4 key shifts life insurers cannot afford to overlook

As we enter a new year, I am often asked by clients to understand what opportunities lie ahead and risks demanding attention. Naturally, the ongoing geopolitical disruption, coupled with a bonanza year of elections, is going to have a profound impact. Carriers will take a measured and conservative approach, closely monitor the regulatory upheaval, and make strategic decisions in anticipation. Personally, I see a greater challenge knocking on the door.

Humans are living longer and healthier lives. By 2050, the United Nations estimates that the over-50 population will hit 3.2 billion, or 33% of the world's total population. While this is good news for individuals, the impact of an aging population for the life insurance market will be significant.

Insurers have cause for concern: Capgemini research reveals policyholders over the age of 65 own 40% of insurers' assets under management, totaling USD 7.8 trillion for the 40 largest global life insurers – funds likely to transfer to beneficiaries by 2040. Despite this potentially massive outflow of assets, life insurers hold a unique opportunity to heighten their relevance, boost policyholder trust, and accelerate growth through meaningful engagement with people aged 50 and above. 

1. Rising demand for comprehensive aging-well solutions

Families, on average, spend more than a year navigating post-death financial matters. While life insurance payouts alleviate financial burdens, there is a growing demand for additional services during this challenging period. As policyholders transition from the workforce to retirement and successfully age, strategic insurers will pivot from individual risk-focused products to comprehensive aging-well value propositions with flexible payouts. I am optimistic by the signals shown by some insurers as they seize this opportunity. 

For example, Guardian Life Insurance, a U.S.-based life insurer, introduced Safeguard 360 last year. This comprehensive offering seamlessly combines whole life insurance, long-term care protection, and disability income insurance within a single policy. It simplifies the purchasing process with guaranteed premiums, death benefits, and cash value through a single digital application.

2. Powering up the customer experience with API wrappers

Life insurers often face operational obstacles when accessing critical policy information. Challenges arise from reliance on outdated legacy systems that spur delays, inefficiencies, and increased claims and service operations risks. Unfortunately, these results affect customer satisfaction, data security, and for 29% of policyholders, a lack of trust in the industry.

A 2023 Gartner survey found that more than half of insurance companies are significantly increasing investments in integration technologies like APIs. Digital API wrappers seamlessly integrate old systems with modern back-ends – ensuring a smooth transition, reducing risk, and boosting efficiency. It also buys time for the carrier to reassess data management and legacy modernization strategies. I truly believe the industry can meet the needs of today's consumer, however, without changing the way technology works and engages with customers – both the policyholder and broker – success becomes elusive.

Incorporating API-wrapped systems in the life insurance sector is a promising trend that will likely pick up steam in 2024, thanks to the significant advantages it offers, primarily in improving legacy system capabilities, reducing IT costs, and cost-effectively enriching customer experience.

3. Optimizing the claims process and improving the beneficiary experience

Life insurers are grappling with a surge in claim payouts for policies, exposing the limitations of legacy manual systems still in use. These outdated processes hinder the industry's ability to deliver seamless services to policyholders, leading to frustration among the beneficiaries at the payout stage.

The surge in claims volume resulting from this wealth transfer is shifting the way insurers perceive the claims function. Once considered cost centers, insurers are now recognizing and assessing how to transform them into revenue-generation opportunities by deepening beneficiary engagement. In 2024 and beyond, carriers will strategically invest in digital transformation to optimize claims processing, engage beneficiaries earlier, retain assets at the time of claims payout, and unlock new growth opportunities.

4. Addressing the needs for a new generation of policyholders 

In 2023, LIMRA released a survey indicating a growing interest in life insurance in the United States, with 44% of Gen Z and 50% of Millennials considering a life insurance purchase. Numerous insurers are taking advantage through partnerships with technology, healthcare, retail, and other sectors to tailor offerings and align with customer desire for value-added services. Recently, Federal Life, Swiss Re and Reframe Financial partnered together to develop a hybrid policy combining long-term care benefits and universal life insurance with fast-response cash benefits, catering to those juggling the responsibilities of supporting growing children and aging parents.  

Ultimately, it involves curating a portfolio of the right products, which may require establishing partnerships to deliver the perfect mix for your clients. It is about thinking outside of the box for an evolving landscape across the economy, healthcare, social responsibility, and sustainability as a carrier. We will see a pivot towards value-added services to deepen customer engagement through multiple touchpoints: moving carriers from a transactional model to a dynamic, customer-centric, engagement-driven ecosystem.

In the early stages of the pandemic, Datos Insights warned us that it's not just about the dollar figures at stake for carriers. It's about carriers being ready to navigate an unexpected surge in death claims and ensuring a smooth experience for beneficiaries. Today, older policyholders dominate the market, as insurers struggle to connect with younger demographics. They must demonstrate the value of life insurance beyond just at death – a challenge in reaching Millennials and Gen Z. 

The journey ahead transcends policies and premiums. It is about building lifelong partnerships.