By Peter Mastrantuono
Despite the central role life insurance plays in protecting the financial security of individuals, it has been a rather staid business, seemingly immune to the great disruption of the last twenty years. That’s about to change.
Life insurers have found new and exciting ways to implement today’s technologies to improve their products, elevate customer service and make insurance coverage less expensive.
Six Ways Technology is Changing Life Insurance
- Shared-Value Life Insurance: Life insurance is transitioning from what McKinsey & Co. refers to as the “assess and service” business model to a more customer-centric “prescribe and prevent” model.
The growth of data collection and connected devices, like wearables, will allow insurers to play a more proactive role in a policyholder’s health, by, for instance, reminding them to visit the doctor, take their prescription and to stay physically active. Think of it as your life insurer becoming a health and lifestyle coach.
Consumers are willing to share their personal data if they see a benefit, and one such benefit is the reduction in premiums that insurers offer for sharing such information.
2. More Coverage Choices: One of the biggest hurdles for consumers is their perception that life insurance is too expensive. Thanks to advancements in data collection and front-end processing technologies, insurers are increasingly offering more flexible products at more affordable prices. One such product is “on-demand” life insurance, which allows an individual to purchase coverage for the duration he or she wants.
3. More Personalized Underwriting: Underwriting is generally an upfront, once-and-done exercise. Its big failing is not taking into account subsequent changes in a person’s life. Again, through data collection and connected devices, this underwriting can become a continuous activity. For example, weight loss may result in a premium reduction on an individual’s existing policy.
4. Lower Coverage Costs: Lengthening life expectancies won’t be the only driver of falling life insurance premiums. Artificial intelligence, data gathering capabilities and machine learning tools will not only improve products and service, but they will also act to drive costs lower.
It is estimated that by 2030 44% of insurance work activities have the potential to be automated. This wave of automation will significantly reduce operating expenses, which will likely, in part, flow to lower insurance premiums.
5. Quicker and More Satisfying Customer Service: Using artificial intelligence and machine learning technologies, insurers will be able to improve access to customer education and service.
Imagine a chatbot that can helps with the “term vs. permanent” decision or explains how life insurance can be used to fund a buy-sell agreement.
6. Expect a Shorter Underwriting Period: The time that elapses between the decision to purchase life insurance and becoming covered may last up to two months. With access to more data and using artificial intelligence, insurers can reduce the number of questions they ask individuals and eliminate the need for a medical exam, accelerating the underwriting process to as quickly as immediate.
Chatbots, online calculators and internet-based intermediaries are valuable tools in empowering individuals to make smarter life insurance decisions. Nevertheless, most Americans still appreciate the value an insurance professional can provide throughout the process of researching life insurance, buying it and post-sale servicing.
Peter Mastrantuono is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Peter worked for over 30 years in the wealth management industry, focusing on retirement planning, investing, asset allocation and financial planning.