The COVID-19 pandemic forced rapid adaptation and created a fast-moving environment throughout the life and health insurance industry, accelerating innovation and new product development trends around the world. While some innovations are only temporary, some are likely to stay.
Lockdown measures disrupted the industry’s normal operations – restricting face-to-face meetings between advisors and clients, limiting the ability to sell fully-underwritten insurance (as paramedical exams and labs were no longer available), and causing an economic downturn and reduced consumer spending.
From an insurance product development and innovation standpoint, a few major changes occurred that, based on proven success and business needs in certain markets, are expected to remain and expand to a wider audience. These changes include modification to risk selection criteria to maintain new business volumes, adaptation of traditional advisor-led distribution, and successful introduction of new and diversified distribution models. In addition, there is growing interest in maximizing both the value of in-force through cross-selling and upselling, as well as recognition of the inherent value in existing customer bases.
Disruptions to paramedical exams and labs transformed the existing underwriting model and led to the expansion of accelerated underwriting programs, where alternative underwriting evidence supplements traditional evidence to maintain protective value. Insurers were able to engage more applicants with accelerated approaches, helping to maintain new business flow as a result.
In accelerated underwriting, applicants do not require a full paramedical exam with fluid testing to qualify. Instead, a multitude of data sources are assessed, such as application disclosures, prescription scoring databases, credit scoring mechanisms, motor vehicle record data, digital health data, and prescription drug history. The U.S. market, for example, is extremely rich with available data sources. When the depth of alternative data sources is limited, statistical models based on application data, demographic data, body mass index, drug history, and driving habits can be used. More investment in such programs can be expected in the future.
Quick Issue Solutions
The emerging “quick issue” market is filling the gap between simplified and accelerated underwriting programs in Canada. Offered at moderate face amounts, such solutions offer consumers the ability to get their policy simply and quickly, while maintaining protective value. Quick issue products provide effective and profitable solutions to existing challenges highlighted during the pandemic.
COVID-19 also highlighted the urgent need for distribution diversification, especially in North America, Europe, the Middle East, and Africa. Relying on the traditional advisor relationship was not an option, which left many insurers searching for another distribution channel. Different from direct-to-consumer or online distribution, alternative distribution is built on selling insurance through entities with access to a captive and existing customer base, such as banks, affinity groups (e.g., schools, professional associations, sport associations), and non-financial services entities (e.g., retailers, supermarkets, utilities).
However, traditional advisors are not going away; they are just experiencing an evolution that will empower them to be more productive through technology and digital tools. Technology enables remote insurance sales through providing full customer service through video, co-browsing, and online payment functionalities.
Maximizing Value of In-Force via Cross-sell and Upsell
The pandemic created an incredibly challenging environment for finding new customers, but it also presented renewed interest in maximizing value from an insurer’s existing customer base across the globe. This can be achieved by using data to identify customers with the best risk profiles and presenting them with insurance offers at reduced underwriting requirements, bundling products and services together, examining the rider portfolio to increase the coherence and simplicity of those offerings, or integrating cross-sell and upsell offers more tightly with the ongoing customer relationship.
However, marketing should be carefully considered to ensure customers are not overwhelmed with insurance offers – incorrect targeting can ultimately damage the relationship. Several factors, such as demographic information, financial information, and transaction history for banking and insurance products can be used to determine prioritization of customers who are most likely to purchase more.
The long-term impacts of the COVID-19 pandemic are yet to be determined, but it is already apparent that certain areas of evolution are likely to remain and expand to other territories. Going forward, the industry will also need to evaluate other impacts that concern mortality, risk assessment, demand dynamics, regulation, as well as balance sheets – all ultimately informing the future of life and health insurance product development.