Study: Consumers find life insurance policies overly complex

Despite efforts to improve customer communications, life insurers are seen as unnecessarily complicating explanations of their policies, according to the J.D. Power 2024 U.S. Individual Life Insurance Study released Thursday.

This perception is most pronounced among younger customers, including Gen Zers, according to the study.

“Life insurers are facing new communication challenges as they court younger consumers,” said Breanne Armstrong, director of insurance intelligence at J.D. Power. “Currently, only 29% of life insurance customers ‘strongly agree’ that their insurer makes complex policies simpler, and Gen Z has the lowest incidence of saying their agent or advisor explains things in terms they can easily understand. The old model of text-heavy binders and jargon-filled informational packets will no longer cut it. Younger customers are looking for simpler guides, diagrams and easy-to-understand definitions when evaluating policies.”

Key Findings

Policies are too complex to understand. Let than one-third (just 29%) of life insurance customers say they “strongly agree” their insurer makes complex policies simpler while 61% say their agent or advisor explains things in terms they can understand. Among members of Gen Z, that number falls to 57%. Overall, 64% of life insurance customers say they fully understand their policies.
Simplifying the life insurance statement: When asked what insurers could do to make life insurance statements easier to understand, most customers say: “reduce complexity/make statements easier to read.” Younger Gen Z and millennial customers are looking for a guide or diagram on how to read the statement or links to educational videos and materials that explain how to read it, according to the study.
Meeting future needs: Fewer than three-fourths (72%) of life insurance customers say their policy completely meets their future needs. According to the study, insurers can increase this rate significantly by “tailoring communications to specific customer needs, delivering the right frequency of communication and ensuring that the policy is completely understood.”

Study Rankings

State Farm ranks highest among individual life insurance providers for a fifth consecutive year, with a score of 699. Guardian Life (685) ranks second and MassMutual (673) ranks third.

The U.S. Individual Life Insurance Study was redesigned for 2024. (Scores are not comparable year over year with previous studies.) The study measures the experiences of customers of the largest individual life insurance companies in the United States across eight core dimensions (in order of importance): trust; value for price; ease of doing business; people; product offerings; ability to get service; problem resolution; and digital channels. The 2024 study is based on responses from 4,731 individual life insurance customers and was fielded from April through July 2024.