Individual Life Insurers Embrace Digital, but Need to Work on Customer Experience


Individual Life Insurers Embrace DigitalIndividual life insurance carriers’ ability to roll out new products, pricing, and product changes rapidly in response to market conditions and regulatory changes is vital to grow revenue. Carriers are waking up to the importance of customer experience from the perspective of both the policyholder and the producer, with continuing straight-through processing efforts and growing acceptance of underwriting without medical exams.

Carriers know that it is critical to stay relevant to younger, tech-savvy demographics in customer and producer communities, otherwise they could lose those populations to consumer-friendly financial services alternatives. Attracting these demographics will require better digital capabilities and new products that fit their needs and expectations.

COVID-19 has impacted demand, new business, and underwriting.
Carriers are reporting increased demand for life insurance as consumers focus more on mortality and seek to improve finances during the pandemic, with an understandable growth in mobile and online applications. Digital initiatives that were previously stalled or on the back burner have moved up in carrier priorities.

Despite excess mortality, most carriers are coping with the increase in death claims. Individual life carriers are pricing non-medically underwritten policies to account for potentially higher mortality rates and are adding underwriting questions to reduce risk. Some are now mandating good health statements and accepting electronic health records and historical exam and lab data instead of paramedical exams.

Some carriers are restricting sales to older age groups and limiting face amounts and premiums for new coverage. COVID-19 has impacted mortality assumptions, both directly and because of policyholder co-morbidities and policyholder postponing medical care.

Life insurance sales are up, dramatically for some lines.
LIMRA reported a 20% annualized total individual life premium increase, 6% face amount growth, and a 5% increase in the number of policies year-over-year in 2021.

Variable universal life showed the greatest year-over-year policy number growth, 53%, driven by carriers’ shift to products better suited to a low Interest rate environment followed by fixed universal life. Variable universal life also saw dramatic annualized premium growth, 74%, over 2020.

Regulatory challenges continue.
The Department of Labor is working to bring back the fiduciary rule, and carriers still face best interest regulations from the SEC and states such as Massachusetts and New York. They must also harmonize these regulations with NAIC model legislation. Recent federal tax reforms have also reduced capital requirements for carriers.

Recent accounting standards changes may render balance sheets and operating performance more transparent, but they also have implications for actuarial modeling, data and analytics strategies, pricing, and systems integration.

In July 2021, the New York Department of Financial Services issued Insurance Circular Letter No. 7, repealing and replacing a 2019 circular and laying out requirements for business continuity and disaster response planning for life and health insurance and retirement firms

Insuretech comes calling.
Individual life carriers are exploring the potential advantages of working with insuretech startups. These startups offer insurers UI and UX capabilities they might not have in-house. Insuretech startups are also making it easier for financial advisors and other financial services firms to offer life insurance products.

AI and analytics are an area of increasing interest for claims processing and for marketing use cases including cross-sell/upsell, policyholder retention, product recommendation, and understanding customers’ buying patterns. Several carriers have corporate venture capital arms or programs.

Alternative brands create interesting and potentially powerful ways for insurers to experiment at a time when significant demographic and technological changes impact their core business capabilities and markets.

The future is changing for individual life insurers.
Individual life carriers wrestle both with revenue growth and with cost reduction. They are pursuing enhanced product modeling and management capabilities; improving customer experience and customer service; and expanding their use of AI, business intelligence, and analytics in customer service, marketing, underwriting, and other functions.

If you’d like to discuss our key findings for the changing environment for life carriers, please read our new report Business and Technology Trends, 2022: Individual Life or contact Nancy Casbarro ([email protected]) or Rob McIsaac ([email protected]) to continue the conversation.