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Product Innovation: Global Trends in Life Insurance

Author

Alison Salka, Ph.D.
Principal Research Consultant
LIMRA and LOMA
asalka@limra.com

October 2024

The life insurance industry is experiencing a period of rapid transformation, driven by technological advancements, evolving consumer expectations and changing economic conditions. As these factors shape the market, insurers are innovating to meet the diverse needs of today’s customers.

In a recent LIMRA EY survey, about a third of executives (30 percent) said that product innovation is their primary source of competitive advantage. It can be hard to find ways to differentiate, but the market demands products keep pace with customer needs. Carriers are evolving their product strategies in a number of ways.  

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Source: BCG Executive Survey (n=115, as of July 11, 2023).

Digital Transformation and Fintech Adoption

The digital revolution has dramatically altered the life insurance industry, prompting insurers to integrate fintech solutions into their operations. Technologies such as artificial intelligence (AI), big data and advanced analytics are enhancing the customer experience, improving risk assessment and streamlining processes.

For instance, Lemonade, a digital-first insurance company, leverages AI to provide instant life insurance quotes and policy approvals. Their AI-powered chatbots guide customers through the application process, making it quick and user-friendly.

Fintech adoption has also made it easier for insurers to collect and analyze customer data, enabling them to offer more personalized products. For example, John Hancock’s Vitality program uses data from wearable devices to monitor customers’ health and fitness activities.

Technology also adds to the customer experience. AIA’s Smart Claims service allows policyholders to submit claims via a mobile app. The app uses optical character recognition (OCR) to scan documents and expedite the claims process.

Customization and Flexible Products

Consumers are starting to expect life insurance products that are tailored to their specific needs and lifestyles. Insurers are responding by offering customizable and flexible policies that can be adjusted as circumstances change.

For example, Ethos offers access to term life insurance policies that can be customized with various riders, such as critical illness coverage or accidental death benefits. These riders allow customers to add coverage for specific risks, making their policies more relevant to their individual situations.

Additionally, some insurers are offering modular life insurance products that allow customers to build their own policies by selecting from a range of coverage options. These products, often referred to as "à la carte" insurance, give customers the flexibility to choose only the coverage they need, which can be adjusted over time as their needs evolve.

Simplified Products and Processes

To attract more customers and reduce administrative burdens, many insurers are simplifying their products and processes. Simplified issue policies, which require minimal underwriting and offer near-instant approval, are gaining popularity, especially among younger consumers.

For instance, Bestow, an InsurTech company, offers term life insurance policies that can be purchased online in minutes without a medical exam. By using data from existing health records and other sources, Bestow can assess risk quickly and provide coverage immediately, appealing to customers who want a hassle-free experience.

Another example is Ladder, a company that offers term life insurance with a unique "laddering" feature. Customers can adjust their coverage amount as their needs change — such as when paying off a mortgage or after their children become financially independent — without the need for a new policy or additional paperwork. This simplification of the process not only makes it easier for customers to manage their policies but also enhances their overall satisfaction.

Health and Wellness Integration

As consumers become more health conscious, life insurers are increasingly integrating health and wellness programs into their offerings. These programs incentivize healthy behaviors by offering rewards such as lower premiums or additional coverage. This integration of health and wellness not only promotes better health outcomes but also helps insurers manage risk by encouraging preventive care.

Another innovation is to offer policyholders access to additional health information. John Hancock, Nationwide and M Financial offer access to multi-cancer early detection tests. Additionally, a partnership between Genomics and MassMutual offers genetic testing. The program offers a saliva-based genetic risk assessment service to select policyholders, providing insight into their personalized risk for eight major diseases.

Financial Inclusion and Microinsurance

In many parts of the world, traditional life insurance products are out of reach for low-income populations. To address this gap, insurers are developing microinsurance products that provide essential coverage at a low cost.

One notable example is BIMA, a company that offers microinsurance products in emerging markets across Africa, Asia and Latin America. BIMA’s products, which include life, health and accident insurance, are designed to be affordable and accessible to low-income consumers. The company partners with mobile network operators to distribute its products, allowing customers to purchase and manage their policies via mobile phones.

In India, the Life Insurance Corporation (LIC) offers a range of microinsurance products tailored to the needs of low-income individuals. One such product is the Jeevan Mangal policy, a term insurance plan with a return of premiums on maturity. This product provides basic life coverage while ensuring that customers receive their premiums back if they outlive the policy term, making it a popular choice among those who are hesitant to purchase traditional life insurance.

These microinsurance products are important for expanding financial inclusion and providing a safety net for vulnerable populations. By offering coverage that is both affordable and accessible, insurers are playing a key role in promoting economic resilience in underserved communities.

Retirement and Longevity Products

As life expectancy increases globally, the need and desire for retirement planning and longevity products is growing. Consumers are seeking insurance products that not only provide financial protection but also help ensure a secure and comfortable retirement.

Some insurers are also combining life insurance with long-term care benefits, offering hybrid products that address both the need for income protection and the potential costs of long-term care.

Conclusion

Insurers that embrace digital transformation, offer customizable and flexible products, simplify their offerings, integrate health and wellness initiatives, promote financial inclusion and cater to the needs of an aging population will be best positioned to succeed in this dynamic market.

By staying ahead of these trends and offering products that meet the diverse needs of today’s consumers, insurers can not only maintain their competitive edge but also play a vital role in ensuring financial security for individuals and families worldwide.

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