Individual Life Insurers Must Pursue Holistic Agent and Customer Experiences: Digitalization Is Not Enough


Individual life insurance carriers are more open to greenfield policy administration system (PAS) deployment for new lines of business or new products, rather than launching on existing platforms. Carriers are waking up to the importance of customer experience from the perspective of both the policyholder and the producer. Automation and digitalization of processes are still necessary, but so are data access and quality, along with easy integration with sales and service ecosystems.

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.

Here’s a breakdown of the trends Aite-Novarica Group is observing in the individual life insurance market.

Life insurance sales were down in 2022, but 2023 holds some hope.

LIMRA reported flat annualized total individual life premiums, a 5% decline in face amount, and a 10% decrease in the number of policies year-over-year in 2022. There are signs of recovery in 2023, judging by MIB’s statistics on individually underwritten policies for Q1 2023. Applicants aged 50 and younger are responsible for the majority of application volume growth in 2023.

Indexed universal life showed the greatest year-over-year policy number and premium growth in 2022, driven by the potential for significant upside. Variable universal life also saw strong annualized premium growth in 2022. It is unclear whether policyholders will retain their existing policies in the face of market volatility, or if they will upgrade to newer policies with more attractive benefits.

Regulatory challenges continue.

The Department of Labor continues to work 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 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. 

There are competing proposals for fixing loopholes in Actuarial Guideline 49-A, which currently allow proprietary indexed universal life products to illustrate better than indexed products tied to benchmark indexes such as the S&P 500. Any changes to how indexed universal life products illustrate could dampen sales.

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 as well as a fast track to direct-to-consumer digital platforms. 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.

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, especially in a time of economic uncertainty. They are pursuing improved agent and customer experiences and expanding their use of AI; business intelligence; and analytics in customer service, marketing, underwriting, and other functions. For new lines of business or new products, starting fresh with greenfield PAS is attractive.

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, 2023: Individual Life or contact Nancy Casbarro or John Keddy to continue the conversation.