The COVID-19 pandemic has uncovered latent demand for insurance protection of all kinds as people grapple with how to protect their families from unexpected shocks. LIMRA's research shows strong direct-to-consumer growth over the past year for certain types of life insurance, for example. This surge in interest comes even though life insurance ownership rates have fallen nine points over the last decade to 54%.
Consumers have always understood the importance of insurance coverage. Financial Health Network's research found, for instance, that over 50% of people without life insurance knew they needed it. (Cost was the main barrier.) It appears that a global pandemic has forced even more urgency for protection and that people are finding a way to make it a priority. As consumers begin to seek more coverage, the industry needs to step up to meet their evolving needs.
Here are four ways that insurtechs have begun to do that.
1. Diversifying distribution channels.
There is a lot of chatter about how the traditional insurance agent is disappearing. But, at least in the medium term, agents aren't going anywhere. 89% of individual life insurance products were distributed by independent and affiliated agents in 2019. P&C numbers are similar, although auto insurance relies heavily on direct outreach. A more helpful perspective is to think about how to diversify the distribution channels to meet and serve a larger swath of consumers in many different ways. For example, group insurance distributed largely through employers represented 43% of all life insurance policies in 2018. As I've written elsewhere, there are limitations to employment-linked insurance, but it is still an important tool for distribution. How else can the industry diversify? Agents, employers, banks, and direct-to-consumer channels all have a role to play in getting insurance into the hands of the consumers who need it most.
We see insurtechs stepping out in new ways to reach customers. Some are going direct-to-consumer through AI-enabled chatbots that replace agents, like life insurers Bestow, Ladder and Ethos, and disability insurer Breeze. Other insurtechs are leveraging partnerships with financial institutions, like life insurer Everyday Life and disability insurer Simple Disability. Some of these companies have dual strategies relying on agents in certain cases and going direct-to-consumer in others.
2. Increasing flexibility.
People's protection needs change over time, but pricing and policy terms are often static. More insurtechs are introducing flexibility into how they price and provide coverage. Metromile and Hugo were innovators in offering pay-as-you-go auto insurance, adjusting coverage to people's driving habits and resulting in reduced costs. Everyday Life and Ladder allow customers to adjust their life insurance coverage, which can make policies more affordable for those with limited incomes.
3. Rewarding good behavior.
Behavioral incentives are getting increased traction with carriers of all kinds. Life insurers like Haven Life reward policyholders for healthy lifestyles. Lots of auto insurers are relying on telematic apps to reward good driving behavior. The auto insurtech Sigo has developed the first Spanish-language telematics app for the Latinx market. And startup Marble is building the industry's only rewards program, increasing engagement and loyalty between policyholders and their carriers.
4. Reaching the mass market.
Because insurance companies are in the financial resilience business, they can offer struggling customers the peace of mind and protection that only insurance products can provide. People themselves understand better than anyone else the risks in their lives, and they're looking for protection now more than ever. Sigo is reaching the Latinx mass market with affordable car insurance based on a fully digital experience and fairer underwriting. Harmonic is helping people build their financial safety net starting with a free $10,000 accidental death policy. Now is the time to embrace the mass market, listen to what they're telling us about their risks, and provide them with the protection and resilience they deserve.
This is a unique moment that presents a huge opportunity for the insurance industry. Consumers recognize now more than ever the importance of adequate insurance coverage to protect their families. They are looking for flexible, responsive, and personalized policies to fit their needs, their risks, and their budgets. Now is the time to seize on this opportunity to strengthen the financial well-being of all consumers.