New study highlights importance of education for life insurance customers

Interesting new data from this year’s Insurance Barometer Study from LIMRA and Life Happens shows that today’s middle-income Americans (those with a household income of $50,000 – $149,999) are facing a life insurance coverage gap, despite more than half of them (54%) reporting that they intend to buy life insurance.

So, what’s the disconnect holding this 50-million-adult-strong cohort back from buying this critical coverage? Simply put, it’s an information gap.

What was long considered to be a health and family security blanket has now evolved into an investment tactic. This may also explain why fewer middle- and lower-income Americans have life insurance compared to higher-earning Americans.

Americans have recently navigated a span of time that will be remembered for its continuous disruption, crises and change, and today, they work, live and spend money in a puzzling and contradictory economy. The rates for life insurance coverage in the U.S. have declined since 2011, but we are now seeing signals of a normalization within the life insurance market, along with an expansion of annuities business.

There are a few reasons that I believe set up the life and annuities (L&A) insurance market for sustained growth – as well as a few strategies that can bolster the growth for the industry value chain while seizing some of the more lucrative opportunities.

Pursuit of more consistent UX
Digital transformation has rewritten playbooks and forever altered most industries. Digitization, however, is an iterative process that often introduces additional complexities as it matures and develops. For example, it was once revolutionary — for customers as well as carriers — to launch a fully online and digital solution to shop for insurance and generate quotes. But as startups emerged providing digital software solutions for case management, underwriting, applications and order entry, some manufacturers and distributors found themselves spiraling down into rabbit holes of disparate systems that didn’t talk to each other, and deriving insights from fragmented data was near impossible. Additionally, these types of cobbled-together insurtech stacks can often result in inconsistent user experiences, whether the user is the customer, agent or carrier.

Fortunately, connected technology has now advanced to the point where everything is moving toward an interlocking architecture that helps to reduce complexity while increasing scalability, all while digitally integrating self-service offerings into a consistent, enhanced user experience.

Simplify the buying process
Carriers, BGAs and wealth managers have a lot to gain by making the path-to-purchase L&A products much smoother for customers — but this journey can be lengthy and disjointed. The educational and informational gaps surrounding L&A remain one of the most significant obstacles, outside of cost. But if industry players can use technology to help consumers help themselves, they can turn the tide and demystify life insurance. For example, introducing customers to advanced data and illustration solutions that provide clear visualizations of coverage scenarios and expected payouts can help customers to better understand their options during the application process.

This simplification gives customers the easily digestible information they want, when they want it, where they want it, and without stacks of paper forms. It also helps remove any frictions and bottlenecks and shortens cycle times: aka speed.

Meeting the expectations of modern consumers
Modern life insurance is a speeding train, but it doesn’t have to be a runaway train. Today’s savvy consumers want — rather, they demand — speed, but they also want products tailored to their needs.

Consider Gen Z and Millennials; these generations were born into the digital world and online shopping has always been a part of their life. They want more choices and innovative products, and they want it instantly. This customer is all-in on an online insurance shopping journey.

But it’s not just the younger generations who are driving the digital shift. Gen X and younger Baby Boomers have also become accustomed to digital interactions, which was only accelerated by the pandemic. They have become savvy digital consumers, conducting business online, such as healthcare, banking and insurance. Now more than ever, they will flock to companies that give them the easiest path to purchase, with apps and tools that offer personalized recommendations, product comparisons and scenarios, and most importantly, do so conveniently in one place.

Smooth flow of L&A data
Regardless of the generation, today’s consumers want customized workflows, personalization and friendly user interfaces. Automating these and other workflows provides full access to and command of data throughout the customer journey, creating an unobstructed path for the wealth manager or agent to accelerate the movement of data and access documentation for optimal client management and transactions. This gives the customer a cohesive, consistent experience that will build loyalty and prohibit them from doing business elsewhere. The data needs to flow smoothly across the entire lifecycle, fueling the trend of end-to-end, wealth management and insurtech solutions that connect all lines and channels.

This speed-to-decision isn’t just about the customer and their decision making. L&A manufacturers and distributors are accelerating their critical risk management decisions and shortening cycle times with automated application tools, needs analysis and underwriting. By speeding the time to decision at every touchpoint, carriers can capture the business of distributors. Not doing this results in a longer time to decision and risks the loss of a customer who is on the fence, indifferent or in danger of churn.

Handling annuities volume
The ballooning annuities business shows no signs of slowing so far, with a great wealth transfer and the arrival of Peak 65 on the horizon, as more than 11,000 people in the U.S. turning 65 years old each day in 2024. As this trend continues into 2029, the year when all boomers will be at least 65, a “catch the deluge in a paper cup” strategy will just not work. Compounding that, as the largest generational cohort in history, the millennials, is in or approaching their 40s, carriers and distributors need more than hustle to capture their share of the pie. As annuities have a reputation for being complex, it will be critical to help clients realize the optimal time-to-decision and time-to-execute in this notoriously cumbersome investment class. Without automation, there is no way to track or predict processing times, which makes the ordering process for annuities daunting to navigate.

Automating the annuity process minimizes time-intensive calls and reduces emails with carrier support staff to alleviate bottlenecks and create an indispensable value-add for financial institutions. Automated tech solutions for financial and legal forms can help dissolve operational blockages in complicated paperwork while also helping to clarify perplexing legal jargon for the everyday consumer. Providing a transparent, accurate view of a customer’s order and lifecycle data is essential to unearth efficiencies and generate actionable analytics. AI and generative AI tools, used well, promise to significantly augment and accelerate the documentation, compliance, customer service, and likely most other processes.

Accelerating the movement of money
The champions of the annuities surge will be those who are willing to accelerate their digital transformations — and do so with connected, integrated technology infrastructure. Those with the drive to continue digitalization can also help to elevate the entire life insurance industry into a new era of growth by making L&A transacting faster and accelerating the movement of money for the entire value chain. The sooner the insurance and wealth industries can modernize in alignment with consumer expectations of speed, ease and personalization, the sooner we can collectively fill the coverage gaps that have persisted for far too long and restore relevance to life insurance.