The Future of Life Insurance

The future of life insurance is a big topic, and advancements in technology, changes in society, and consumer expectations are having a significant impact on the industry. In particular, the COVID-19 pandemic accelerated digital-transformation efforts across the industry.

At the same time, the experience of life insurance – from perceived cost, product and purchasing complexity, and time-to-policy – remains cumbersome. At Zinnia, we believe the future of life insurance relies on delivering exceptional experiences and outcomes for all stakeholders. The way we get there is Open Insurance.

The life insurance industry continues to deliver value to families despite the many challenges the industry has undergone since its inception. We believe that more loved ones should have the benefit of these important products, and we believe that Open Insurance is the answer. At Zinnia, the future of life insurance is open.

A Brief History of Life Insurance from the First Industrial Revolution to the Fourth

Historians trace the origins of insurance back to Ancient Rome but the modern life insurance industry in the United States is rooted in the Industrial Revolution. The first life insurance entity was the Presbyterian Ministers’ Fund, established in 1759, to provide life insurance to the widows and families of deceased ministers. By 1820, the state of New York alone had 17 stock life insurance companies.

This is largely thanks to the industrial revolution, which led to an increase in factory jobs, the rise of the middle class, and the market for life insurance to protect families from the unexpected death of the wage earner. Then came the Panic of 1837 and ensuing financial crisis, which sparked the transition from stock owned to mutual owned companies. In fact, many of the largest life insurers, such as New York Life, MassMutual, John Hancock and MetLife, were formed during this period.

Unfortunately, this early growth of the unregulated life insurance industry was marked by poor business practices, almost wiping out the entire industry during the next financial crisis, the Panic of 1873. By 1877, more than 80 life insurance companies had failed and states had begun regulating the industry.

By the early 1900s, the more regulated life insurance industry began thriving again and experienced an annual growth rate of approximately 8.4 percent a year from 1910-1990, a 626-fold increase for the 80-year period.

In most of our lifetimes, it is the third and fourth industrial revolutions (as defined by the World Economic Forum) that have had – and will have – the most significant industry impact. The third revolution, also known as the digital revolution, has been underway for many years but is still relatively recent in the insurance industry. In fact, many credit the COVID-19 pandemic as the major driving force behind the most significant digital transformation the industry has experienced in decades.

According to the WEF, the fourth industrial revolution builds on the third and “represents a fundamental change in the way we live, work and relate to one another.” While it’s too soon to predict exactly how the fourth industrial revolution will impact the business of life insurance, there are some early clues including the rise of “Open Insurance,” a concept we’ll explore in more detail below.

How COVID-19 Affected the Life Insurance Industry

The impact of COVID-19 on the life insurance industry cannot be overstated. While life insurance sales had long been transitioning from kitchen table conversations to more technology enabled sales (think phone, fax, and email), social distancing requirements forced more change, more quickly, than ever before.

Seemingly overnight, life insurers had to reach and serve their clients digitally, across the entire buyer’s journey – a level of modernization that few life insurance carriers had previously achieved. This level of digital transformation was largely planned by most insurers, but 10-year roadmaps quickly compressed into 12-24-36 month roadmaps just to maintain business continuity.

Some of the most significant impacts of the COVID-19 pandemic on the life insurance industry include:

  • Increased consumer demand: According to data from LIMRA, six in 10 consumers said they had a heightened awareness about the value of life insurance and 31% said they were more likely to buy coverage.
  • Increased claims: In 2020, US life insurers paid more than $90 billion in death benefits to beneficiaries, an increase of 15.4% compared to 2019. A record $100 billion in payouts were made in 2021, up nearly 11%.
  • Changes to underwriting: From changes to underwriting criteria to longer processing time and increased premiums, unprecedented levels of uncertainty plagued the life insurance underwriting process – and many unknowns remain. The standard medical exam was simply not feasible during lockdowns, and even today many consumers prefer to pay more for a no-exam policy.
  • Accelerated digitization: A LIMRA survey during the pandemic found that nearly 80% of respondents indicated that the pandemic accelerated their company’s digitization efforts. This includes increased use of digital channels for customer engagement, underwriting, and claims management.

While many people have moved past ‘the COVID-19 era,’ the disease is still with us. Severe disease, hospitalizations, and mortality have been trending downward for some time, but COVID-19 is the most deadly pandemic in US history, claiming more than 1.1 million American lives (6.8 million globally) as of this writing. In addition, the prevalence and impact of long covid is not fully understood.

These are massive changes to just about every aspect of an industry that, up until recently, hadn’t changed much in decades, and there is no going back. Just as many Americans do not want to return to offices, they also aren’t going to return to life insurance as usual circa 2015.

What Customers Don’t Like About Life Insurance

LIMRA conducts an annual survey of “consumer perceptions, attitudes, and behaviors” of adult consumers in relation to life insurance, and the findings are always instructive. In its latest 2022 Insurance Barometer Study, LIMRA cites the following reasons that consumers do not have life insurance:

  1. Life insurance is too expensive: 49%
  2. Household has other financial priorities: 47%
  3. Not sure how much or what to get: 31%
  4. Haven’t gotten around to it: 26%
  5. Don’t like thinking about death: 24%

The same survey found that 106 million Americans lack adequate life insurance coverage and that more than half of non-insured people surveyed would like life insurance coverage and think it’s important.

As a result, there is a massive, trillion-dollar opportunity for life insurers that remains untapped. The LIMRA data makes clear that education is a major issue, but there are other reasons that consumers have not purchased life insurance related to the experience of life insurance.

Shopping preferences have changed: the LIMRA 2022 Barometer study reports that the preference for shopping online increased 29 percent over the last six years. At the same time:

  • It’s still harder to buy a life insurance policy online than it is to buy most any other consumer product.
  • Complex products, poorly marketed, make it difficult to navigate without professional help, often resulting in a quick transition from a digital to an analog sales process.
  • The time-to-policy can take weeks or months while consumers expect considerably faster turnaround.

And just as consumers suffer from a poor experience of life insurance, so, too, do life insurance agents, brokers, and advisors – all of whom have a big impact on the carrier experience and outcomes.

Is Customer Experience the Future of Life Insurance Industry?

Any industry that relies on consumers to purchase its products is beholden to the consumer experience – past, present, and future. It’s an easy concept to understand, that customer experience is the future of life insurance, but that doesn’t make it any less difficult for the industry to achieve.

“The global life insurance industry is facing an inflection point. A fundamental

reimagination will usher in significant change.”

McKinsey Global Insurance Report 2023

At the start of each new year, many of the top global consulting firms release a ‘state of the industry’ report and there are often many overlapping themes. McKinsey calls for “reimagining life insurance,” while Deloitte discusses the need for “reinvention” in its 2023 Insurance Outlook. Meanwhile, Capgemini recently released its “Top Trends in Life Insurance 2023” report, and four of the trends identified are consumer-centric.

There are a variety of levers that each report has identified for achieving the required industry changes, but a couple of common themes across all are the emphasis on consumer expectations and the growing role of technology. And in truth, they are intricately intertwined.

The modern buyer’s journey is digital:

  1. Research – the vast majority of consumers research life insurance online, visiting company websites, through online searches and social media.
  2. Application – while paper applications for life insurance still exist, most consumers prefer to complete an online application either on their own or with advisor support.
  3. Underwriting – the consumer experience of underwriting is typically just the decision, but technology is increasingly improving underwriting accuracy, risk management, and speed-to-decision.
  4. Policy issuance – upon acceptance, a policy that outlines the coverage, premium, and terms and conditions is issued for the applicant to sign. In part thanks to COVID and regulatory changes, many consumers can use digital signatures to secure life insurance coverage.
  5. Premiums – almost all life insurance carriers offer online premium payments.
  6. Claims – policyholders can initiate and file most claims online, with or without advisor support

But while the consumer experience is increasingly digital, there are still a lot of analog processes behind the scenes in life insurance that add unnecessary complexity and friction. Advancements in technology will make it easier for carriers to unlock valuable information from legacy systems that can be used to “reimagine” and fully digitize the policy lifecycle.

How Technology Will Shape the Future of Life Insurance

Technology trends such as artificial intelligence and blockchain are headline grabbers, but technology is ultimately an enabler. Very few companies, and even fewer insurance carriers, will ever invest in technology for technology’s sake – there needs to be a path to value.

At Zinnia, we believe that Open Insurance will deliver the value, enabled by technology, to power the future of life insurance.

In its report, “The Ultimate Guide to Open Insurance,” Accenture offers this definition of Open Insurance:

Open insurance is a new way of doing business that enables insurers to boost revenues, increase efficiencies, gain business partners and reach many more consumers. It requires carriers to open their data resources to other organizations and to share and consume data and services from many sources and across lots of industries. This allows insurers to create new value propositions, generate fresh revenue streams and deepen their relationships with customers.

The concept of Open Insurance follows a similar transformation in the financial services sector known as Open Banking. Both concepts rely on making reliable data securely available to the parties that need it, when they need it – this is how technology is shaping the future of life insurance.

With Zinnia Open Insurance, we will seamlessly connect people, data, and technology to create a more intuitive, collaborative, and enjoyable experience of insurance for consumers, advisors, and carriers. There is considerable advanced technology ‘under the hood,’ but our focus is on delivering exceptional outcomes for all stakeholders.

Zinnia: Bringing Life Insurance into the Future with Open Insurance

Zinnia Life Insurance Solutions transform how life and annuities are bought, sold, serviced, and experienced – using the systems and technology you already have in place. Our products help carriers deliver exceptional experiences and outcomes, while laying the foundation for Open Insurance experiences yet to be imagined.

Zinnia solutions and outcomes include:

Zinnia Hybrid Origination: revolutionize the end-to-end buying lifecycle from lead to in force policy. Hybrid Origination is a thoroughly modern SaaS platform that delivers a personalized buying experience for consumers, a flexible and unified selling experience for advisors, and powerful data analytics for carriers. According to LIMRA research into the purchasing funnel, “Omni-channel carrier capabilities at all points in the shopping process are essential, and online methods are preferred at most stages of the funnel.”

This is precisely what Zinnia Hybrid Origination enables.

Zinnia Engagement & Loyalty: build brand loyalty and uncover new sales opportunities. Engagement & Loyalty is the leading SaaS engagement product in the life and annuity market. The platform educates and motivates customers to improve their financial, physical, and emotional well-being while driving key carrier metrics. Zinnia Engagement & Loyalty is powered by behavioral science and positive psychology to build customer loyalty and repeatedly draws customers back to the platform with its highly appealing, gamified experience.

Zinnia Third-Party Administrator Services: optimize administration to reduce costs. Zinnia Third-Party Administrator Services brings together modern technology and more than 150 years of insurance industry experience to transform end-to-end administration, enabling insurers to dramatically improve speed to market, reduce costs, and focus on growth initiatives. We have an unmatched track record and expertise launching new products and converting and servicing complex blocks from other third-party and home-grown systems.

Zahara by Zinnia: a secure system of record for policy management and administration.

Zahara uses digital ledger technology to transform how data is managed, analyzed, and leveraged across the product life cycle. A powerful, cloud-native system, Zahara will enable the seamless flow of accurate, real-time, and secure data to the parties that need it and serve as the trusted source of information, anytime and in real-time.

Zinnia Fund Management: transform unit pricing and trading processes. Zinnia Fund Management is the insurance and retirement industry’s only cloud-native variable product and separate account asset management pricing and trading platform. It consolidates mission critical pricing and trading processes onto one modern platform.

Zinnia solutions combine the expertise of insurance-company professionals and the vision of innovators from technology and data science. Using our software, carriers can simplify the complex, get products to market faster, serve the customer better, and turn data and insight into better risk-based outcomes for everyone.

The Future of Life Insurance is Open

The life insurance industry has weathered many storms in the past and there are many challenges ahead. Regardless, the value proposition for these products remains strong.

There is currently a large opportunity for the industry to make its products more widely – and easily – available to consumers who want the protection these products provide. Modern technology, while not a silver bullet, should be used to reduce complexity and friction – to improve the experience of life insurance.

Just as Open Banking transformed financial services, we believe Open Insurance is the solution for life insurance. Zinnia Open Insurance empowers our clients to deliver better experiences, to innovate and launch products faster, to buy, sell, manage, and service products more effectively, and to better serve their customers.

To learn more about Zinnia’s vision for the future of life insurance see here.