While it remains to be seen which of the COVID-19 pandemic’s many ripple effects will have the most enduring impact on life insurance business, one thing is certain: The industry will never be the same.
This includes insurance distribution and sales, where the pandemic has accelerated an ongoing convergence of traditional and digital channels, carriers and technology companies, and distribution strategies and product design.
As we continue to speculate how the “new normal” will unfold, insurance market dynamics will continue to shift while technology increases the pace and breadth of change. In order to meet new consumer needs with speed, agility, and innovation, a life insurer’s focus must be on combining proven approaches with new ways of doing business via collaboration and co-development. Today’s successful life insurers are collaborating at scale with ecosystem partners such as insurtechs and technology providers to acquire business-critical capabilities that maximize new business operating models.
Key drivers of insurance’s accelerated convergence:
- The pandemic has increased interest in life insurance. A study from LIMRA and Boston Consulting Group (BCG) of consumers surveyed between July and August 2020 showed a third of consumers (32%) who began shopping for life insurance were prompted by the pandemic.
- The industry’s digital transformation is gaining momentum. The pandemic’s social distancing protocols and prolonged lockdowns have limited traditional insurance channels, driving a need for accessible, real-time purchasing processes. Life insurers are expanding adoption of digital technologies to facilitate consumer engagement and to automate application and underwriting practices.
- Consumer trust remains critical to any insurance journey. Following on more than a year of havoc and “fake news,” ensuring trust is non-negotiable. Consumers not only expect their insurers to provide them with the right product, great service, and value for money, they also require them to protect their personal information and to behave ethically in all facets of their business. Trust is also a key reason why, despite the growth of digital processes, agents remain critical to the insurance ecosystem.
- Life insurers want to grow and modernize their customer experience. Despite increased awareness of the importance of insurance, the global life insurance gap continues to grow. In the U.S., for example, an estimated 46% of people do not have life insurance.  Modernization would not only help attract and retain consumers, it could also meet the need for greater operational efficiency as life insurers seek to minimize losses and expenses and drive underwriting profitability.
- New entrants sense an opportunity. Insurtechs and health innovators are attracting more venture capital. StartUp Health estimates that $20.1 billion was raised globally in the first six months of 2021 for health innovation – more than double the amount at the same point in the prior year.  To the extent such funding is spent on hyper-focused marketing and customer acquisition, innovators are making it easier for consumers to access protection products and raising the bar for incumbents.
The Solution: Bringing It All Together
What has emerged in the wake of COVID-19 is a more urgent need to develop hybrid models of traditional and digital channels that build the customer journey into product design. By applying analytics to data observed within the sales process, insurers can better match people to the coverage, services, and purchasing experience they want. The resulting products have the potential to not only make the insurance process more streamlined and accessible, but also to improve risk management.
Today’s consumer prefers a hybrid approach. The typical insurance journey begins online and, depending upon the product complexity and level of consumer engagement, can be completed seamlessly either off or online depending on consumer preference, confidence, and trust. In other words, they want the life insurance buying experience to mirror any other purchasing journey.
The pandemic only accelerated this trend: According to research from LIMRA and BCG, 40% of survey respondents purchased life insurance using a hybrid of online and consulting with a financial professional, up 10 percentage points compared with pre-pandemic life insurance purchases.  Successfully hybridizing insurance distribution requires effective collaboration and co-development among carriers, insurtechs, and related partners.
At RGAX, we have seen an increased appetite for such collaboration through our Life Design Sprints, a facilitated step-by-step approach designed to help accelerate insurance innovation. Throughout the past six months, we have led several multi-day sessions with carriers that are looking to address a specific business challenge or to rethink their existing buying journeys. In one recent scenario, we worked with a digital broker to create a direct-to-consumer insurance product, developed through a partnership with a major carrier and supported by RGA as the reinsurer. We finish each Life Design Sprint with concrete, tested output to a clear, well-defined customer problem – all in days rather than the weeks or months typical of product testing.
Distribution channels should be treated as more than just product delivery vehicles; they should be integral to the products themselves and serve as a means to enhance customization to meet individual consumer needs. Data collected through all distribution channels via strategic touchpoints and targeted questions can inform a more personalized sales process and segment applicants according to desired product features. Coupled with alternative data sources and risk scores, this journey-specific information can generate insights, streamline processes, and increase conversions.
By bringing together traditional and digital, insurance and technology, and distribution and product design, insurers can create a win-win for themselves and consumers alike. It is common parlance in the life insurance industry to describe a trade-off between sales volume and good risk-selection. This is not necessarily so – in fact, RGA has shown that it is entirely possible to both sell more and improve underwriting results with a thoughtful, multi-faceted consumer approach, transparent sales and underwriting processes, and the right underwriting rules for the direct-to-consumer market.
Viewed in context, the pandemic is not so much changing the direction of the insurance industry as it is accelerating an evolution already underway. As forces converge to make it possible for insurers to deliver more convenient, personalized, and valued protection products to consumers, the opportunity for the industry to close the coverage gap is greater than ever.