'A life worth living is a life worth insuring’

In 1885, when Judge Willard Phillips, founder of New England Mutual Life Insurance Co., first wrote these words, the average life span in the U.S. was about 40 years and life insurance was still in its infancy. Today, the average life span has doubled and the industry is mature, but life insurance remains a tough sell.

The problem remains significant. Using LIMRA’s Life Insurance Needs Model, an estimated 48 percent of households (60 million) have an average life insurance coverage gap of $200,000. This amounts to more than $12 trillion in total life-market need that is not being successfully addressed.

As I’ve explained in my earlier posts, much of the problem stems from life insurers’ inability to help customers understand the relevance of life insurance to their lives. Truly transformational life products have been few and far between. And even when new products are introduced, we still have difficulty in helping potential customers see a tangible or immediate benefit – not just a future one.

The saga of Long Term Care (LTC) insurance is a good example of where innovation has had an impact.

Many insurers breathed new life into LTC insurance when they developed hybrid products that link LTC riders to life insurance or annuities policies. They overcame the “use it or lose it” purchase barrier that constrained LTC sales. If the LTC component is not used up, there is still a tangible return since a portion of the premium is paid out as a death benefit. Customers can count on a payout, regardless of what happens to the policyholder, and has provided a more compelling reason to buy.

Change and Grow

Life insurers are feeling the pressure to change and grow. To reverse years of steadily declining and now stagnant sales, they need to focus on reinventing their products to uncover value; moving from transactional moments to becoming embedded in the customer’s life. John Hancock, for example, has been changing the narrative by making it about living. Hancock teamed with Vitality, a provider of health and wellness solutions, to target consumers already living a healthy lifestyle and those who aspire to improve their health. They did this by offering a Fitbit device to track  policyholders’ activity, premium reductions, retailer discounts and other rewards when policyholders engage in healthy activities.

Insurers need to be laser-focused on creating products that consumers want – – not simply policies that are purchased, put away and forgotten until needed. To achieve that, they should concentrate on four elements during the product innovation process:

  • Put design at the heart. Today, consumer expectations are being shaped by other industries. Customer experience is the new battleground and the success metric is delight. Products that win the hearts and minds of consumers are intuitive to use and elegantly simple.
  • Overcome behavioral economics. Consumers expect instant gratification in the form of a “today benefit” plus the traditional “tomorrow benefit.” Reframing the narrative is of equal importance.
  • Embed value-added services. Surround core products with an array of value-added living services to enhance their relevance, create greater customer engagement, and provide additional opportunities for revenue.
  • Use data successfully. Data and analytics need to be utilized throughout the product development lifecycle to drive growth, efficiency and market relevance.

Let’s face it, the traditional “peace of mind” message for a benefit at some future date has stopped working for most people. It’s easy for consumers to delay taking action on difficult, complicated or unpleasant matters, and buying life insurance has elements of all three. A totally uninsured market of 30 percent of households and an underinsured market of more than $12 trillion attests to that.

It doesn’t have to be this way. If you can show consumers an immediate and compelling benefit framed so they feel they have to have it, they will become your customers. It’s all about creating innovative products that are part of a customer’s life from the start. Only then will more consumers understand the relevancy of these products.

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