Boost Life Insurance Sales with a Digital Customer Experience

Insurers have an opportunity to grow their life insurance sales in untapped markets using new digital tools and customer experience techniques 

Key Points: Optimizing Customer Experience to Grow Life Insurance Business 

Life insurance sales and distribution were transformed over the course of the pandemic. With a large proportion of the population still uninsured or underinsured, there is an opportunity for insurers to target these markets by improving the customer experience and streamlining processes. 

Key ways insurers can boost life insurance sales we cover in this article: 

  • Improve product flexibility and personalization 
  • Increase engagement using health data from wearables 
  • Embrace accelerated underwriting and automated health data integrations 
  • Support cross-platform digital distribution channels 

The ongoing threat of COVID-19 poses a constant reminder of the importance of life insurance. Life insurers have an unprecedented opportunity to communicate their value proposition to an engaged audience through multiple digital channels. Indeed, life insurance sales jumped to the highest level seen in nearly 40 years in the first quarter of 2021. Despite the increase in sales, the percentage of individual Americans covered by life insurance dropped from 63% in 2011 to 52% in 2021.   

Insurers could make close to $4 billion more annually in potential premium income by closing sales with this untapped market. 

To understand how life insurers can seize this opportunity, we must first understand the challenges they are facing, then discuss how approaches like hyper-personalization, digital distribution, and accelerated underwriting can solve them. 

Why are so many people underinsured? 

For consumers, it comes down to price and policy complexity.  

The Oliver Wyman Forum’s Global Consumer Sentiment survey found 69% of consumers say the price is essential when choosing a life insurance policy, and 44% of consumers say ease is vital in their decision. Additionally, one-third of Americans who considered buying life insurance did not end up purchasing it.  

Traditional whole life and term life policies can be generic and inflexible. Rather than having a one-size-fits-all approach, carriers need to allow policyholders to determine the length of their policies so they’re able to afford premium payments and get coverage when they need it the most.   

 With these critical factors in mind, let’s look at how life insurers can improve sales and reduce churn by hyper-personalizing life insurance.  

Personalized life insurance customer experience 

Customers expect life insurers to offer policies that are flexible, personalized, and easy to understand. Insurers can meet these expectations with targeted pricing, offers, and messages sent at the right time.  

Naturally, this relies on massive quantities of customer data or “big data”. 

Insurance customers are open to sharing their personal data to get a more personalized policy and customer experience. A recent study by Accenture says 80% of new insurance customers are willing to share personal information for personalized insurance policies that include incentives and reduced premiums. 

Insurance industry terminology can be overwhelming for customers. Personalization ensures customers only invest their cognitive energy in understanding concepts they need to know based on their coverage needs.  

Through personalization, clients are ideally presented with the exact information and policy they are looking for, allowing them to understand their policies better. This is why a client never feels overloaded with information.   

One way insurers are delivering personalized advice is through chatbots. By integrating demographic and health data with AI chatbots, the bot can learn from each interaction and provide customized answers to the user’s questions and guide them through changing, renewing, or signing up for policies.  

Insurers can use client data to target people who are interested in their products. This allows insurers to:  

  • Find their ideal customer 
  • Understand their customers’ needs  
  • Create products tailored to their client’s needs 
  • Reduce spending on insurance agents and marketing programs  
  • Increase sales and revenue through cross-selling and upselling 

A personalized customer experience in life insurance can help clients improve their overall well-being, reduce premiums due to improved health, and strengthen customer loyalty to a particular carrier. 

Policy Flexibility and Personalized Deathwishes 

Insurers can also personalize life insurance policies by finding unique ways to help their deceased clients be remembered and honored.  

A number of disruptors have entered the life insurance market such as DeadHappy, which seeks to modernize the market by enabling customers to select or create their own “Deathwishes.” Aside from the creative branding, Deathwishes are a great example of policy flexibility. They can help insureds to pay off bills, donate to charity, or even buy a friend a tattoo or a vacation after the policyholder’s death.  

Large incumbent insurers are also offering impressive policy personalization to insureds. For example, MetLife Hong Kong’s Infinity app taps into its customers’ emotions by allowing users to create their legacy.  

The app acts as a digital time capsule where users can upload sentimental documents, write notes, and share memories, photos, and videos with family and friends at a future date – even after the user has perished. The app ensures customers that their memories will be preserved forever, creating a bond between different generations of family and friends. 

Personalized life insurance can appeal to younger demographics by making life insurance easier to understand, improving the well-being of their lives, and helping them protect and pay for things they care about.  

For example, a childless 22-year-old would likely have different priorities than a 40-year-old with a family. By communicating an alternative value proposition, insurers can motivate younger demographics to consider life insurance that activates a charitable donation, cares for a beloved pet, or sends a friend on a trip after the insured’s death. 

Personalized options for life insurance sales include funding a tattoo  

Digitized distribution of life products 

Before COVID-19, distribution was typically done in person. McKinsey’s January 2020 US agent survey reports this has changed as 90% of life insurance agents’ sale conversations and 70% of ongoing client conversations were in person before the pandemic. Fewer than 5% of agents had any in-person conversations since the beginning of the pandemic.  

Amid increased digitization, life insurers are challenged to find different methods to make insurance products easier to comprehend through digital sales. Insurers also need to find new digital strategies to generate leads and build relationships with clients.  

Although some insurance companies have struggled to adapt to new digital methods, others have taken advantage of the virtual opportunity.  

State Farm’s virtual platform allows customers to use digital tools to purchase policies online by themselves. Additionally, clients do not need to provide them with a medical exam, speeding up the purchasing process. The result has led to State Farm ranking second in client satisfaction amongst all life insurers.  

It’s well-known that upselling and cross-selling existing customers is more profitable than acquiring new business. At Sun Life, digital “nudging” via a digital assistant was responsible for a $1 billion increase in additional coverage purchased in 2020. The assistant, named Ella, would send carefully timed notifications, or nudges, to plan members suggesting they take action before deadlines and recommend additional coverage based on that individual’s characteristics. 

For new businesses, life insurers can also leverage predictive analytics to provide a benchmark of which additional products are most likely to be sold based on historical success data. Predictive analytics can also streamline the application process, the point where many prospects tend to drop out of the sales funnel. 

Digital distribution allows agents to do business with more clients, allowing life insurance companies to lower commission costs per sale. In addition, the desire for superior digital tools amongst agents is more vital than ever as 44% of agents rated investing in digital tools or customer tools as the best way their employers can support them.  

Accelerated underwriting in life insurance 

In traditional life insurance underwriting, it was common for customers to take a medical exam or seek other in-person health evaluations. Since the onset of the COVID-19 pandemic, this was no longer possible and many life insurers had to embrace accelerated underwriting, supported by digital self-service tools. 

A survey by LIMRA found 74% of insurance companies say accelerated underwriting has reduced wait times for policies, 59% say it has diminished policy issue costs, and 37% say it has helped increase sales.  

While the industry is shifting from more traditional underwriting methods, life insurers still need adequate medical information to underwrite profitable life insurance.  

Life insurance companies are using the following sources of information to accelerate underwriting:  

  • Electronic Health Records 
  • Medical claim records 
  • Medical information bureau 
  • Credit records 
  • Combined Rx and credit-based scoring models.  

Since the beginning of the pandemic, usage for Rx-based scoring models has increased by 30%, followed by medical claims records’ 32% increase, and Electronic Health Records at 23%.  

The new tools for accelerated underwriting are not the only thing that’s changed since the pandemic. Life insurance companies have also changed the risk class structure of accelerated underwriting.   

Usually, accelerated underwriting programs are limited to healthier demographics and only a small portion of those eligible could qualify without completing traditional underwriting requirements.  

Munich Re’s 2021 survey says 67% of companies now offer the same number of standard and preferred risk classes as their traditionally underwritten products, up 17% from 2018. These classes allow life insurance carriers to provide coverage to a larger audience.  

For example, 83% of accelerated underwriting programs now allow tobacco users to participate in their accelerated underwriting programs, a 16% increase from 2018. Although more people can get coverage, there are more limitations and a lack of table rating offers for programs that accelerate people with health risks, such as tobacco users.  

Additionally, the use of predictive analytics and machine learning algorithms in underwriting programs makes it easier and faster for customers to obtain life insurance coverage by skipping traditional tedious underwriting processes.  

The bottom line 

Today, life insurers must offer a digital-first customer experience. Research from PwC shows that 41% of consumers will switch insurance providers in favour of more digitized alternatives. The pandemic served as a radical shift towards digitization, changing how life insurance companies perform underwriting, the information needed to underwrite policies, and distribution channels and approaches.  

Insurers who can most effectively collect data to create personalized policies and recognize when clients could be candidates for cross-selling and up-selling opportunities will win in the post-COVID-19 world. Conversely, insurance companies who don’t adapt will miss out on a chance to expand to markets they never knew existed.  

About the author

Author Mike de Waal

Award-winning, results-driven, and experienced leader with a passion for innovation, technology, and the employee benefits industry.