Life Insurance’s ‘New Normal’ Is a Major Opportunity for Modern Financial Advisors

As financial advisors sort through the aftermath of the pandemic, they will find that life insurance has been completely transformed.

At the beginning of 2020, distributing life insurance was an arduous task — requiring multiple, often in-person meetings, awkward conversations on gory details of medical history, followed by time-consuming medical exams and paper applications.

Opening just one new policy would take a few months or more.

Today, advisors and their clients are positioned to benefit from the “new normal” of the life insurance industry: Kitchen table conversations have evolved into videoconferences.

Paper applications have shifted to digital forms.

Invasive medical exams can often be replaced with automated underwriting based on predictive models.

The pandemic has also fueled record-setting demand for life insurance.

In 2021, sales grew by 20% from the year prior, according to the trade organization LIMRA, topping levels not seen since the early 1980s.

However, financial advisors often rely on a constellation of legacy technology solutions which have slowed their ability to adjust to these digital ways of conducting business.

These outdated solutions aren’t keeping up with the current uptick in demand. One of our core beliefs at Modern Life is that it will require a rethink of current solutions and a digitally native tech stack to enable advisors to best take advantage of this new landscape.

New Technology is Making Life Insurance Easier (Finally!)

New technologies are helping advisors on two fronts.

First, carrier appetite for accelerated underwriting — based on predictive models instead of medical exams to make decisions — has dramatically expanded in recent years.

Today, many Americans no longer need an extensive medical exam to take out a policy. Many carriers offer up to $2 million or more of death benefit on an accelerated basis, which is four times more than what was typically available just a few years ago.

It’s simple math that adds up to a less-invasive and more comfortable client experience.

Meanwhile, for clients who don’t qualify for accelerated review and underwriting, increased adoption and access to electronic medical records helps expedite the time consuming process of retrieving medical records for underwriting.

Second, digital applications and e-signatures have streamlined what is often one of the most cumbersome parts of the process.

A paper life insurance application can be 50 pages or more and its complexity can be daunting.

Roughly half of all paper applications are sent back by carriers due to clerical errors or inconsistencies, which causes delays and client frustration.

Digital applications ensure that all the right information is included the first time.

They also reduce manual rekeying by underwriters, leading to faster decisions and fewer transcription errors.

Digitization is here to stay, according to researchers.

“Many of the pandemic pivots we’ve seen over the last two years are likely to stick,” according to Elaine Tumicki, vice president of insurance research at LIMRA. “Alternative sources of underwriting data, accelerated and automated underwriting, e-apps, e-signatures and all the other practices are not going away,” she added.

For good reason the life insurance industry is responding to increasing demand for client-friendly experiences that embrace financial advisors.

Demand Isn’t Just About COVID-19

The sales records set last year by the life insurance industry weren’t just a reaction to the pandemic.