Life insurance sales have inherent challenges regardless of market conditions or consumer trends. First, many people simply do not understand insurance or its value proposition. If they do, its association with end of life or illness causes many individuals to keep putting off a purchase. With that said, the pandemic did heighten awareness of the importance of life insurance and did, in fact, increase its sales. LIMRA reported that the number of life insurance policies increased two percent in 2020, largely in the whole life and term categories. Do not, however, count on this trend persisting as industry data suggests that concern over the mortality risk has been steadily declining over the past years and likely to continue. To overcome these and other challenges associated with life insurance sales, brokers will need to leverage market conditions, consumer trends, new technologies and best practices to expand their insurance and benefit sales.
Current Challenges and Market Conditions
Its unpopular purpose and the declining concern over mortality risk notwithstanding, brokers face other challenges in selling life and other insurance products. Getting back to the perception issues, a major one relates to price. In the LIMRA 2021 Barometer Study, it was found that over half of Americans overestimate the cost of insurance by as much as three-fold. Erroneous cost values were more pronounced among the younger generations with 44 percent of Millennials incorrectly estimated the annual cost of a 20-year term life insurance policy for a healthy 30-year-old at over $1,000 per year versus the actual average cost of approximately $165 per year. The good news is that many consumers admit to not understanding life insurance basics with the Barometer Study finding that less than one third said they were “very” or “extremely knowledgeable” about life insurance.
Another challenge brokers need to overcome is the heavy reliance on employer-sponsored coverage. U.S. Bureau of Labor Statistics found the median life insurance coverage offered at the workplace to be either a flat sum of $20,000 or an employee’s one year salary. This is hardly sufficient to cover the expenses of an individual, two-income household or a family. LIMRA’s data suggests that there are an estimated 60 million uninsured and underinsured American households with an average coverage gap of $200,000.
Recognizing the need to build greater financial literacy specifically where life insurance is concerned, the industry has taken measures to address the problem. LIMRA and LOMA, the American Council of Life Insurers, Finseca, the Million Dollar Round Table, the National Association of Insurance and Financial Advisors, the National Association of Independent Life Brokerage Agencies, and Life Happens, a nonprofit whose mission is to help consumers take personal financial responsibility through their purchase of life insurance and related products, have joined forces and launched the Help Protect Our Families campaign. As part of this campaign, these associations will be developing consumer insights and industry best practices to help insurance professionals reach those families with inadequate coverage.
Apart from this initiative, another measure being applied is that of automated underwriting. It is believed that more consumers would purchase coverage if underwriting procedures were simplified; for example, if they could avoid a medical exam. There is also a growing trend toward continuous underwriting, which applies data and digital connectivity to personalize underwriting based on a customer’s personal data and engagement with the insurer. This process also will help insurers to direct leads to their sales channel to better meet a customer’s needs. A multichannel approach which reflects a higher degree of customer personalization will be used to increase life insurance sales, as well as extend the relationship to encompass the sale of other products. McKinsey & Company’s The Future of life insurance: Reimaging the industry for the decade ahead projects that this approach will not only help reduce the cost of acquiring a customer by up to 50 percent, but will also increase new premiums by five to 10 percent, and lower customer turnover by up to 30 percent.
Another example of how the insurance industry is transforming is the so-called “engaged wellness ecosystems” and “pay as you live” systems. Reflecting a shared-value economic approach, these systems reward customers who follow healthy behaviors (e.g., annual check-ups, exercise, healthy eating, etc.) with lower premiums.
While the emphasis on health management is not new, the approaches coming from insurers directly to consumers, along with the greater emphasis on personalization, increased consumer engagements through mobile devices, and a receptivity to more flexible underwriting are new. There also has been an expansion of value-added services by insurers who realize that helping their customers with challenging insurance-related administrative or health management tasks is advantageous in keeping policies in force and expanding the customer relationships.
Not to be underestimated is the role of technology in helping increase life insurance and benefit sales. Currently, many brokers rely on outdated information management systems that are not keeping pace with today’s tech-driven communications. Customers, especially the younger generations, rely on their mobile devices heavily to communicate, bank, pay bills, research purchases, and make purchases online. Brokers who leverage new technologies to facilitate customer engagements, as well as to capture more data for better targeting, have a competitive advantage. Today, there are insurance broker-specific platforms that enable a broker to manage a prospect’s entire journey through the sales cycle and beyond to customer status. These platforms optimize prospecting, customer communications, data entry and overall productivity.
Mobile apps have become standard today with carriers providing them to share product information, policy features, pricing, etc., all readily accessible at any time. More and more insurance apps today display features such as AI chatbots to expedite customer and broker/agent communications, as well as push notifications to keep customers updated. There are also apps for broker employees to help them with everything from onboarding a customer to keeping track of important customer data, and accessing policies, quotes, notifications, claims and documents.
Artificial Intelligence (AI) driven solutions will continue to expand with insurance carriers leveraging AI and related technologies such as Machine Learning, Fuzzy Logic and predictive analytics to improve their prospect-to-customer conversion rates, advance their risk assessments and related pricing, and optimize their claims processes. In the most advanced applications, we are now starting to see next-generation digital insurance agents support the role of their human peers. With an Alexa-like approach and human-sounding voice, these digital agents are helping improve broker productivity, answer customer inquiries quickly for faster resolutions, reduce risks, and promote better customer service and satisfaction.
Best Practices and the Human Touch
Digital agents are by no means a replacement for a broker/agent. The best brokers know how to expand their life insurance and benefit sales by tapping into what matters most to prospects and customers. They have not waited for industry initiatives to take a proactive role in educating prospects and customers regarding life insurance; the different types, their roles and how to supplement one sale with other products in order to promote optimum financial protection. They are actively involved in the industry, staying abreast of new laws, regulations and trends affecting carriers, brokers, employers/plan sponsors, employees/plan members and the general public. They are also routinely cultivating new strategic alliances with carriers, accountants, attorneys, investment advisors and other professionals.
To increase sales, successful brokers also are looking at the changing skills needed in their businesses. In addition to having “digital natives” among their staff to navigate new technologies, platforms and apps, it is also important that there be skilled customer-facing professionals able to serve in today’s multicultural, multigenerational marketplace. That requires having some multilingual staff, as well as individuals who can relate to the younger generation and aging baby boomers. In other words, brokers need to future-proof their workforces so that they can succeed into the future. At the core of all these practices should be a focus on personalizing the customer experience and adherence to proven best practices for those selling life insurance and benefits—which are to conduct annual reviews, always introduce new products/solutions and, when selling to employers, unions and/or associations, make sure that the focus is not just on group products, but also on voluntary benefits which continue to show increasing demand.