As we step into a new year, clients frequently seek insights into upcoming opportunities and risks that require attention. The prevailing geopolitical turmoil, along with a flurry of elections, is poised to have a significant impact. Carriers are expected to adopt a cautious approach, closely monitoring regulatory changes and making strategic decisions proactively. However, I foresee a looming challenge on the horizon.
The global population is witnessing an increase in life expectancy and improved health conditions. Projections indicate that the population over 50 years old will reach 3.2 billion, constituting 33% of the world’s total population. While this demographic shift bodes well for individuals, it will have profound implications for the life insurance sector.
Insurers are facing a critical concern: research from Capgemini highlights that individuals above 65 years old possess 40% of the assets managed by insurers, which are likely to transition to beneficiaries by 2040. Despite the potential outflow of assets, insurers must enhance their relevance, cultivate policyholder trust, and drive growth by engaging effectively with individuals aged 50 and above.
1. Surge in Demand for Holistic Aging Solutions
Managing financial affairs post-death can be a prolonged process for families. While life insurance payouts provide financial relief, there is a growing need for additional services during this challenging period. As policyholders transition into retirement and navigate the aging process, forward-thinking insurers are shifting from traditional risk-centric products to comprehensive aging solutions that offer flexible payouts. Encouragingly, some insurers are already seizing this opportunity.
For instance, Guardian Life Insurance in the U.S. launched Safeguard 360, an all-encompassing solution that integrates whole life insurance, long-term care protection, and disability income insurance into a single policy. This streamlined offering simplifies the purchasing journey with guaranteed premiums, death benefits, and cash value accessible through a digital application.
2. Enhancing Customer Experience through API Integration
Life insurers often encounter operational challenges when accessing crucial policy information due to reliance on outdated legacy systems. These systems contribute to delays, inefficiencies, and heightened risks in claims and service operations. Consequently, customer satisfaction is impacted, data security is compromised, and a considerable percentage of policyholders lack trust in the industry.
A recent study by Gartner in 2023 revealed that over half of insurance companies are ramping up investments in integration technologies like APIs. By leveraging digital API wrappers to connect legacy systems with modern back-end platforms, insurers can facilitate a seamless transition, mitigate risks, and enhance operational efficiency. This approach allows carriers to reevaluate data management strategies and modernize legacy systems. Adapting to evolving technological landscapes is crucial for successful customer engagement with both policyholders and brokers.
The integration of API-wrapped systems in the life insurance sector is a promising trend that is expected to gain momentum in 2024. This advancement offers significant benefits such as improving legacy system capabilities, reducing IT costs, and enhancing the overall customer experience cost-effectively.
3. Streamlining Claims Processing and Enhancing Beneficiary Satisfaction
The life insurance industry is experiencing a surge in claim payouts, exposing the limitations of manual legacy systems still in operation. These outdated processes impede insurers from delivering seamless services to policyholders, leading to dissatisfaction among beneficiaries during the claims settlement phase.
The increase in claims volume resulting from the transfer of wealth underscores the need for insurers to revamp their approach to claims management. Insurers are transitioning from viewing claims as cost centers to exploring ways to leverage them as revenue-generating opportunities by enhancing beneficiary engagement. In the coming years, carriers will strategically invest in digital transformation to optimize claims processing, engage beneficiaries proactively, retain assets during claims disbursement, and unlock new avenues for growth.
4. Catering to the Needs of a New Generation of Policyholders
A report by LIMRA in 2023 highlighted a growing interest in life insurance among younger demographics in the United States, with 44% of Gen Z and 50% of Millennials considering a purchase. To capitalize on this trend, insurers are forming partnerships with technology, healthcare, retail, and other industries to tailor offerings that align with customers’ preferences for value-added services. Collaborations such as the one between Federal Life, Swiss Re, and Reframe Financial have led to the development of hybrid policies that combine long-term care benefits and universal life insurance with cash benefits for individuals managing the responsibilities of supporting both young children and elderly parents.
Creating a diverse product portfolio necessitates establishing strategic partnerships to meet clients’ evolving needs. It involves thinking innovatively across various sectors such as the economy, healthcare, social responsibility, and sustainability. Carriers are shifting towards offering value-added services to enhance customer engagement through multiple touchpoints, transitioning from a transactional model to a dynamic, customer-centric ecosystem.
During the initial stages of the pandemic, Datos Insights emphasized the importance for carriers to be prepared for an unexpected increase in death claims, focusing not only on financial implications but also on ensuring a seamless experience for beneficiaries. With older policyholders dominating the market, insurers face the challenge of connecting with younger generations and demonstrating the long-term value of life insurance beyond traditional perceptions. Building enduring partnerships with clients is key as the industry moves towards a more collaborative and customer-centric approach.