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6 Megatrends Shaping Life Insurance

Senior executives in few, if any, industries think in longer or broader time horizons than those in life insurance. But, thanks to persistent low interest rates, shifting demographics, technology-driven disruption and regulatory shifts and the current global pandemic, life insurance leaders have adopted a more urgent and near-term perspective. While insurers face considerable risk if they fail to take bold enough action or delay necessary investments, there is also tremendous upside potential for firms that move quickly and creatively. 

As highlighted by the most recent installment of our NextWave Insurance series, the following megatrends are reshaping the life insurance and retirement market now and setting the stage for more profound change in the next decade: 

1. Financial health and wellness: Financial well-being — or having the ability to control day-to-day finances, the capacity to absorb a financial shock and the confidence to meet financial goals — has become increasingly important to more consumers around the world. With state pension and retirement plans looking less viable, such security will be harder to achieve. 

For insurers, value propositions will highlight how they can help people live the lives they want. Offerings will be more flexible, forward-looking and “goals-based,” with an emphasis on preparation rather than downside protection. The value propositions will also reflect that more people work for themselves or participate in the gig economy. 

However, insurers will be more transparent about prompting necessary consumer behaviors to achieve goals, rather than guaranteeing outcomes, as in the past. Retirement savings products will be more holistic and offer more options as consumers’ needs change. That’s how they’ll enable individuals to follow nonlinear career paths and take nontraditional retirements, based on alternating phases of asset accumulation and decumulation. 

2. Long-term value: Investors and analysts will expand their valuation approaches to include more holistic, long-term metrics, rather than only short-term financial measures. Intangible assets, such as intellectual property; talent; brand reputation; innovation; and environmental, social and governance impacts now carry greater weight. The shift toward inclusive, or stakeholder, capitalism will help build trust with younger generations and spark broader public-private collaboration to address societal issues, including the cost of future environmental damage or social injustice. 

3. Collaboration with governments and regulators: Difficult macroeconomic conditions, underfunded government retirement programs and intense regulatory scrutiny (especially around consumers’ best interests and data privacy) will force insurers to collaborate with public authorities on multiple fronts. Other priorities: increasing financial education, facilitating product innovation, influencing public policies, including tax incentives and issuing long-term bonds. More robust consumer protections and data privacy standards, as well as financial reporting frameworks, will be designed to promote financial stability. 

See also: Speeding Innovation in Life Insurance

4. Ecosystems and omnichannel engagement: Ecosystems will continue to grow and mature, becoming a primary method that companies use to engage consumers across channels. Technology advancements – particularly in the realm of application programming interfaces, microservices and data fabrics – hold the key by enabling rapid integration and smooth data sharing. 

Insurers will create their own networks of partners to offer complementary services. They will also engage in those orchestrated by others. Ecosystems will allow insurers to focus on their specific strengths (e.g., offering particular services to niche segments) or innovate more broadly (e.g., with subscription models). Ecosystems also suit insurers looking to modernize their distribution and shift to hybrid advisory models that balance robo-advice with human interaction. Partnerships being formed today will set the stage for future ecosystem success.  

5. Capital optimization and convergence: Beyond the near-existential threat of low interest rates, macroeconomic and competitive factors are driving the quest for higher levels of capital efficiency. Mergers and acquisitions and reinsurance are key variables in the equation. 

With more capital available from a wider range of sources and increasing clarity about the need for well-being, sector convergence will accelerate among life and health insurance, retirement planning and wealth and asset management. Capital efficiency will be a key design principle for future business models, largely because it will be necessary for survival. 

6. Commoditization and customization: The long-term trend in customer preference toward greater simplicity, transparency and comparability has helped commoditize life insurance and retirement products. Increasingly, consumers perceive value through user experiences, ancillary services and trust-based relationships. That’s why flexibility and customization are imperative. Delivering the right balance of simplicity and personalization requires stronger digital and analytics capabilities.

In light of these megatrends, we see a greater appetite for operational, organizational and technology transformation than ever before. The rapid shift to remote working and all-digital customer touch points revealed how quickly companies could adapt. That ability to change quickly and nimbly will serve life insurers well in what promises to be a dynamic decade.

Speeding Innovation in Life Insurance

This year continues to present challenges that force us all to think differently. The pandemic response promoted independent action, self-help and a heightened sense of social responsibility. This has accelerated the harnessing of technology as solutions for how we work, communicate, access healthcare, buy goods and receive services. Perhaps more than ever, we are aware of the risks we take and how they affect our chances.

For insurers, the focus on health and wellbeing could be a signal to launch new types of technology-led digital services and support for policyholders. Individuals who are embracing remoteness demonstrate a more open-minded attitude to sharing their data when using technology to get things done. Changes in patterns of working may have revealed shortfalls in existing protection product design that present an opportunity to do things differently.

The pandemic has cruelly also exposed the comorbid impact of previously reversible conditions, including diabetes, obesity and poor cardio-respiratory health. The socioeconomic consequences have also highlighted the financial inequalities behind the increased prevalence and unequal distribution of mental ill-health. Insurers will be asking themselves if they can do more to help.

A new era of preventative healthcare and remote monitoring means individuals can take control of their health by leveraging technology. Right at this moment, insurers have an excellent opportunity to engage customers with products that add some real value. Life practitioners have been flirting for some years with the idea of a new digital paradigm in underwriting, health protection and remote claims management. Perhaps now is the time for it.

Insurers aim to provide as many people as possible with financial protection. As recent claims have provided a grim reminder, life insurance protection helps when all is lost, but products linked to health-boosting technology could help to prevent loss. Flexible disability income products that better serve home and gig workers could have eased the burden on government during the current pandemic. Developing products based on parametric design, such as digital health software, may allow consumers to receive much fairer levels of coverage by deploying technology that avoids medical exclusions.

Offering products that offer flexible help rather than pure indemnity is only one aspect of improvements made possible by technology. Simplifying the road to policy issuance is another. Chatbots and automated processes can link customers to insurers and provide faster response times and increased levels of service with less hassle. Emerging technologies are promising to augment and replace current medical underwriting; digital apps and platforms are proven to improve medical outcomes. In view of these developments, insurers should leverage the new awareness about health and financial risk by appealing to consumers who have experienced for themselves the brittle nature of social support.

See also: COVID, and How to Pivot to Innovation

The life insurance industry has very effective with longstanding protocols that work well, and it has a low appetite for swapping proven methods for new ways of working that may not be as robust. But we are not promoting technology for the sake of it. Proxies for medical risk assessment, for example, will emerge as perfect replacements for health record paper chases and tricky questions on application forms. It is also important to offer safe solutions in this context, particularly in health interventions. The importance of safe solutions underscores the importance of selecting carefully from the large numbers of potential solutions, choosing only those with convincing scientific underpinning.

We all like technology that provides what we want while keeping our data safe. People, however, are also willing to engage and share data in return for something tangible. Working with these two factors, customers will soon be willing to offer disclosures of their digital health metrics in exchange for the benefits of health monitoring if they know their data will be protected and kept private.

This is a period of opportunity for the life insurance industry. Over the next 18 months, the smartest and most nimble insurers will take the collaborative action necessary to develop and deploy tech-based solutions for the new normal needs.

You can find this article originally published here.

A New Boom for Life Insurance?

When executives are looking at future business scenarios, they are often called upon to “connect the dots.” If we draw a line from A to B to C to D, what kind of future scenario emerges? In which direction are the dots pointing?

Sometimes the lines are fuzzy. The dots don’t quite line up. The possible futures are too many to count. The next steps are nearly invisible. In fact, coming out of COVID-19, some industries, such as the food industry, real estate, automotive manufacturing and travel, are going to be faced with some, “So, what’s next?” moments. The train of progress might be leaving the station, but it’s anyone’s guess which platform you use to hop on board.

This is not the case with life insurance. Though the numbers of policies sold may vary and the types of life products may have some new wrinkles, if we connect the trends and dots today, we get an excellent picture of tomorrow. We know where this train is headed. We also know that your ticket to get on the train will be the launch of a new life business model.

Our latest thought-leadership report, Rethinking Life Insurance: From a Transaction to a Life, Health, Wealth and Wellness Customer Experience, outlines the latest trends, expectations and insights from consumers that will change life insurance from a traditional, risk-focused, transaction-based product into a viable core component within a cohesive life, wealth, health and wellness ecosystem.

We surveyed consumers asking them a range of questions related to health, wealth, wellness and life insurance. The survey results highlight a rapid shift, particularly by millennials and Gen Z, to wanting a lifestyle experience across life, health, wealth and wellness, rather than just a life insurance transaction.

Majesco’s survey sheds important light on several of the dots that can help insurers connect today’s strategies to tomorrow’s futures.

Life insurance – from boom to bust

On the eve of the Great Depression, there were more than 120 million life insurance policies, the equivalent of one policy for every man, woman and child living in the U.S. Once again, following World War II, the economic boom in the U.S. fueled a rise in life insurance ownership; by the mid-1970s, 72% of adults and 90% of households with two parents owned life insurance.

Fast forward to today, and only 54% of American adults own life insurance, according to a recent LIMRA report. That is down nine percentage points from 2011. Only 34% of Millennials own individual life policies.

Over the course of a century, life insurance went from a boom to a bust. What went wrong?

Growth and viability of the life insurance industry is vitally connected to the major trends redefining insurance, including demographic and market trends, customers’ expectations and their adoption of new technologies. Insurers’ long-held business assumptions and operating models were built to support “traditional” insurance approaches for products, channels, pricing and customer engagement, and this has not dramatically changed since the early 18th century when the first product mortality tables and structures were introduced. Innovative products like variable life, critical illness or long-term care still followed a similar business foundation.  

However, today’s customers are increasingly digitally adept, with higher expectations, different needs and a demand for better experiences that are not met with the “traditional” insurance approach. Unless insurers develop a new approach, they will be unable to capture customers within the millennial and Gen Z segment, right as those customers become the dominant buyers beginning next year.

This new generation is not satisfied with traditional insurance processes, products and business models. They have grown up in a digital world. They expect and demand digital capabilities. Encouragingly, there are opportunities for growth and glimmers of revival of life insurance ownership on the horizon – but with a focus on engaging customers differently…and digitally. 

See also: Life Insurance’s New Occupation

COVID-19 and digital acceleration

Forbes recently reported that, starting January 2020, online life insurance sales increased 30% to 50% for companies with speedy apps that used data/algorithm-driven underwriting, particularly for those 45 and under, the prime growth market of millennials and Gen Z. In contrast, agent-driven sales were down by up to 50%. The COVID-19 crisis is accelerating the online competition started by new players such as Fabric, Ladder Life and Haven Life. 

A recent Nielsen survey found that by mid-March, when COVID-19 reached critical concern, there was a significant increase in online shopping and that 25% expected this to continue post-COVID-19. 

The COVID-19 crisis has contributed to a digital wildfire that has exposed less than desirable customer experiences due to manual, paper-bound processes and non-digital transactions. Multiple trends are pushing life insurance out onto a digital limb.

Once again, the life insurance industry is faced with an opportunity for growth and capturing a new generation of customers. But, to do so, insurers must adapt their business approach to meet a vastly different set of needs and expectations.  

Generational views on life insurance are shifting to a holistic perspective encompassing health, wealth and wellness. Majesco’s research identified key differences between millennials and Gen Z versus Gen X and Boomers. Some of the highlights include:

Life insurance value is trending upward. Millennials and Gen Z believe life insurance is more important – 79% as compared with 60% for Gen X and Boomers. The younger customers also have a larger array of reasons why life insurance is important, many of which are based on new behaviors and needs.

Millennials and Gen Z are very willing to share personal data if they benefit from it. Millennials and Gen Z are willing to share their personal information and data 25% to 39% more than the older generations.  

Millennials and Gen Z want more than a transaction – they want to manage their life more holistically. Millennials and Gen Z outpace Gen X and Boomers in wanting access to all health, wealth and wellness areas by 17% to 33% or more. The younger generation seeks information and advice for a variety of areas: health, financial planning, legal, tax, mortgage loads, bank balances, etc.

Younger generations want access to their information. They want information on their policies, medical records, fitness data and household purchases. There is strong interest in possible value-added services.

Millennials and Gen Z will use a wider and larger number of channels. This includes traditional agents as well as those they have existing relationships and loyalty with, including Big Tech like Amazon, Apple and Google.

This new era of life insurance is so much different than even just a few years ago. It will pressure insurers to develop products and services that are more affordable, digital-first, simpler, tailored to very specific needs and grounded in trust. Customer will want new, digital products like on-demand, single-item and embedded coverages and value-added services, that are bundled in a way to help customers manage their lives. 

Life insurers must reimagine the scope of what they will offer to customers. They must think of a compelling customer experience that is wrapped around a risk product and of value-added services that are part of a broader health, wealth and wellness ecosystem.  

The status quo is no longer an option 

We see the impact of the status quo with the 50-year-long decline in life insurance ownership. In this new decade, a new life insurance opportunity exists for those who will participate in a broader health, wealth and wellness ecosystem and the growing insurable opportunities… offering a new boom era for life insurance.

Capturing the boom — turning a transaction into an experience

The success of life insurance, in part, depends on the longevity of the human body. We predict longevity and use our mortality numbers to gain the ratios we need to keep our business healthy. In the new realm of life insurance, that formula is backward. Start with the human body. Make it healthier. Improve our systems of health data and find out that people are sick before their sickness becomes an issue. Help them improve their wellness as a part of their natural lifestyle. Add lifestyle and financial benefits to the customer experience. Add years to lives. Improve mortality, lives, finances, satisfaction and security.

The 2020 LIMRA study picks up on the idea of the better life/health relationship within the life insurance industry.

This personal health push provides an opportunity for the life insurance industry. What if life insurers — typically focused on mortality — could “flip the frame” to disease prevention and longevity? What if they became partners in the effort to live the longest, healthiest life possible?”

See also: Reigniting Growth in U.S. Life Insurance

To retain the customer and revenue, insurers must rethink their scope away from a life insurance transaction to a broader lifestyle experience across health, wealth and wellness.

Highly networked, data-driven, value-added business models are emerging, within and outside of insurance. They are redefining the customer journey, and the entire customer relationship, across a broader set of health, wealth and wellness options across insurance and financial services.

Life Insurance’s New Occupation

It has been a long time since I took chemistry as a pre-med student in college – yes I was pre-med before switching to a math and computer science major! I loved science, and I remember the experience. I can’t recall many of the formulas or compounds. But I remember the labs – especially the all-night ones. I remember mixing chemicals, and I remember the role of the catalyst. No matter what you had in the tube or the beaker, we always had to watch out when we added the catalyst. It was the game changer. It was the one that could set the classroom on fire. The catalyst took all of the primary chemicals and created a quicker reaction. Poof.

A catalyst accelerates a chemical process without itself being affected. If you think about it, COVID-19 has acted as a sort of digital demand catalyst.

In an earlier blog, we talked about reading the signs of what is to come in the life insurance industry, and we talked about connecting the dots. If we look at the trends closely, we can make out a picture of where the life insurance industry seems to be headed. Too much is changing not to notice. COVID-19 has added an extra variable – a catalyst – that has accelerated and pushed insurance to the point of reaction.

No test scenarios could have accomplished what COVID has accomplished in seven short months. In fact, Microsoft CEO Satya Nadella stated in April, “We’ve seen two years’ worth of digital transformation in two months.” COVID has compressed time frames for digital utilization as it has ignited a rush for digital capabilities. It is speeding up a demographic and customer engagement shift. That is a catalyst!

We have not seen such a rapid shift like this in our lifetime, one that will demand core systems that will adapt to customer needs and behaviors – moving between jobs regularly, seeking on-demand offerings, looking for value-added services, buying benefits that can port to individual insurance and full digital engagement. These trends are tied to the new dominant insurance buyer of the digital era.

Who are the new dominant insurance buyers? How will they change the nature of insurance?

In Majesco’s latest thought-leadership report, Rethinking Life Insurance: From a Transaction to a Life, Health, Wealth and Wellness Customer Experience, we use our recent consumer survey to paint a picture of this dominant insurance buyer as we chart the similarities and differences between demographic groups. For the purposes of our reporting, we place the segments into two large “super segments.” Gen X and Boomers fit into one segment – the older generation that has been the foundation of growth for 50-plus years. And the younger segment — Gen Z and millennials, who represent the next generation of buyers and who expect digital-first engagement, products and business models.  

Some interesting insights regarding the younger generation set the stage for a different view on expectations and engagement. Currently, the younger generation rents at twice the rate of the older generation and is two times more likely to live with parents/family or friends/roommates, as seen in Figure 1. However, the younger generation is also 80% more likely to have children under 18 in their household. Yet, they represent a strong segment increasingly ready for insurance as they form new households and raise their families, replacing the older generation as the coveted insurance buying segment.

Figure 1: Demographic profiles of the generational super segments

These segments identify how insurance’s dominant buyers are changing, particularly their expectations, usage and perception of life insurance. The urgency of adapting to millennials and Gen Z is reaching a tipping point. Next year, millennials will overtake the older generation. And by 2025, the combined Gen Z and millennial generations will dominate the 30- to 60-year-old sweet spot for insurance — a complete flip in dominance in the next five years.

Insurers unprepared for this new dominant insurance buyer and their extremely different needs and behaviors will increasingly find they are no longer relevant.

See also: Reigniting Growth in U.S. Life Insurance

Opportunity Within the Dominant Market

As we have been pointing out recently in our webinars and blogs, insurance’s focal shift from transactions to experiences is going to result in a wide range of growth opportunities. The younger generation seems to understand the value of insurance and wants it. However, they expect something that is personalized to them. To get this, they are more willing to share personal data like health and exercise data (including in real time) to underwrite their policy. They want services. And they expect a seamless, digital process. 

You may not realize it yet, but this is the generation we’ve all been waiting for! The only drawback is the lack of preparedness and the swiftness with which this is unfolding…now accelerated by COVID-19.  

While L&A insurers needed to operationally improve prior to COVID-19, they are now more pressured to do so, both during and after the crisis. The pandemic is rapidly exposing less-than-desirable customer experiences, as insurers deal with paper-bound processes, non-digital post-service transactions, a rise in “fluidless” online life insurance purchases through new competitors and the need for extra caution due to fraud. At the same time, risks have emerged that demand new products such as “pay gap” for employees unable to work during a shutdown, various health products and simple life coverages – either as individual products or voluntary benefits. 

To retain the customer and revenue, insurers must rethink their scope away from a life insurance transaction to a broader lifestyle experience across health, wealth and wellness that includes:

  • Insurance Product: Product (risk, services, experience) redefined but requires insurance to participate and play within ecosystems, rather than simply existing as a product unto itself.
  • Lifestyle – Health, Wealth and Wellness: A unified view to cover all aspects of life from health, wealth and wellness for banking, insurance, wellness activities, brokerage account 401K accounts and more, in a holistic way instead of separate transactions or policies for each.
  • Services: Provide services such as wellness discounts, preferred access to gym memberships and access to online brokerage accounts that provide a powerful, single engagement, eliminating points of friction between the different participants of the ecosystem.
  • Continuous and Fluidless Underwriting: Constantly updating the risk profile of an individual or thing that changes the terms and pricing that are influenced by the continuous flow of data and use of the data to avoid fluid-based underwriting for a range of life insurance products.

Highly networked, data-driven business models are emerging, within and outside of insurance. They are redefining the customer journey, and the entire customer relationship, across a broader set of health, wealth and wellness options.

The viability of the insurance industry is vitally connected to demographic and market trends, customers’ expectations and their adoption of new technologies. The combination of these factors will pressure the insurance industry to develop products and services that are more affordable, tailored to very specific needs, digital-first, simpler and grounded in trust that not only protect lives but also enhance those lives across a wide array of areas beyond insurance, as reflected in Figure 2. They will also be looking for consolidation. “Can I meet more than one need with this one relationship?”

Customers will expect a different experience that brings solutions to all of these needs together. 

Figure 2: Elements of a holistic lifestyle ecosystem

Protecting Themselves and Their Lifestyles

Numerous research studies, including our own primary consumer and SMB research, have highlighted customers’ view that insurance is complex and difficult and unpleasant to deal with. From the multi-page, fluid-oriented applications to the multi-page contracts full of confusing legal terms and exclusions and a variety of different riders, traditional broad policies exacerbate the problem. Understanding what is covered and how much can be like a maze, where the “truth” is difficult to determine, creating frustration and lack of trust. 

In contrast, newer coverage options remove complexity, because they are simple, specific coverages for specific needs and time frames. Simplification of the life insurance process and policy has been a major focus of startups like Ladder Life, Haven Life, Bestow, Fabric, Health IQ and others – driving their growth and loyalty with customers. But simplification may also mean a broader approach.

As we mentioned in our recent blogs on mobility ecosystems, organizations are expanding their brands to offer simplicity through tools that meet multiple needs at once. With life insurers, this kind of ecosystem will begin to look much more like a comprehensive life, health and lifestyle management process. Insurance will always be a part of it. The experience created by the insurer, however, might look dramatically expanded and radically simplified. The result will be straightforward – insurers will be contributing, not just to the security of individuals and families, but to holistic life improvement.

Connecting to Better Life, Health and Wellness

Technologies like IoT and wearables have rapidly matured from emerging technologies over the past five years. Fitness trackers and other connected wearables are becoming important connections and hubs for new ecosystems that provide value-added services or insights for people to manage their health and wellness. A 2018 study commissioned by Vitality found that adults who used fitness trackers tied into a rewards scheme could add two years of life expectancy, on average.

Scientists and tech companies are realizing the potential of these devices beyond their original fitness tracker role to predict possible adverse health conditions, including COVID-19. In the 2020 Innovation in Insurance Awards sponsored by Efma and Accenture, a submission by PZU in Poland used a wearable device to measure oxygen and pulse in real time to reduce transfer infections of COVID to medical staff in hospitals. 

Michael Snyder, chair of genetics at Stanford School of Medicine, noted that smartwatches and other similar connected devices make at least 250,000 individual measurements a day. This continuous stream of data, fed into powerful predictive algorithms, can be more effective than traditional methods at detecting health issues. For example, Scripps Research Institute found that changes in heart rate caused by an infection can get detected four days before a conventional temperature check detects a fever. Recognizing the health and wellness potential of these devices, Apple has been researching how its watch can be used to detect heart problems, and Fitbit is conducting 500 research studies on issues like cancer, diabetes and respiratory conditions.

These innovations fit the younger generation. Gen Z and millennials who own a connected device are nearly three times more likely to say they received an insurance discount or free/discounted products or services as part of the device as reflected in Figure 3. Whether these discounts are real or perceived, it’s clear that the younger generation wants a stronger connection between these devices and related products and services – an example of ecosystem thinking. Just as these generations grew up with digital technology as a defining factor of their youth, ecosystem engagement is a defining influence on their behaviors and expectations (just look at Apple and Amazon engagement) as they become the dominant buyers of products and services to protect life, health and wealth. 

Figure 3: Discounts and benefits bundled with smart devices

A screenshot of a cell phone

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But the use of these devices is not just for wearables; it extends to home IoT as well, offering an opportunity to create a bridge from P&C and home security into home health and wellness. As health awareness technologies arise, IoT home devices can add value to those who choose to age in place, creating an all-in-one connected home and health offering.

See also: Will COVID-19 Spur Life Insurance Sales?

So, if we follow the digital thread properly, the same capabilities that are desired by the younger generation are going to be used to assist the older generations with their health, security and lifestyle during retirement. With more than 10,000 Baby Boomers retiring each day, this is a huge market opportunity. Life insurance’s “new occupation” may be far broader and far more helpful than insurers had ever imagined. In targeting millennials, insurers may find themselves better prepared to meet the needs of all generations.

The Mood to Move

Motivation is the key to insurance sales. Is the new dominant generation motivated to seek life insurance, and are our sales processes advanced enough to capture them at the point of need?

Selling Where Life Happens

Every moment of every day, retail operations are under scrutiny. Executives and management teams for grocery stores, gas stations, big box home goods, home repair and department stores are obsessed with merchandising. Product placement is always in flux. Endcaps are changed for a season or a weekend. Special displays are constructed as demand is anticipated.

And now executives are equally obsessed with their digital storefronts – the digital version of the physical store – highlighting new products and sales and suggesting items to customers based on their behaviors and engagement. 

A great deal of thought goes into both the digital and in-store experience – the same questions, just addressed differently. What is the flow like? Can we drive the flow of our store offerings to add more impulse purchases? How can we construct our checkout process to make it quick and easy? Can we accommodate for visual space for products at the point of purchase? May we suggest something else that may go with the purchases? In some cases, this results in a mini-maze just prior to checkout, where by chance some last glimpse of something will trigger an additional sale at the point of purchase. Do I add a warranty? Should I get a Starbucks gift card for my neighbor who took care of watering my plants? At the point of sale – whether in person or digitally – the retailer buys the space that’s in our heads. We advertise to ourselves. We make the decision.

And the process works and creates growth opportunities for retailers that are rapidly moving to offer both in-person and digital, like Walmart, to meet customer needs and expectations. When Walmart recently announced second-quarter results – crushing the numbers! – it said e-commerce sales in the U.S. shot up by 97% and same-store sales grew by 9.3% as customers had packages shipped to their homes and used curbside pickup. This was the biggest earnings surprise in 31 years for Walmart! A company that disrupted retail decades ago and was in the crosshairs of disruption by Amazon is reinventing itself once again.

Walmart is leveraging its massive store base – which is accessible by nearly every person in the U.S. – with investments in its e-commerce platform to expand reach, engage customers and grow the business. If you go on the platform, you will see brands that you don’t see in the store — partners selling through Walmart. And with this platform Walmart is now looking to expand by adding a membership service. This traditional retailer has reinvented itself to meet the expectations and needs of customers and create an experience – like Amazon – that creates loyalty and deepens the relationship with the customer as the place to buy and manage different aspects of their life. 

Which makes us wonder, what if life insurers reinvented themselves to be obsessed with the point of purchase – digitally and in-person?

In 2020, life insurers, annuity providers and voluntary benefits providers should remind themselves that, when it comes to point of purchase, this new retail mindset can be a game-changer. This is the very first step in establishing the need for a flexible, ecosystem approach that will fit as comfortably at any digital checkout queue as it will at the adviser’s office. If we can establish the points of life where purchase can be seamless, easy and almost frictionless, then we’ll drive growth – something that has been elusive the last few decades.

The Point of Purchase

In Majesco’s latest thought-leadership report, Rethinking Life Insurance: From a Transaction to a Life, Health, Wealth and Wellness Customer Experience, we take a closer look at what is driving buyers of life insurance and other related products to cross the line and make the purchase. In our analysis, we identified some indicators regarding product location and the easiest ways to construct simplified purchase experiences. Digging deeper, we looked at how we can help customers sell to themselves through new digitally enabled opportunities, which may still be connected to in-person engagement.

To better understand just how people’s life experiences relate to their potential life insurance transactions, we surveyed consumers, asking them a range of questions related to health, wealth, wellness, life insurance and purchasing habits. The details of the survey results highlight a rapid shift, particularly by millennials and Gen Z, to wanting a lifestyle experience rather than just a transaction.

This blending of the purchase experience into the life experience is the key to unlocking the point of purchase in insurance.

See also: Reigniting Growth in U.S. Life Insurance

Trends in Life Insurance Ownership

Ownership of life insurance has seen significant declines over the last 50 years. In our survey, the older generation segment, Gen X and Boomers, has overall lower ownership than the younger generations, Gen Z and nillennials, as shown in Figure 1. Across the three categories of traditional, universal life (UL)/variable life (VL) and annuity, the younger generation’s total ownership level is 35% more than the older generation, reflecting a potential upswing in the life insurance market as the younger generation matures and expands their need for insurance. Most interesting is that both generations clearly gravitate to traditional insurance – term and whole life – as opposed to investment-backed products such as UL, VL and annuities by a factor of three to nine times, depending on the product. 

Interestingly, this strong interest in traditional products aligns with the growth of non-traditional, fluidless, rapid-issue life insurance from companies like Haven Life, Ladder Life and other insurers. The two are increasingly compatible.

Figure 1: Types of life insurance owned

Even more interesting and encouraging is that the younger generation believes more strongly than the older generation in the importance of life insurance, at 79% versus 69% (Figure 2). The key will be to meet their expectations in the risk product, customer experience and value-added services areas. 

Figure 2: Importance of life insurance

Interestingly, 70% of the younger generation who do not have life insurance still believe it is important – indicating a strong market opportunity for insurers who can meet their needs, demands and expectations. In contrast, only half (49%) of the older generation who do not have life insurance believe it is important.

With the value and importance of life insurance established, what will prompt each of the generations to purchase life insurance? Our research has shown that the younger segment has more life event needs on the horizon that would motivate them toward a life insurance purchase. They are interested. They find it to be important. So…

Why aren’t many of them acting on their need at common moments of impulse? 

Something is standing in the way of the insurance purchase. There is an understood need. There are relevant life events. So, something within current product offerings or the sales and engagement process does not align with their expectations. A hint emerges when you compare preferences for coverage periods.

For typical term insurance, everyone still favors monthly payments. However, coverage for a specific event or short period – on-demand insurance – is of higher interest to the younger generation and on par with the other payment options.

What this indicates is the need for different options to meet different needs at any point for life insurance, whether planning for a long-term coverage for death, or meeting the need for short-term insurance for an activity like a vacation. It is all about need and placement. The younger generation is poised to purchase at the point of need – and likely digitally.

Validating these assertions, we found that the younger generation is significantly more engaged in activities that would cause them to buy insurance. Nearly a third of the younger generation participated in a sport or activity that could result in injury or death as compared with 8% of the older generationMillennial and Gen Z generations participate more in extreme sports, they travel more, they do more shopping online. They are the generations that value experiences over ownership, which makes them highly likely to want to protect themselves and their experiences. This sheds new light on ways to capture and grow new customer relationships. 

With the Gen Z/millennials valuing and showing interest in buying life insurance, where and how will they buy?

Unsurprisingly, members of the younger generations are open to buying life insurance from a wide array of options, as highlighted in Figure 3. Agents and insurer websites are at the top, but, of the 16 options we included in our survey, seven of them exceed the 50% level of interest (a rating of three on the five-point scale), with the balance of them within just a few tenths of a point of this level – and a majority of these are digital, focused on the point of sale. In contrast, the older generation has only three of the 16 options at 50% interest or greater. 

The acceptance of a wider range of purchase options highlights the need for insurers to consider how and where they interact with the younger generation, and to be there with timely purchase prompts. This is where having partnerships and an ecosystem becomes very strategic in helping insurers expand their reach and presence to where their customers will be.

Figure 3: Preferences for different life insurance purchase sources

The Case for Point-of-Purchase Preparedness

If customers are interested and willing to purchase insurance from so many different sources and in so many different ways, then we can begin to innovate around what it will take for insurers to place their products in any place at any time – including their own digital platform. Walmart and Amazon are proving that product sales are most effective when they are multi-channel, multi-delivery-type and easily accessible. They are placing related products, such as warranties and accessories in front of buyers at precisely the right times. Each of them is successful because they understand their market’s purchase patterns and customer behaviors and they customize the purchase process to fit – with a digital platform that also uses sophisticated data and analytics.

See also: Fundamental Shift in Life Insurance?

When the process conforms to the person, retailers and insurers alike will be able to relax and know that they are not just capturing the up-and-coming generations, but, like Walmart and Amazon, they are giving the best service possible to every generation.

Innovate for the Future

Will your products one day sell on auto screens? Will they sell through smart homes? Will they be as easy as a tap on an Apple Watch? Will they be part of another purchase – like buying a home and getting a mortgage?

Your best life ideas will come from watching lives and lifestyles and thinking, “We could place ourselves right there.” It all begins with insights and the initiative to transform the insurance model from a transaction to an experience.