Tech Is Key In Filling The Life Insurance Gap

An end-to-end life insurance business model can help reach the 37 million households without coverage.

By Mike Burns

The opportunity to help Americans plan for their financial futures with life insurance has never been greater.

Every day, 10,000 baby boomers turn 65, and many of them still have unmet retirement needs. Generation X is faced with the balancing act of taking care of their families, planning for retirement and often caring for aging parents. Meanwhile, millennials are now the nation’s largest living generation, many just beginning their life insurance journey as they reach milestones, such as starting a family or buying a home.

As these demographic shifts take place, we’re on the cusp of the largest generational wealth transfer in history. Cerulli Associates projects that nearly 45 million U.S. households will transfer a total of $68.4 trillion in wealth to heirs and charity over the next 25 years, with $48 trillion coming from boomers. By the end of the 25-year period, baby boomers will be replaced by Gen X as the generation with the greatest wealth.

In all of these scenarios, life insurance has a role to play in helping families build, manage, protect and transition their wealth. Yet today, there are more than 37 million households without life insurance coverage, according to LIMRA, which estimates that 48% of households have a life insurance gap of $200,000 on average, amounting to more than $12 trillion in market need.

Filling that huge life insurance gap is going to require the advancement of the end-to-end life insurance business model, centered on the customer and their rapidly changing needs, preferences and expectations. Today’s consumer is looking for life insurance products that offer financial planning flexibility, and simpler, faster, high-tech buying and service experiences more consistent with other industries.

Holistic Financial Planning Solutions

Many people think of life insurance only in terms of protecting loved ones. In a recent Lincoln Financial study, nearly 70% of consumers said life insurance is one of the best solutions to provide for family if you die. Yet, today’s life insurance marketplace offers a more diverse and flexible set of products that also provide living benefits to address holistic financial planning needs that can help clients achieve financial goals in various phases of life.

As life insurance competes for share of wallet with everyday expenses, increasing life insurance relevance will require products that offer additional value through living benefits. The aforementioned Lincoln study found that among those who do not own an individual life insurance policy, their top financial concerns ranked as retirement, unexpected expenses, monthly bills, long-term care and job security. Life insurance can address almost all these scenarios and many more.

Indexed universal life is a prime example of a single solution that can help clients plan for these concerns. The addition of an IUL policy to a client’s financial portfolio provides cash value growth potential that can be accessed in times of need — whether that’s supplementing retirement income, helping with a child’s college tuition or addressing a financial emergency. With the addition of an LTC coverage rider, IUL can also protect against future LTC expenses, which can potentially exceed $100,000 annually.

Although an IUL policy and other types of life insurance can address these needs, clients are often unaware of these solutions. In the same Lincoln study, just 17% of consumers said life insurance is one of the best options to provide retirement income or pay for a child’s college education, and less than 25% it is one of the best options to help with unexpected expenses or LTC expenses.

In addition to helping with these individual planning strategies, the living benefits of life insurance can help with planning strategies for entities. Business owners can use life insurance to address a variety of needs such as retaining key talent, protecting the business from the loss of key employees or developing a succession plan.

Nearly 60% of those who don’t own an individual life insurance policy agreed that living benefits increase the appeal of life insurance. This reinforces the importance of advisors helping clients understand the flexibility that life insurance can bring to their financial portfolio.

Meeting Customers Where They Want To Be Met

Securing life insurance coverage should be as simple as possible. Consumers increasingly expect immediate and personalized service experiences based on their interactions with “born-digital” companies such as Amazon. Leveraging technology will break down the traditional process barriers that our industry is known for.

As more product options enter the market and financial planning becomes more comprehensive and complex, the role of the financial advisor is as important as ever. Yet, in today’s “one-click” world, the advice model must be complemented with the convenience of technology to meet customers where they want to be met.

Using mobile tools, advisors can provide their clients with self-service underwriting quotes, and when it comes time to submit their application, clients can do so online. Those policies can then be delivered digitally, and we have the ability to sign documents electronically. These digitally-enabled processes eliminate the administrative hassles of postage and paperwork, reduce “not-in good-order” submissions and speed up the process of securing coverage. The technology capabilities exist; now it’s time to increase their adoption.

The purchase process can be further expedited through the use of technology during underwriting. Automated underwriting capabilities can process and verify application information and make underwriting decisions, providing a streamlined and faster underwriting experience.

Consumers view life insurance as a solution primarily for death benefits, often overlooking its holistic value-proposition.

Source: Lincoln Financial Group

Integration of technology into the underwriting process can also provide the opportunity for the healthiest individuals to waive lab tests, providing a less-invasive experience and saving time. According to LIMRA research, nearly half of American consumers find simplified underwriting more appealing than

Leveraging technology will break down the traditional process barriers that our industry is known for. traditional underwriting, suggesting that 117 million consumers are more likely to buy life insurance via simplified underwriting.

When these technology-enabled experiences are packaged together, it’s now possible for policies to be issued in as little as 24 hours, compared to the traditional 60 days that consumers have come to expect.

Post-issue service is also advancing to deliver a consistent end-to-end experience for customers. One emerging enhancement in the life insurance industry is the deployment of web chat capabilities, which can include the ability for an advisor or client to chat with a live service representative or a chatbot about their case or policy. These chat capabilities increase self-service options for customers and enable carriers to offer 24/7 service for certain interactions. As another example, some carriers now offer a digital claims experience for life insurance, allowing for faster turnaround times, improved submission accuracy and a simplified client experience during a difficult time in a claimant’s life.

These are just some of the examples of the progress the industry has made in recent years to make it easier to do business and drive value through the use of technology. But we can’t stop here. It’s incumbent upon us all — carriers and advisors alike — to embrace digitization and invest in the tools to harness all that technology brings to the sale, purchase and ownership customer experience.

Amid a shifting marketplace, there is a clear opportunity to challenge the status quo and advance the business model in order to help clients across generations secure their financial futures with life insurance. New products and processes are putting advisors in a unique position to reframe their conversation with clients around holistic life insurance solutions, and personalized experiences that are simpler, faster and technology-enabled at every customer touchpoint.

Mike Burns is senior vice president of life solutions for Lincoln Financial Group. Mike may be contacted at mike.burns@innfeedback.com.