Can life insurers keep Millennials' attention as COVID fades?

The last year and a half has seen a dramatic reversal of a long-term trend where younger households didn't buy life insurance. Despite a period of volatility around March and April, coinciding with the initial swathe of lockdowns, the MIB Life Indexended 2020 up 4 per cent year-on-year, the highest annual growth rate on record. What’s more, this growth was driven predominantly by younger cohorts, with activity increasing in the 0-59 age range rather than 60+, in stark contrast to recent years where any growth has been almost entirely driven by the latter group.

Intriguingly, this shift started slightly before the pandemic. In January 2020, Kobe Bryant’s death from a helicopter accident, which dominated the news cycle for weeks, appears to have triggered a sharp uptick in demand for financial protection in the case of untimely and unpredictable tragedy. Soon following, the pandemic understandably heightened awareness of mortality in generations previously unaccustomed to such perspectives. The attendant economic uncertainty is also contributing, with many either having lost or facing the imminent prospect of losing employer group coverage (42% of Americans report that they would face financial hardship within just six months if their household’s primary wage-earner died unexpectedly).

Prior to the pandemic, the so-called "generation gap" when it comes to life insurance was a major and constant point of consternation for the industry. Younger cohorts, especially the millennial generation – under new financial constraints and not necessarily catered to by traditional sales channels – had little awareness of or inclination to take out life insurance policies, and sales had withered to a fraction of what had once been a dependable and sizeable revenue stream.

But consumer demand and awareness among younger Americans has only ever been one piece in a larger puzzle. For some time now the industry has been aware that re-engaging with younger market segments, while also continuing to serve its traditional customer base efficiently, will require a wholesale adaptation to more advanced technologies and digital forms of distribution that, for younger generations especially, are now standard habit. Technology and digitization – and taking full advantage of the new opportunities and business models they enable – will be key to taking long-term advantage of this renewed interest in life insurance.

This turnaround in sentiment is reflected in the latest edition of LIMRA’s annual Insurance Barometer Study. While only 52% of eligible Americans currently have life insurance (down from 63% just a decade ago), demand has shot up. Nearly one third of consumers report that Covid-19 has made it more likely they will purchase life insurance within the next 12 months, corresponding to 59% of the uninsured, and 22% of the underinsured. Notably, Millennials are now the most keen of the generational cohorts (while just under half of this age group currently own life insurance, 48% declared an intent to buy within the next year), with Generation Z following not far behind. Crunch the numbers and this adds up to well over 100 million potential customers that are already motivated to buy – a huge opportunity by any measure.

This spike in interest, however, will not alone be enough to bridge the generation gap over the long-haul – especially once Covid begins to fade from the agenda.

It’s good news then, that on the insurer side, the pandemic has dramatically accelerated, rather than reversed, existing trends. As with many other industries, the chilling effect of lockdowns and other emergency measures on physical, face-to-face interactions has forced life insurance firms to dive headfirst into technology driven approaches and distribution methods as a matter of imperative. The transition to digital distribution as well as automated underwriting and digital policy issuance leveraging new forms of data, was already inevitable before anyone had heard of COVID-19. But from early 2020 what was once a priority for future growth has become an immediate non-negotiable. New approaches, business processes and distribution models made commercially viable by this technology are higher up the insurance industry’s agenda than ever.

While nearly half of agents have reported a collapse in in-person business since the onset of the pandemic, life insurance companies of all shapes and sizes across the industry have leapt headfirst into new digital technologies, tools and channels, to compensate for the sharp drop in traditional methods of doing business. For example, embracing new technologies enabling real time access to electronic health records and other forms of advanced data allow insurers to underwrite policies accurately even without face-to-face assessments or interactions. A variety of new data sources are being leveraged to automate decisions in the underwriting process, such as HumanAPI, a source of electronic health records, and LabPiQture, a source of real-time lab records. Using these technologies in the underwriting and distribution process, by integrating them with advanced automated underwriting software, is pivotal in future-proofing the industry, and in creating massive efficiencies at the same time.

The life insurance industry has always, by nature, been cautious in embracing technological change, preferring the slow and the steady as to the sudden. But the pandemic has entirely removed the luxury of time from the equation. New technologies, new data forms and new approaches to automated underwriting that may have spent long periods in planning and testing are already live and gathering momentum. Years have become months. A transition to digital technology that prior to the pandemic could have spanned the next decade will now likely be complete in just a year or two.

This is no bad thing. If the industry is to take advantage of the new interest in life insurance among the young, as well as continue to service its traditional customer base in a more efficient and sustainable way, the sooner the better. The sector was already facing a challenge of modernization, COVID-19 is unlikely to change the future shape of life insurance. What it does mean, though, is that the future is going to be here much, much earlier than expected. For those firms keen to acquire first-mover advantage, the window of opportunity just became even narrower. The time to embrace new technology is now.