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Why Life Insurers Need to Build Wellness Rewards Into Premiums

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When the insurtech company Lemonade released a video in July to commemorate its fifth anniversary, the company conducted vox pop interviews on the streets of New York , asking ‘What do you think when you hear the world insurance?’. “Boring” and “a trigger word” were among the milder responses.

There’s no denying that the industry — and life insurance in particular — have reputational issues, largely because most insurers have failed to effectively engage consumers. Look no further than a Deloitte study finding that 31% of life insurance policyholders let their policies lapse. When nearly a third of policyholders don’t think their policies add enough value to their lives to justify renewing them, there’s undoubtedly a problem afoot.

Even in an industry slow to embrace innovation, life insurance is especially reluctant to embrace change. The last major substantive change came more than half a century ago, in the 1960s, when insurers introduced higher premiums for smokers. In terms of engaging customers since then, most insurers have failed to heed the successful examples of other industries, with many carriers not even attempting regular contact points with policyholders beyond their annual renewals.

This is a major missed opportunity. To improve customer retention and drive better engagement, more life insurers should assume an active role in promoting wellness among policyholders. Moving forward, the industry should leave behind the days when for many policyholders, their life insurance was out of sight and out of mind at best or felt downright adversarial at worst, with either the insurer or the customer “winning” but with one certainly having to lose. Instead, life insurance should assume an active role in improving policyholders’ quality of life, from their physical health to their overall resilience and mental well-being.

Not only do insurers have many tools at their disposal to do this, but charting this new course would be a win-win for insurers and the insured alike. Here’s why.

The Importance of Wellness

As the coronavirus pandemic has driven home, it’s difficult to overstate the importance of both physical and mental well-being. Amid lockdowns and stay-at-home routines, it’s all too easy to cut back on exercise, while prolonged social isolation exacts a formidable toll on mental health. A recent survey found that nearly half of UK small business employees say their mental health has been damaged by working from home, although 89% want to continue doing so — underscoring the need for solutions that boost physical and mental wellness.

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The good news is that even simple steps like taking a short daily walk can go a long way toward improving people’s stamina, promoting healthier metabolism, and reducing the risk of heart conditions.

Additionally, mindfulness and meditation can help improve sleep quality, boost concentration, and minimize anxiety. With the rise of popular wellness apps like Headspace and Calm, a growing number of people are learning firsthand what a difference it can make to integrate these activities into their daily schedules.

But while there are plenty of steps individuals can take to take charge of their physical and mental health, people also need external support and motivation to do so — and that’s where life insurance comes in.

Rethinking Life Insurance

To make life insurance win-win — and for insurers to spur their customers to make healthy and productive lifestyle changes — insurers should reward policyholders for leading healthier lives. The result: Happier and healthier policyholders, with reduced risk for insurers.

Employers have a role to play in this as well. Through group life insurance policies, employers can provide their workforce with a valued benefit while helping employees and their families safeguard their long-term financial futures. Businesses themselves also stand to gain big , as employees who look after their mental and physical health are likelier to be happier and more productive at work — which is why 58% of executives say they invest in employee wellness to boost productivity.

How can insurers make this new vision of life insurance a reality? It’s not enough to simply emphasize wellness; instead, insurers should harness the latest technology to improve outcomes and make their offerings more engaging for policyholders.

Wellness apps, artificial intelligence, and the principles of gamification can go a long way toward enabling policyholders to improve their overall well-being. While wellness apps are commonplace, the norm is that user engagement drops off over time — not unlike adherence to an “analog” diet and exercise plan in the era before smartphones. But gamification — which taps into people’s natural competitive instincts and thirst for adventure to make activities feel game-like  —  can help sustain engagement and prevent the dreaded drop-off. For instance, offering quests and competitive challenges can increase the incentive for policyholders to complete activities like walking 10,000 steps a day, completing a certain number of mindfulness sessions, or running a virtual 5K race.

Meanwhile, the smart deployment of AI-derived insights can help gauge which wellness activities are most popular and effective  —  helping insurers tailor programs to better align with the preferences of certain demographic groups, users in particular geographic areas, participants in a group life insurance plan, and so on.

Life insurance has a vital role to play in people’s lives and their family finances. But that role needn’t solely be relevant when a policyholder passes away. Life insurance should cover life, and by helping enhance the quality of the lives policyholders lead, the industry can shore up its image, improve engagement, and serve the bottom line at the same time.

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Sammy Rubin (Credit: YuLife)Sammy Rubin is the chief executive officer and founder of YuLife.


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