Ownership of life insurance has been on a steady decline, and the reason many experts point to are other more pressing financial priorities — particularly with retirement income becoming such a hot priority.
According to recent data from the 2015 Insurance Barometer study, a report produced annually by Life Happens and LIMRA, the chief financial concern among Americans is having enough money to comfortably retire. Nearly two-thirds of those polled (67%) identify retirement funding as an issue — compared with 55% who flag paying for long-term care services, covering medical expenses (54%) and supporting oneself if disabled and unable to work (51%).
“We’ve consistently seen over the last five years that consumers think life insurance is more expensive than it really is, and now we’re seeing many are also confused as to what factors determine the cost for life insurance,” said Marvin Feldman, president and CEO of Life Happens, an industry advocacy group, speaking at this week’s 2015 Life Insurance Conference in Arlington, Va.
Currently, fewer than 60% of adults in the U.S. have life insurance coverage about a quarter are solely covered by individual insurance and about 20% only have group coverage obtained through an employer, the study notes. Fewer than 15% say they have both.Yet there are some who are more optimistic that a changing tide for the life insurance industry is coming, and that further integration into workplace voluntary offerings, as well as technological improvements, may also help.
“The good news is the heat, we’ve turned up the heat this year,” says Kimberly Harris-Ferrante, vice president and distinguished analyst at Gartner. “I’ve seen more focus on innovation in life insurance the past seven months than I have the past seven years.”
A big player in this innovative wave, she says, is the digitization of the insurance industry.
“The number one benefit of digitalization is improved efficiency,” she said.
In the next five years, she points to a number of attributes that will define the next generation of insurers:
- Data driven.
- Technology empowered.
New technological advances are going to further develop the insurance industry, providing additional ways to collect and interpret data as well as provide better ways to mitigate risks, she adds.
“One of the things we need to think about we have to think beyond today’s definition of insurance product,” adds Denise Garth, a partner with Strategy Meets Action. “I think you have to think about it in terms of services you’ll provide to mitigate and prevent risk.”
Some of the newer technologies that will lend themselves to make this change include technologies such as wearable devices, 3D printing and “the internet of things” a scenario in which objects, animals or people are provided with unique identifiers and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction.
In the next three years, more than half of insurers are planning to invest more into the wearable market, she notes, and 17% say they plan to partner with third party providers.
“[Wearables are] doing something insurance is supposed to do, help people manage their risk and live a better life,” she says.
She adds that underwriting will also begin to shift to writing toward an individual rather than writing for the masses.
Through wearables, customers who maintain healthy habits will be able to receive markedly better pricing on insurance as an added incentive to sustain prevention practices.
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