In the US, the life insurance participation rate is in a steady decline, reaching new historic lows each year. This, coupled with insufficient savings, creates financial instability for millions. An early or unexpected death of a loved one creates a vacuum of loss, bills, debt and reduced income that is both devastating and unnecessary. Preventable poverty due to lack of savings and insurance is on the rise, even among the employed and financially thriving.
Analysts and industry leaders have tried to understand the motivations and aspirations of millennials who “believe they will live forever” or haven’t grown up and “live in their parents’ basements.” While psychological and lifestyle factors certainly contribute to empty savings accounts and a dearth of insurance policies, the truth is a far more mundane structural issue: no one is selling insurance to the younger generation.
The old industry adage that life insurance is “sold, not bought,” is proving true through its decline. The historical insurance sales approach – an army of captive and independent insurance agents providing a consultative sale to customers—is becoming more and more ineffective over time. Today only 26 percent of Americans own their own life policies. Why is that?
The average age of a life insurance agent in the US is 59, and agents tend to sell within five years of their own age. This leaves the bulk of millennials and even GenX potential customers without the advice, education, and handholding that their insured predecessors have had. This gap leaves young families, who most desperately need the protection, underinsured and in a state of potential poverty if tragedy strikes.
This endemic crisis evident than on the memorial pages of GoFundMe, where one can scroll through page after page of “my brother-in-law suddenly passed away and the family needs help to pay for the funeral and provide for the family.” Successful campaigns raise as much as $50,000 – an amount woefully low for the future liabilities of family and future.
Younger customers have different needs and priorities than previous generations. They prefer to use technology to find the information they need about insurance and to buy a policy. Many younger customers are not sold on the need for life insurance; however, once educated on the benefits are likely to purchase a life policy. In fact, 86 percent of Americans overestimate the cost of life insurance, some by as much as 300 percent. And among the insured in America, many are grossly underinsured, including the 32 percent who have less than $100,000 in coverage.
In the last 50 years, the way insurance companies do business has changed very slowly. Even in recent years, where other industries such as banking, payments, and retail have had to shift their distribution models in major ways, insurance is still only dipping its toes in new sales models, even as their workforce careens toward retirement.
That said, there have been incredible leaps forward in making it easier for consumers to BUY insurance. Insurance companies are investing hundreds of millions in expanding products and services to make it easier for the interested buyer to make an informed purchase quickly, less intrusively, and for the best price, all while retaining the financial viability its customers require.
Key investments in data and analysis gave birth to no-exam life insurance policies known as simplified issue insurance. These policies require no medical exam or blood test and are beginning to be offered at greater and greater face values.
This innovation is made possible through a massive data-sharing initiative between healthcare providers, insurers, and governments. The data-sharing allows insurers to gather information in order to assess various risk factors for potential policyholders, even in the absence of the medical exams and blood tests that were once necessary.
Many insurance carriers have also pivoted their direct marketing focus to online sales and digital purchase, and enabled a new generation of price comparison engines to ensure those in the market for a policy can easily buy it. Some of these shifts have created channel conflict with the declining direct salesforce, and that conflict often results in hamstrung marketing initiatives that attempt to satisfice amidst this dialectic and strategic conflict.
These one-sided investments on the buy side of insurance primarily serves the needs of those who have already opted into the marketplace. It begs the question: Where is the real innovation that will close the insurance sales gap?
Closing the sales gap?
In a world where three in four Americans do not own life insurance and 50 percent of millennials would have an immediate financial need if something were to happen to the primary wage earner in their household, it is now a societal need to close this gap.
The insurance industry needs to look beyond its own agents. Consumers depend on many advisors for financial services, and the industry needs to engage those providers. Paving the way for broader licensing and reducing barriers erected to protect carriers (not the ones for protecting consumers) will help bring more educators and salespeople to the industry.
Insurance digital investments must do more than digitize the past. While making it possible to buy insurance online is an advance, it still resides in the Web 1.0 world of price-comparison and lead generation.
Break down barriers between insurance and adjacent industries. While it has always been true that the person who designs your estate plan is not the person who sells you the appropriate amount or insurance or defines your future investment needs, the consumer doesn’t want to find multiple vendors and convince them to work together. In a modern world, these artificially siloed industries should simply work together.
It was through these observations with fellow World Economic Forum attendees that I saw the need to create the Tomorrow app. Using Tomorrow, families can set up a trust fund for free, including a free will and revocable living trust. In fact, it’s a social experience one does with family and friends who will take on roles such as guardian, executor and trustee. Then with an understanding of one’s family and finances, Tomorrow educates its customers about their insurance gap, proactively prices the policies that close that gap, and brings them to a policy application. Because Tomorrow leverages all of the data entered to create their trust funds, customers complete the application in 3-5 minutes and the policy is added to their trust. For simplified issue policies, that is often the end of the customer’s work, and policies are issued in a matter of days.
Sales innovation is the way forward
McKinsey estimated in 2015 that 20 percent of insurance agents in the US would retire by 2018, leaving a talent gap in an industry that already has a worker shortage. This is significant on its own, but considering current insurance agents fail to reach the under-40 set, more than ever the industry desperately needs disruptive changes.
The only way forward is innovation in insurance sales through breaking down barriers, investing in modern digital approaches, and looking beyond its own industry.