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Defying the insurance industry’s image as staid and conservative, today’s insurers are placing a premium on innovative technologies that hold the potential to transform critical business processes.
Yoav Shaham is CEO & Co-founder, Sproutt Insurance, a new kind of life insurance company that reveals the ‘hidden’ healthy aspects in everyone to deliver personalised policies and policy buying recommendations. Here he shares his thoughts on how policyholders and insurers benefit from healthy living.
A recent Accenture survey found that 60% of insurance companies are currently investing in artificial intelligence, with about half indicating that they will ramp up their investments in the coming year.
These investments are already making an impact in areas like underwriting, which is increasingly being automated as more AI-driven underwriting platforms come online. According to a McKinsey analysis, less than 5% of applications now require any human input. As insurers leave more such tasks to machines, the thinking goes, their professionals will be able to focus on more complex tasks and sustaining customer engagement – no longer encumbered by more “menial tasks”
Keeping policyholders engaged – or even securing customers in the first place – has been a particular challenge for the life insurance sector, which, despite recent disruptions in the industry at large, needs to go much further in harnessing technology to provide real value to policyholders’ lives.
Unless life insurers embrace innovation and engage customers with compelling incentives that promote better health and overall wellbeing, they risk losing a large pool of potential customers to more cutting-edge competitors.
Ripe for change
Foremost among the challenges confronting the sector is that consumers are largely apathetic to life insurance. A survey conducted by EY found that only 15% rank life or health insurance as a top-three priority when it comes to their financial wellbeing, which likely goes a long way toward explaining why many life insurers have struggled with customer acquisition, retention, and engagement.
Part of the sector’s problem, of course, is adverse selection: Those at higher risk of death tend to be those who gravitate toward buying life insurers, while lower-risk people (i.e. the young and healthy) may not immediately see the need for coverage.
But the price of going without life insurance could be too much to bear for many families. A recent LIMRA survey found that 42% of Americans would encounter financial hardship within half a year if their household’s breadwinner died suddenly, and the same survey pegged the market opportunity for life insurers at a staggering 102 million Americans. That represents the number of people who could benefit from either obtaining life insurance or enhancing their coverage. How can insurers seize this massive opportunity?
A new buying experience
The answer lies in life insurance that accounts for healthy living and lifestyle to personalise the buying experience. Shifting to such a model brings clear benefits for policyholders: economic security for their families paired with better health through more exercise, improved sleep, and more self-care; and greater satisfaction with their coverage. There’s already a market for such coverage: 81% of life insurance customers said they would be more likely to get annual checkups if it influenced their policy coverage. Insurers stand to gain, too. By utilising AI and data analytics to pinpoint the healthy attributes of policyholders, carriers will benefit from a larger pool of less risky customers who are taking active steps to improve and maintain their health. In turn, insurers will see greater profits, as they will have more paying customers but will only have to pay out death benefits to a smaller share of them.
Not least of all, moving to this model empowers insurers to improve their competitive position by staying ahead of the most disruptive and innovative trends in the industry. Focusing on the positive aspects of customers’ lifestyles – getting exercise, sleeping well, and making mental self-care a priority – rather than solely penalising unhealthy behaviours like smoking, insurers will fundamentally redefine the nature of insurance, making it more engaging and user-friendly.
As millennials enter their prime earning years, now is the time for life insurance carriers to capitalise on the unique opportunity that the insurance technology revolution presents. Barely a third of millennials own a life insurance policy – and insurers can’t count on what worked for previous generations to appeal to younger, digitally savvy cohorts. The customers insurers need the most want to fall in love with a company before they do business with it – and there’s no better way to win them over than to go beyond the macabre matter of death and instead focus on the positive aspects of policyholders’ lives to offer tailored coverage that reflects customers’ unique needs.
Put simply, through an insurance lens, healthy living means less risky customers for insurers, while at the same time ensuring competitive rates for those very customers that were previously put off by life insurance (like millennials). Through a cultural lens, the benefits of healthy living are perhaps even more salient – creating a society wherein insurers and customers operate symbiotically to promote longevity and mutual prosperity.
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