While the repercussions of the pandemic and subsequent economic paralysis touched many industries, changes within the life insurance sector are among the most widespread. Some changes were underway prior to the events of 2020, yet the pandemic and its economic consequences accelerated an industry-wide transformation. Regardless, life insurance is shaping up to look vastly different in 2021.
New Administration and Best Interest Regulation
Under the incoming administration, the focus on consumer protection regulation will rise for financial services, including insurance. Much of this has been done at the state level already, but we’re seeing increased appetite among federal regulators to extend certain requirements.
New York’s 2019 amendment to Regulation 187 is a perfect example. The rule requiring insurers to act in the best interest of the consumer will likely become the standard for the U.S. life and annuity insurance industry over the next few years. The rule demands more simplicity and transparency within the annuity and life insurance sales experience to prevent what some call “consumer financial exploitation.”
The last four years revealed trends toward a “consumer-only mindset” that’s rooted in transparency. For the life and annuity sector, this means digital product comparison will be necessary. Carriers and distributors with a strategic growth agenda should seek to align with this trend rather than ignore it.
Annuity and life insurance sales have traditionally relied on in-person relationships and meetings; with COVID-19 forcing the industry into virtual selling, regulators will want more auditability and transparency over how consumers are treated during the virtual sales process.
Consumers Demand More Control Over Virtual Experiences
Consumers are also experiencing a transformation of their own. With the majority of lives moving toward virtual experiences and the increased demand for instant answers or services online, consumers have little to no patience for a traditional, paper-based sales process.
This is one of the main reasons that life insurance sales haven’t kept pace with general population growth. Younger generations demand seamless, often-personalized digital experiences with the ability to compare policy options dynamically and interactively in real time. Moreover, most Americans now rely on smartphones and broadband technology to do everything from banking to tracking the status of the COVID vaccine, according to Pew Research. This heightened reliance on digital experiences has affected consumer interest in life insurance and the ability to effectively sell it.
Creating an interactive visual life insurance experience is increasingly popular among carriers and distributors. Virtual sales meetings are also increasing. More and more, consumers don’t want to feel pressured to attend a one-on-one, in-person sales meeting and want more flexibility in the sales experience.
Additionally, for better or for worse, we’ve all come to expect immediate gratification and a quick transaction. This same expectation carries into insurance, especially when it comes to term life. We expect the growing shift to “instant issue” capabilities will continue at a compounding rate in 2021. We also believe many innovators will seek to apply the instant issue model to select product classes and target audiences in the permanent life space.
See also: 6 Megatrends Shaping Life Insurance
The Uninsured and Underinsured at Highest Risk
2020 also exposed the risks for remaining uninsured or underinsured in America. Years of shifting cultural priorities along with outdated digital experiences have left many Americans without adequate life insurance. Unfortunately, this past year has given a glimpse of how dangerous that can be.
Americans now realize how vulnerable they and their families are without sufficient savings or insurance. With new insuretech platforms simplifying the purchase of life insurance, we expect an accelerated shift in tech adoption. For example, we saw a 155% rise in virtual life and annuity insurance sales meetings last spring, and that trend only increased throughout the year. Consequently, financial professionals, insurance carriers and distributors are investing in technology platforms to deliver a “hybrid” sales approach where the adviser or agent blends expertise with a consumer-oriented digital experience.
Overall, while 2020 was a transformative and challenging year, it also propelled the insurance industry forward at an accelerated pace. Regulations that reflect our new reality and cultural shifts will continue shaping the industry into 2021 and beyond. Carriers and distributors that aren’t moving toward digital transformation now will fall further behind in 2021. Despite the rollout of COVID-19 vaccines, experts agree that “normal” life is unlikely to return in the first half of the year, making these major trends a new part of the life insurance selling experience at least for the foreseeable future.