As new data and research surfaces each year, it’s interesting to see what consumer needs change, how their values fluctuate in what they buy, and what comes to the top of mind when money and insurance are mentioned; this is especially true when discussing life insurance, specifically.
In what seems to be a growing sentiment from last year’s data, consumers are increasingly focused on two main aspects when they sit down to buy their life insurance policies: speed and convenience.
2018 LIFE INSURANCE STATISTICS AND FACTS: CAN A.I. TAKE THE WHEEL?
A QUICK OVERVIEW
Wait, artificial intelligence in the life insurance industry?
While the previous years saw paper applications turn to online applications, wrist watches helping insurance companies identify healthy people, and people simply saying convenience was the most valuable piece of their buying process, what could be left open for debate?
How about giving consumers the capability to not only use technology to start the buying process online, but allow this technology to create a way for them to buy:
- 100% online
- without an agent
- without a medical exam
- with rewards for the healthiest people
- while being approved instantly
Enter – artificial intelligence.
We previously analyzed what A.I. could mean for the industry as it relates to eliminating life insurance related jobs, but while it might seem tormenting to the agents, it’s a consumers’ dream.
Life insurance is unlike any other type of insurance because it has an intense amount of underwriting spanning health history, family history, driving record, credit history, financial history and more. This creates a rigorous buying experience, and also drags the purchase out over a month’s time… or more.
But it’s all changing.
Speed Is The Name Of The Game (And A.I. Is Integral)
As artificial intelligence and big data pair up, machines are the new underwriters, and they’re actually really, really good at what they do–and this is just the beginning.
Even when they come across something they can’t handle, the application is still passed on for visual review, yet the person reviewing it is much less bogged down by bulk amounts of applications.
How has this changed the environment in just the last year?
Where the standard used to be $350,000-$500,000 in death benefit without needing an exam (but still requiring human underwriting), Haven Life has pushed the envelope to offering up to $2,000,000 in life insurance without an exam, and can offer it almost immediately to those who qualify.
Not only are these technologies and algorithms allowing newer companies to come in and sweep up market share, but it will more than likely push “old school” life insurers right out of the market for certain demographics.
This all goes to say the life insurance industry is actually moving in the right direction as it adopts and streamlines major efficiencies to give consumers exactly what they want.
And here are the big ticket numbers on exactly what they want.
This Year’s Life Insurance Statistics
Given this year’s trends on consumer’s focusing greatly on speed, convenience, and basically getting the buying process over with as fast as humanly possible, the first set of numbers won’t come as much of a shock.
- 50% of people will admit they have a higher propensity to buy life insurance if they can do it without the medical exam.
And, fortunately, more and more products are being created to meet this demand.
As consumer sentiments seem to drift further and further away from what has been traditionally offered, it’s forcing a lot of insurance company’s and agents to rethink how they’ve always done business.
Or do they?
Here’s an interesting point to keep in mind, as we tend to think younger folks are always pushing to use technology more than any other demographic:
- Among the Millennial generation, a majority prefer to do their own research on what they need over the internet, but admit they would still end up buying from an agent face-to-face.
You might hear a loud “sigh” from a lot of financial professionals on that particular point, but this is more than likely due to a lack of trust in online purchasing than it is the method of buying insurance, directly.
Younger consumers are a little more in tune with using the internet to buy from places they already know and trust, but a life insurance carrier isn’t likely one of those.
In any case, whether the policy is originally applied for in-person or over the net, consumers strongly lean in one direction:
- Almost 3 in 4 people think the greatest benefit an insurance company can offer are simplified issue policies.
The simple fact of getting to push through the formidable process has an incredibly high impact on what type of insurance policy a person ends up purchasing, and from what company (due to availability).
This kind of information will likely push even more products and competition, which could actually end up lowering prices, too.
Even aside from the product availability, there’s something else a lot of insurance companies really slack on: their websites.
Yet, we have numbers like these:
- Roughly 50% of adults admitted to searching for life insurance online last year, and about a third even tried to make their purchase online.
The fact is, very few life insurance companies are doing a great job of truly meeting the demands of an ever growing number of people looking to the web for answers.
Just a handful have adapted to meet this online-purchasing mentality, though this is expected to change pretty drastically in the coming years, especially by the companies who focus largely on term life.
Fortunately, there are still other avenues to getting a life insurance policy, and many people do have some coverage in place:
- 59% of adults do already own a life insurance policy of some kind, whether it be a group policy through work or through a private insurer.
While workplace insurance programs play a great part in adults having some amount of coverage, and a good rate, they often are minimal.
Some are based on years of salary, while others are just flat death benefit amounts. In either case, they tend to be supplemental, at best.
And some adults are aware:
- Of the people who already have a life insurance policy, 1 in 5 admit they don’t carry quite enough.
However, even though there is a little bit of understanding on a general level, many people simply don’t know how much life insurance they need to support their families in today’s world.
This creates not only a knowledge gap, but an insurance gap, especially for those who don’t have coverage at all:
- Shockingly, of the people who DO NOT already have a life insurance, only around 1 in 5 can admit they don’t carry quite enough.
This is probably one of the scarier points as it means many people not only have no coverage, but don’t think they need any.
Aside from those who are fully self-insured (have enough total assets to cover what life insurance normally pays for), there is a huge piece of the American public which would in financial turmoil, and fast:
- 1 in 3 families admit a financial disaster would be more than likely, if not absolutely, within a single month should the household’s breadwinner suddenly pass.
For families who also have children, college funds, houses and cars, retirement plans and businesses which are all depending on their ability to bring home an income, this is a saddening percentage.
Life insurance is one of the more critical forms of financial leverage in any financial plan, yet it tends to take a back seat.
Younger Americans, however, are starting to get the idea as they are seeing the need in their own relationships:
- About 40% of Millennials would feel more comfortable if they partner/spouse carried more coverage. Among the older generations, this is not so much the case.
This isn’t all bad, though, for the older generations as they have had time to get their kids out of the house, pay down debts from college and buying and home, and even have some years to sock away retirement funding.
In this way, they wouldn’t need nearly as much life insurance anyway, as long as they did everything else right with their money.
So why don’t more people have some amount of life insurance if it is such an integral bit of a financial safety net?
- Adults admit to not buying a policy because they find it too costly, and not a priority among other financial obligations. However, they tend to overestimate the cost, especially the Millennials.
Money is still the driver.
Cost is the highest barrier to entry, even though its overestimated, but a close second is people keeping their eye on other financial issues which seem much more likely and near.
Ironically, even though the small monthly payment might be a hurdle for most buyers, the average cost of a funeral would likely be much more shocking if it were suddenly due.
Beyond Life Insurance: More Facts And Figures
As people continue to grapple with the best ways to save and make money, life insurance is, in truth, just a small little piece of a giant puzzle.
Given its complexity, its easy to gloss over it and focus on something a little more exciting, like the idea of paying off debts and saving up for the golden years.
And these financial transactions have some stark similarities to how people shop for life insurance, too:
- More than half of Millennials find it highly important to get a recommendation from friends, family and colleagues on social media before engaging life insurance agents and financial advisors.
This comes back to the issue of “trust” for many consumers.
Yes, we can all go online and do our research, but when it comes to our money, we’re a lot less likely to take action unless we’re working with a real life human whom we have at least a little rapport with.
So, for those who are a little more willing, what’s building this trust?
- 2/3 of people (of all ages) feel as though an updated website and social media presence makes them feel more confident when dealing with insurance and money topics.
And that makes sense.
We’re all more likely to make a purchase from companies and brands we trust.
And even as complex and detailed as life insurance can be, it still can pale in comparison to decisions on investing, 401(k)’s and investment real estate, for example.
For those, financial advisors like Certified Financial Planners are still a go-to:
- About 50% of people would prefer to do business with a financial professional in some way, with more than a third already doing so, and about 1 in 10 in the process of finding the right fit.
Truth be told, nobody is a better money manager than those who do it for a living.
It’s not to say many Americans excel at doing it themselves, but a much larger portion go through life with little education and planning, which has a devastating effect on millions each year as they get to the end of their working years.
One of the greatest worries of older generations is the fear of running out of money, and it’s been a fear for decades, or longer.
Yet, we know they are still going through life uncovered:
- 91 percent of Americans have some form of health insurance, and concerns of high costs for medical impairments are high. However, even though the same concern is shared for disability or long term care situations, coverage levels sit at just 20% and 15%, respectively.
Whether it be cost or education, there’s still a huge gap for other insurance products will are all supposed to help us keep our money and investments secure.
So, what does this mean for most?
Ironically, our perception of things seem to be a little bit on the bright side, overall:
- In general, most people are more positively focused on their financial situation than last year, but only by a small margin.
Americans still haven’t necessarily grasped the overall importance of life insurance, though the propensity to buy grows as education on insurance products does, too.
In addition, faster and simpler policies, even though they cost slightly more, are taking the industry by storm. Like many other things in life, we all want something sooner than later.
Expect the trend to grow even greater this year.
For its eighth year, in January 2018, LIMRA employed an online panel to survey adult consumers who are financial decision makers in their households. This resulted in the 2018 Insurance Barometer Study, by Life Happens and LIMRA. Responses were received from 2,082 individuals. The data were weighted by age, gender, education, race, region, and income to be representative of the general population. A propensity score adjustment was added to correct for biases inherent in Internet panels. The margin of error in this study is +/- 3 percentage points.