In a recent Forbes article, Dave Shatto and I talked about how the insurance industry needs to get with the times. In the article, we mention that people under 40 don’t buy enough life insurance—and those who do don’t particularly care who they buy it from.
In fact, the under-40 market is underserved by the life insurance industry. This represents an excellent opportunity for the savvy insurer. By developing smaller, more flexible policies, this underserved market can allow insurers to expand their market focus and position.
Life insurance is misunderstood
Generally, there is a perception that life insurance is complicated, or that it is difficult to switch providers once a purchase has been made. Consider the growing population of people who are single, healthy and have no dependents, and it’s easy to see why people under 40 aren’t voracious buyers of life insurance.
This is not to say that no one under 40 buys life insurance. In fact, many do. However, most of these customers buy life insurance through an employer and have no choice in their insurance provider.
Making life insurance affordable and flexible
As expected, affordability is a primary concern when it comes to life insurance. Certainly, coverage and terms are important, but cost will always be a big factor. Fortunately, life insurance can be very affordable for a non-smoking, healthy person under the age of 40.
However, affordable need not mean cheap. As Kevin Kraft, Accenture senior executive in life insurance, says in this article in National Underwriter Life and Health, companies need to make life insurance policies more valuable to the customer. Previously, insurance companies took one of two strategies: distributing directly, through cheaper channels like online life insurance exchanges; or offering more expensive, branded insurance through well-known carriers.
Today, insurance companies are developing mid-market products specifically to serve the underserved. These smaller face-value policies offer the affordability of buying through an exchange while providing the emotional connection of a branded product and well-known carrier. These policies can capture the part of the market that has a smaller budget, who might otherwise not be able to afford or justify insurance at all.
By identifying this underserved market and assessing its needs, insurers can develop targeted products for these customers. Having a solid strategy for market segmentation will help insurance companies achieve high performance.