Reimagining life insurance to close the coverage gap

There is a difficulty in selling life insurance through all channels – it typically requires customers to confront their own mortality. Traditional milestone-based selling (e.g., marriage, birth of a child, purchasing a home) is a struggle, with younger generations delaying these life events.

Needs-based selling will not work in the same way. That does not mean that life insurance is not needed – it just means that needs-based selling will not work quite the same way it used to.  Carriers and agents must consider a different strategy to make life insurance relevant to consumers.

Although there are several ways to make life insurance more compelling, repositioning life insurance from a protection product to a wellness benefit is a win for both carriers and consumers.

John Hancock’s Vitality program is a herald of what is to come – transforming life insurance from a traditional financial product into a wellness product by encouraging healthy living.

For life carriers, this type of program is a mutual benefit. Prolonging longevity reduces the likelihood of prematurely paying out a death benefit, while encouraging gamification of healthy living. The results are clear – significantly greater interactions (20-30 interactions per month as opposed to 1-2 with traditional insurance), improved health outcomes and a useful differentiator in the market to drive product sales.

Driving life insurance sales through innovative incentives

Carriers should rethink incentives to compete for the most important market – young, healthy consumers. A strong policyholder base provides greater profitability and opportunity for additional product sales. An incentive program helps attract and retain the target customer.

Here are three steps in developing a robust incentive program that will drive meaningful life insurance sales:

1. Identify key health data points to continuously underwrite in-force policies

Carriers must think through what the critical data points are that have long-term impacts on their book of business. There are two ways to think about this (and carriers should do both).

The first is to think through the areas that would traditionally be assessed in comprehensive underwriting. In today’s life insurance world, 60% of individual life insurance applications qualify for some form of accelerated underwriting, requiring no medical examination. And that preference to avoid medical exams is driving most of the industry to have some non-exam underwriting techniques.

Carriers should use this as an opportunity to repackage exam questions into health benefits, encouraging consumer wellness. For example, instead of requiring blood work for policy issuance, offer the same blood test as an activity that earns rewards or a reduction in insurance premiums.

The second option is to think with the end consumer in mind. If you are seeking to attract a healthy, younger demographic, offer benefits that are already in line with their habits. For example, partnering with a large fitness chain to provide free gym memberships is likely to appeal to individuals who already attend the gym. The benefit to the carrier is clear – more complete personas for the target customer while encouraging policyholders to take actions that reduce the carrier’s risks.

2. Identify partners to accelerate the speed to market

Carriers should understand that they cannot successfully do this alone. Instead, they should seek to develop partnerships with wellness providers to license or develop apps and wearables for data collection to support the program. Integrating this data into life insurance policies would then allow policyholders to earn rewards that can either be redeemed for perks or allow for personalized reassessments to impact individualized pricing.

Insurance carriers face high customer acquisition costs. Partnerships with established wellness providers assist insurance carriers with lowering CAC. But those partnerships also provide credibility that the carriers are concerned with policyholder wellness. As a result, carriers become a part of a larger wellness ecosystem that promotes longevity and sustainable living.

3. Develop a continuous improvement program

Carriers must leverage the data gained through these wellness initiatives to inform customer targeting efforts and underwriting risk assessments. From a customer perspective, wellness partnerships should provide strong insights into the target customer, give information on which policyholders the carrier is attracting, and inform future persona development. It is just as important that carriers know who they are attracting as knowing who they are not attracting.

But the data gained from a wellness program should be used to influence assumptions in their accelerated underwriting efforts. Successful programs will develop key performance indicators that tie new policyholders from the wellness program to improving underwriting outcomes and profitability for the carrier. This, in turn, provides better data to support better underwriting standards.

Life insurance is still needed. But addressing coverage gaps requires carriers to rethink products as simple financial products that achieve goals for policyholders. Carriers must develop a strategy that makes legacy products relevant to the next generation if they want to see significant growth.

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Chris Taylor is an established leader in the insurance industry with more than a decade of experience supporting insurance strategy and performance improvement outcomes. Contact him at [email protected].