Will AI Take Over In The Post-Pandemic Life Insurance Boom?

The pandemic was a game-changer. There is no way around the evidence: closed schools, stock market volatility, shuttered small businesses and a swamped health care system. With civil discourse at an all-time low, we might need to wait a bit longer for history to decide what really happened and the lasting effects it will leave on us.

With every sea change comes opportunity; some industries have found a boom amidst the chaos. Courier and logistics services have experienced massive growth with online shopping and doorstep deliveries. Online education is in the midst of an unprecedented heyday. Video streaming services exploded during the initial spring lockdowns; production teams are now scrambling to keep up with demand in a forever changed television landscape.

Another pandemic-time growth industry: life insurance.

The significant rise in policies sold during the pandemic is especially notable because it reverses a decade-long downturn. Between 2010 and 2020, the number of Americans holding a life-insurance policy dropped from 63% to 54%. That’s 16 million less people over ten years, even though the country’s population grew by 21 million.

New Restrictions

A new landscape comes along with some new restrictions. Insurers cannot deny claims due to COVID-19, but many firms are restricting underwriting for certain at-risk groups. Individuals over 60 with heart or lung issues, diabetes or obesity might encounter raised premiums or denials. For individuals over 70, options are even more restrictive.

Finding options has never been easier. Online marketplace applications use reflexive questioning to customize each application in a manner that satisfies underwriters. Behind the scenes, medical records are retrieved electronically allowing policy decisions in just moments. Naturally, prospective buyers like the ability to compare rates and options with such immediacy. Growth during the pandemic would have encountered bottlenecks and obstacles with the industry’s old model, which included meeting with an agent and scheduling a doctor’s appointment.

Is it too early today to call this the post-pandemic era? No one knows; time will tell. What is known is that 2021 has recorded a significant uptick in the number of life insurance policies sold.

According to the insurance industry research and analytics group LIMRA, life insurance policies were sold during the first quarter of the year at a pace unmatched in decades. Sales rose 11% over the previous quarter, and new premiums were signed at a rate 15% higher than the first quarter of 2020. LIMRA reported that early 2021 recorded the highest growth in policies sold since 1983.

Growth does not appear to be limited to specific carriers or niches; eight of the nation’s top-ten carriers reported double-digit increases in new policies signed during the first quarter. Out of the new sales, 88% were whole and term life insurance policies. The largest growth area was in variable universal life policies, which recorded a 31% increase over the same period from last year.

No Passing Trend

Along with the positive results, projections indicate that the spike is likely not a passing trend. LIMRA’s 2021 Insurance Barometer Study measured a notable increase in consumer’s intentions to purchase a policy in the near future; 36% of survey respondents reported they “intend to buy a policy within the next year” - the highest percentage the survey has ever recorded over eleven years of existence.

Two main factors are driving increased demand. One is the pandemic. Years and years of diminishing sales were brought to a stark halt by the reality of the pandemic. Life as we knew it ground to a stop, and people of all ages were forced to reckon with their own mortality. Industries changed overnight and unemployment skyrocketed. The reality of financial ruin was an unavoidable consideration for all - the pandemic forced us to consider how to best prepare for the worst and provide for our families in the event of the unthinkable.

The second factor driving the boom is the removal of barriers for selling policies. Technology had already advanced to the point where underwriting decisions could be made instantly and at the point of sale; the pandemic served to hasten the public’s comfort with online-only service options.

Consider the advances in recent history. Fifteen years ago, a potential policy-seeker might meet with an agent and schedule a doctor’s appointment. Five years ago, one might print off a form and mail it to office headquarters. Now, the necessary medical and personal records required for underwriting decisions are accessed online immediately through automation and analyzed through AI.

There is an expectation that growth will continue into 2022.  Applications are on the rise and forecasts for increased, future sales as well as increased demand in applications tells us things will persist for several years following the pandemic.  The trend right now is pointing toward accelerating into an automated and digitized future.  This will lead to greater efficiency, more informed decisions and better outcomes for both buyers and sellers in the insurance industry.

Leading the charge in the technological revolution that has spurred the boom in life insurance volume will be firms that work in creating customized or turn-key automated solutions. Behind the scenes, they will create platforms that use cutting edge AI and automation to ensure that underwriting decisions can be performed within moments and at the point of sale, saving carriers and end users time and resources.  The future of insurance automation is here and the transition into automation, no-code solutions is excelling.

Jesse Gospodarek is an independent sales and marketing consultant with Management Research Services, Milwaukee. He may be contacted at [email protected].

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