How Technology Is Transforming the Way Life Insurance Companies Offer Coverage & Enlarge Revenue

Jul 25, 2023

Though life insurance policies continue to provide consumers with peace of mind, external conditions are changing the industry. The pandemic prompted more consumers to purchase life insurance, but also resulted in a 15.4% increase in payments to beneficiaries as well as reduced reinvestment return due to lower interest rates.

In fact, a range of factors have thrown a curveball at life insurance decision-makers. The aftereffects of the pandemic, disrupted value chains, heightened inflation, and low interest rates are reshaping what people want from their plans, how they interact with insurers, and whether they’re ready to buy.

On the positive side, widespread digital transformation has elevated the ability of established brands and nimble startups to address emerging challenges, serve existing customers, and appeal to hesitant prospects. As a result, those who innovate will have the most success generating revenue and satisfying customers.

Which innovations can revamp your capabilities? Here are the life insurance and technology trends which are improving responsiveness, personalization, and accuracy in the industry.

Reinventing the Customer Experience

There has been a gradual shift in the way customers purchase their policies. For decades, human agents (independents or your own employees) have sold, collected premiums on, and serviced life insurance policies for the insured and their beneficiaries.

Unlike other sectors, the physical sales channel has survived for life insurance because of the intricacies of guiding consumers through choosing term-life or whole-life plans or filing beneficiary claims. The personal touch of a human agent has made people feel supported during a very vulnerable and emotional process. That said, a growing number of people are turning to other channels to acquire, ask questions about, and redeem policies.

The J.D. Power 2022 U.S. Individual Life Insurance Study found 51% of customers have used at least one digital channel in the last three years. Moreover, they tend to be more satisfied with their overall life insurance experience than those just using traditional channels. That’s not to say human agents are without their place, but that they should be one element of a larger, increasingly hybrid experience.

How does that work in practice? By creating a centralized, authoritative, and responsive data foundation. Policyholders and beneficiaries want continuity across their conversations. Every detail from across voice, email, social media, chatbots, and other channels should funnel into a single source of truth. Though many organizations have made progress modernizing their data architecture, there are still strides to make toward greater maturity.

The ability to leverage your data architecture to better serve your customers depends on how you respond to a few key questions.

  • Is your business properly ingesting all types of data from across customer-facing sources? Getting details from all customer interactions or even lifestyle data from wearable technology can streamline support or even the distribution of payments.
  • Are you using metadata to advance overarching analysis and customer service practices? Proper metadata management can enable a better understanding of customer habits, allowing for automated reporting and clearer takeaways.
  • Are you integrating new data sources into your data warehouses or data lakes in real time? If not, you risk the customer service continuity that can elevate experiences.

Creating the right data and digital foundation can deliver results and enable capabilities when you have answers to these and other questions.

Expanding Your Revenue Funnel

Collecting premiums from coverage and reinvesting them in interest-generating assets has traditionally supplied the industry with stable revenue, but these strategies appear to have lost some of their luster. Research conducted by Insider Intelligence finds that the percentage of the population that are life insurance policyholders is on a steady decline. They predict only 49% of the U.S. population will have life policies by the end of 2023 and only 47.5% by 2025.

Leveraging partnerships with other businesses inside and outside the insurance ecosystem is the key to increasing that revenue flow. Embedded insurance is an increasingly essential revenue source. The practice of bundling term-life or whole-life insurance policies with the products and services of other industries at the point of sale has the potential to resuscitate fading revenue streams.

There’s a world of opportunities. A retail bank could offer whole-life insurance when completing transactions for home loans, personal loans, or retirement planning services. There’s even an option to bundle term-life insurance (only for the duration of an activity or journey) with travel or entertainment related purchases.

Another way to expand revenue streams is to mirror what the financial services sector has done. More fintech and traditional financial services companies are developing application programming interfaces (APIs) which third parties can use to cross-sell their services. At least 76% of worldwide banks expect a 50% increase in the use and adoption of open banking APIs in the next few years. Using a similar model for life insurance organizations could rekindle the procurement of life insurance nationwide.

Reducing Risk & Boosting Profits in Underwriting

According to McKinsey & Co., as many as 40% of life insurers’ expenses stem from their 20 to 30 core processes. One of those areas is the underwriting process. Automated insurance underwriting accelerates the process, reduces instances of human error, and can rightsize policies to fit each consumer. When this life insurance tech trend is used right, it has the potential to deliver more efficient and effective operations as well as profitability.

However, AI shouldn’t be used without guardrails. Unsupervised or unexamined automated underwriting can come with biases of its own. Algorithmic biases can occur when AI evaluates data without context, codifying the existing bias as if it is objective and absolute. This can result in otherwise qualified or low-risk potential policyholders getting rejected for services or receiving higher rates that might prompt them to turn to a competitor in the long term.

When human agents are used to assess or verify the work of AIs, organizations can weed out any of the unexpected biases created by the data sets used. Combining the empathy, creativity, and contextual reasoning of human beings with the speed, efficiency, and scale of AI can help to enhance the underwriting process in ways that boost profits and bring more qualified customers through the funnel.

Staying Competitive While Protecting Your Assets

These innovations are only some that are driving greater efficiency, profitability, and customer service within the life insurance sector. However, threading the needle while trying to implement these practices requires a comprehensive handle on the technology, a clear understanding of how it will augment your goals, and sturdy data foundation to build from.

The right IT solutions partner can help bring your business to a point where the next phase of your digital transformation is painless. With their guidance, you’ll get the same security and stability you provide your customers.

Looking to expand your knowledge with life insurance and technology trends? Reach out to our team to discuss the latest trends.


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