The life insurance industry has been one of the last holdouts in embracing new technologies. The good news is that the old guards are changing their antiquated ways to streamline the buying process and cut costs.
With the use of new technology, we will continue to see insurance companies attempt to bypass the old face-to-face agent sales and sell direct-to-consumer online. There is big money on the table when companies avoid paying agent commissions.
AI (artificial intelligence) programs are now used to pull public records such as credit reports on the fly in order to issue policies quicker and without the need for medical exams. This means that your credit history can now adversely affect your life insurance rates.
My favorite new trend is the inclusion of free accelerated benefit riders. More companies are offering these living benefit riders that allow applicants to withdraw funds from their policy while they are living. These are lower cost alternatives to long-term care and disability policies and are an influential selling point for term life insurance policies.
Insurance companies providing online direct-to-consumer applications
There is big money in cutting out the middleman in the insurance process, aka, the agents. Companies are creating advanced AI calculations to approve applications immediately. New entrants selling direct to consumer products are Mass Mutual and Sagicor Life. Mass Mutual created a new product that is sold through the havenlife.com website. With its new approach, Haven Life has found a way to potentially mobilize the highly coveted millennial demographic, which it counts as a growing customer base.1
Sagicor life has been a leader in providing quick issue no medical life insurance and has now ventured into selling direct as well through their website sagicornow.com. “Today, consumers rely on digital platforms more than ever and life insurance needs to keep pace with our lifestyles,” said Bart Catmull, president & chief operating officer, Sagicor.2
I expect to see more companies attempting the online direct-to-consumer model this year. The problem is that insurance companies have to carry cash reserves, and immediate issue policies are considered high risk of loss to the insurance companies.
Credit reports affecting how much you pay for life insurance
Insurance companies are pulling credit history in real time from companies like LexisNexis. LexisNexis Risk Classifier utilizes data from attributes derived from public records, driving history and credit to help better assess a proposed insured’s risk profile.3 What this means is credit history such as a bankruptcy, foreclosure, short sale, tax liens, or even a low credit score can affect your life insurance rates.
Recently, The Savings Bank Life Insurance Company (SBLI), which provides life insurance products to individuals and families throughout the U.S., was looking to satisfy the needs of today’s life insurance applicants by providing faster turnaround times, while reducing underwriting costs. To achieve these goals, they turned to advanced analytics and predictive modeling solution, LexisNexis® Risk Classifier, to accelerate life underwriting and remove the need for invasive tests.4
This is a fairly new data source for insurance companies and not every company uses this data, so an independent agent can direct consumers to companies that do not look at this data.
Life insurance policies are replacing disability and long term care policies
Sales of long term care and disability policies are down among insurance providers. What is taking its place is called “accelerated benefit riders” that are either included or added on to life insurance policies. The accelerated benefits options in a life insurance policy provide that all — or a portion of — the policy proceeds will be paid to the insured upon the occurrence of specified events. These include such things as the diagnosis of a terminal illness, the need for long-term care or the onset of a medically incapacitating condition. The life insurance company will deduct the accelerated benefits payment from the death benefit it ultimately pays to the beneficiary.
Currently, more than 150 companies offer some type of accelerated benefits. In addition, other companies have indicated that they are developing such plans or are considering them. More than 3 million Americans are now protected by accelerated benefits.5
The riders are apparently cheap for insurance companies to include on life policies because they have a low probability of being used and the payouts are limited to the amount of coverage in the policy. I believe we will see more companies are offering these added benefits as a free rider on term life policies. It is a strong selling point that counters one of the main objections in buying life insurance. You no longer have to die in order for your policy to pay out.
The main theme for the life insurance industry this year is the use of technology to streamline the buying process. We are seeing more companies selling direct-to-consumer which unfortunately eliminates the need for agents. Companies are using data feeds to access customer data such as credit history in order to determine insurability. We are seeing long term care and disability benefits added free of charge on life insurance policies in the form of accelerated death benefits. The good news is that life insurance is becoming easier to get. The bad news is that life insurance agents are seeing declining job stability.
- Haven Life debuts AI-powered features to streamline life insurance purchases https://www.marketingdive.com/news/haven-life-debuts-ai-powered-features-to-streamline-life-insurance-purchase/506840/
- Sagicor Life Insurance Company Leverages FireLight® to Create a Fully Digital and Enhanced Online Life Insurance Buying Experience for Their Consumers and Agents https://globenewswire.com/news-release/2017/09/19/1124657/0/en/Sagicor-Life-Insurance-Company-Leverages-FireLight-to-Create-a-Fully-Digital-and-Enhanced-Online-Life-Insurance-Buying-Experience-for-Their-Consumers-and-Agents.html
- Questions And Answers on Accelerated Benefits http://www.aldoi.gov/Consumers/BenefitsQandA.aspx