivery from Fresh Direct does. It’s what we’ve all come to expect and demand from service providers.
Kallenbach gives this example of how today’s consumers want to connect: “In New England, one thing that is very popular among families is sporting events that you have to travel to. Kids love them, but they’re very time consuming. You’re driving an hour to the game, then there’s warm-up, then there’s the game itself and the drive home. That time between when I drop my kid off and when the game starts is when I want to engage with my advisor. The companies that are going to be successful are the ones that are going to find ways to do this.”
4. Technology is providing insight that we’ve never had before.
The good news is that all of this is possible because of technology. Wellness efforts and other consumer lifestyle metrics can be tracked at a level of detail that could not have been dreamed up 20 years ago. Life insurers can use this information to provide quicker, more accurate underwriting that minimizes risk and gets consumers coverage right away.
Kallenbach cites companies like Nest Labs, a maker of interactive thermostats that was purchased by Google in early 2014, as the type of multi-tasking technology that may transform the underwriting landscape in the very near future. Nest Labs has since purchased DropCam, with the goal of becoming a one-stop hub for smart homes that are able to track everything from appliance use to home security to resident health. “I don’t necessarily see that these types of disrupters are going to replace traditional underwriting or provide the investment chassis for a retirement product, but they will certainly support the traditional underwriting process,” he says.
5. Consumers love crowdfunding.
Like Kickstarter.com for individuals, GoFundMe.com and other charitably-focused crowdfunding organizations help people raise money to treat an illness, adopt a child or recover from a financial or physical disaster. These sites have revolutionized the way we think about and respond to need. Kallenbach notes that crowdfunding is a sort of insurance, really, calling for everyone to chip in a little bit to cover costs when finanical resources are needed. The difference is that crowdfunding gets consumers excited; they want to participate in these individual stories where a small investment delivers a great result.
This spells opportunity, according to Kallenbach. “What’s to say that a savvy insurance company doesn’t look at this and say, ‘Why don’t we get involved with crowdfunding; become a platform to help people do this?’ At the end of the day, it’s all about figuring out how you can leverage your position and reach to get out there and help more people.”