Life insurance: A human business being digitally disrupted

A few years ago, the woman who processed my life insurance application made me cry. She wasn’t rude, I simply wasn’t prepared for her to ask: “Are your parents alive or deceased?”

My dad had passed away a few months earlier with pancreatic cancer, and I was still getting used to talking about it. It was a very emotional time for our family.

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Allianz AG agent Cihat Polat, left, explains details regarding car insurance at their offices in Frankfurt, Germany, Friday, November 14, 2003. Allianz AG, Europe's biggest insurer by premiums, reported its second straight quarterly profit as earnings in the main property and casualty division advanced. Photographer: Axel Seidemann/Bloomberg News

Purchasing life insurance involves many “cold” elements — policies, premiums, risk, assets — but for customers, the process can be very personal. The emotions involved in seeking life insurance is in direct conflict with the transactional nature of the process. The driving concept behind life insurance — your loved one’s security — coupled with a variety of potential emotions, whether it be mourning a deceased parent or reflecting on one’s own health and lifestyle, can make the process of buying life insurance emotionally charged.

When you couple that conflict with a variety of other hurdles — the need for a physical, the complexity of coverage types, the paperwork and the cost — it’s not surprising many people quit during the process and never purchase a policy.

Most policyholders believe once you buy life insurance, you can “set it and forget it.” And carriers — who do little more than send premium reminders and administrative updates — do nothing to change that perception. So, even if someone converts to a policyholder, lapsing policies are significantly impacting carrier revenue and growth.

An opportunity for reinvention
So who’s scooping up these un-converted customers and lapsed policyholders? Insurtech disruptors are capturing a portion of the $16 trillion in missed coverages that LIMRA identifies as being “stuck shoppers” who don’t finish the quoting process. Companies like Ladder are touting simplicity and ease, taking the complexity and burden out of purchasing a policy. In addition, banks and financial institutions are increasingly expanding their services to include annuities, leveraging their relationships with existing customers.

Meanwhile, life insurance companies are grasping to better engage policyholders to protect against these competitive forces. They’re often unsuccessfully creating Amazon-like portals and mobile apps in the hopes that self-service and digitization efforts will create more loyal customers.

Building a portal where you can upsell and cross-sell policyholders and expecting them to proactively visit it is false hope. Why? Because life insurance isn’t part of their daily lives.

Like it or not, life insurance companies have trained customers to believe the cold, transactional experience they’ve created is acceptable. However, this relationship can be improved by reinventing how life insurance companies do business using a people-centered approach that acknowledges how consumers actually make decisions.

Reimagine the role of life insurance
Life insurance is ready for re-invention, and the key is a business strategy that reimagines your relationship with policyholders.

  • Focus on the Life Between. There’s a life in between policy inception and retirement or death. That life can include kids, college financing, health improvements and declines, salary shifts, second homes, caretaking of parents or grandparents. The definition of “security” for your policyholders will inevitably evolve, so all of these life milestones are potential touchpoints with them to re-assess needs and determine upsell and cross-sell opportunities.
  • Redefine Your Customers. Your policyholders may be the ones paying the premiums, but your customer base doesn’t end there. The beneficiaries are as important as the policyholder because they are the reason your policyholder is doing business with you in the first place. When you think about how you communicate to policyholders, consider the broader system of influencers and loved ones who are important to them. When you’re there for families in life – and in death – you not only develop a relationship where cross-sell and upsell opportunities are fulfilled, but also a pipeline of loyal, future life and annuity policyholders. According to LIMRA, claimants who are extremely satisfied with the claims process are four times as likely to do business with the carrier themselves compared to those claimants who are just satisfied with the process.
  • Take on an Advisory Role. Not everyone can afford a financial advisor or wealth manager. The middle class represents an underserved life insurance customer segment, and they need guidance to find the right policy. You can play a valuable role in helping them understand what’s right for their family, what others do in similar situations and what value and security they will receive.

Changing people’s perception about life insurance is the goal of reimaging your role and relationship with customers. Adopting a customer engagement model that is people-centered ensures you’re making business, technology, process and communication decisions that support this goal. We'll cover that more in our next installment.

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