The individual life insurance market in 2024 presents a paradox: While term life insurance sales are expected to reach an all-time high of US$3 billion, the industry continues to grapple with market penetration challenges. Despite projected record sales, only three out of five product lines—indexed universal life, term life, and variable universal life insurance—have seen year-over-year growth in policies sold. Moreover, LIMRA’s 2024 Insurance Barometer Study reveals that 42% of U.S. adults either need life insurance or are currently underinsured. This disconnect between sales figures and market penetration highlights the complex landscape insurers must navigate.
Several factors contribute to the industry’s ongoing challenges:
- Persistent misconceptions: Years of educational efforts have failed to dispel the common belief that individual life insurance is too expensive. Consumers also remain unclear about which products and face amounts they should purchase.
- Demographic disparities: The gap in individual life insurance ownership between various demographic groups has widened. Black and Hispanic Americans, younger generations, LGBTQ+ adults, and consumers with annual incomes of US$50,000 or less continue to lag in life insurance purchases.
- Distribution costs: Insurance intermediaries are concerned about rising distribution costs, particularly due to increased compliance and regulatory burdens.
- Product-specific challenges: High interest rates have dampened individual whole life insurance sales, while fixed universal life insurance is losing ground to indexed universal life insurance.
However, the news isn’t all gloomy. The industry has made significant strides in certain areas:
- Underwriting innovations: A majority of carriers now offer accelerated and simplified underwriting processes.
- Digital transformation: The implementation of digital platforms and services has reduced costs and enhanced the purchasing experience for consumers.
- Increased awareness: Recent events have sparked greater interest in individual life insurance among younger consumers.
To capitalize on these positive developments and address persistent challenges, Datos Insights recommends several strategies for insurers:
- Enhance support for independent distributors: Establish internal and external wholesaling programs, streamline underwriting processes, and leverage AI-powered coaching tools to analyze sales calls and provide personalized feedback.
- Boost marketing efforts: Utilize machine learning algorithms to identify high-potential leads, deploy interactive needs analysis tools, and implement cloud-based customer relationship management systems.
- Modernize policy administration systems: Invest in newer systems that offer greater data access, flexibility in product design, and integration with emerging capabilities.
- Harness the power of data and analytics: Leverage third-party data and analytics to streamline underwriting, improve the customer journey, and lay the groundwork for AI initiatives.
- Elevate the customer experience: Deploy chatbots, expand self-service capabilities, and use AI to suggest tailored insurance products and coverage levels. Utilize services and APIs to allow for integration to new capabilities and agent portals.
Generative AI and large language models (LLMs) can revolutionize underwriting by summarizing and categorizing data, incorporating new data sources, and conducting application completeness checks. In the realm of customer service, LLMs can power advanced chatbots and conduct in-depth customer feedback analysis.
For claims processing, both traditional machine learning and LLMs can assist with account takeover prevention and fraud detection. These AI-powered tools can analyze customer behavior patterns, assess risk factors, and dynamically adjust authentication levels based on real-time data.
As the individual life insurance market continues to evolve, carriers must embrace technological innovation and operational optimization to overcome persistent challenges. By leveraging advanced analytics, AI, and digital platforms, insurers can not only boost sales but also make significant strides in addressing the ongoing market penetration gap.
The path forward for individual life insurers is clear: Providing efficiency in process and ease in experience are key. Embrace technology, optimize operations, and focus on enhancing both distributor and customer experiences. Those who successfully navigate these challenges will be well-positioned to capitalize on the growing demand for life insurance products in an increasingly complex market landscape.
For further discussions of individual life insurance challenges and solutions to those challenges, read Individual Life Market Challenges in 2024 or contact Nancy Casbarro ([email protected]) or myself ([email protected]).
