The Impact of COVID-19 on the Future of the Life Insurance Industry
How did COVID-19 affect the insurance industry, and what did it do to adapt? This is the question that many people are asking now as we look back on a difficult time in our world. It was difficult to see family due to social distancing rules. Children stayed home from school, both younger workers and older workers stayed home from work or adapted to working from home, and very few people would meet face-to-face for any reason at the height of the outbreak. Some of the implications were higher unemployment rates and companies laying off employees due to COVID-19. But the insurance market would see sales growth in certain age groups, including younger people. As the virus claimed millions of lives around the world, more people became aware of the importance of having life insurance to protect their loved ones and their financial future.
So how did the insurance sector adapt? How did the pandemic affect older and younger consumers? We’ll answer those questions and a few more as we review the information we now know about the effects of the pandemic compared to the previous years.
How Did the Pandemic Increase the Demand for Life Insurance?
In a number of ways, the worldwide epidemic has raised demand for life insurance. It has first brought to light the startling death toll and the frailty of human health. As of October 2023, Wikipedia reported that COVID-19 had claimed the lives of almost 7 million individuals globally. People are now more conscious of their own mortality and the importance of providing a financial safety net for their relatives in the event of an untimely demise.
COVID-19 pandemic death rates by country – Wikipedia
Life Insurance in Pandemic Time
Despite projections from industry experts forecasting a sudden spike in the purchase of life insurance policies, the trend took longer to materialize than anticipated. Data shows that according to the MIB Life Index, applications for life insurance policies only rose by 1% in Q2 (second quarter) 2020 compared to the year previous. Many households faced financial hardship during this period, as the U.S. unemployment rate skyrocketed from 3.6% in Q4 2019 to 13% in Q2 (second quarter) 2020. In April 2020 alone, a record-breaking 20.5 million jobs were lost. The shutdowns and stay-at-home orders had a disproportionate impact on lower-wage workers, particularly in the hospitality and retail sectors, making them more susceptible to financial shocks.
In addition, the global epidemic has caused many people’s expenses to rise for things like online education, home improvements, and medical bills. Many people now experience greater financial stress and anxiety as a result of these issues, which increases their desire to look into life insurance products to learn how to secure their financial future.
However, there was a significant upswing in momentum for term, IUL, and whole life insurance applications in the U.S. during the second half of 2020. In Q3 (third quarter), there was a year-over-year increase of 9.2%, and in July alone, there was a record increase of 14.1% in customer acquisition and those who purchased individual coverage. Overall, insurance applications rose by 4% for the year, making it the highest annual year-over-year growth rate to date. Young consumers and young people under 45 showed the highest life application activity, with a 7.9% largest year-over-year increase, compared to a 3.8% increase among those ages 45-59 and a decline of 1.7% for those aged 60 years and above. This life insurance policy sales increase continued into 2021, with an annual year-over-year growth of 3.4%, the second-highest growth rate to date..
Online Insurance Marketplace
The coronavirus pandemic has also had an impact on many consumers’ choices and habits. The digital transformation of numerous businesses, including life insurance, has been accelerated by the epidemic. Nowadays, a growing number of customers feel at ease purchasing life insurance online and comparing the features, costs, and advantages of various plans using online tools and platforms. In addition, an increasing number of customers are searching for adaptable and personalized life insurance plans that can accommodate their evolving requirements and situations.
The increase in online life insurance applications and purchases of term life insurance and other products played a significant role in driving growth in life insurance policy sales. For instance, the online insurance marketplace AccuQuote reported a 30% jump in sales. This shift in consumer behavior data has mirrored a broader trend of many online tool adoptions, which increased as a result of lockdowns and concerns over face-to-face interactions. Insurers quickly recognized that offering robust digital services and streamlining the client experience could help propel substantial revenue growth in the future.
Additionally, carriers saw an uptick in payouts due to the staggering loss of life caused by the outbreak, particularly among vulnerable older adults who were more likely to hold life insurance policies. As a result, life insurance companies had to pay out over $90 billion in 2020, a 15.4% increase over 2019. This is the greatest annual increase since the 1918 influenza pandemic.
Life Insurance Product Offering
The pandemic has jump started the broader availability and wider adoption of digital tools across many different customer-facing industries, which has helped with customer acquisition. Life insurers can play a pivotal role in digital adoption by developing new capabilities and expanding their digital tool offerings. Partnerships with insurtech companies can also help companies meet changing consumer needs.
In the future, life insurance companies can build on pandemic-driven innovation and shift to more convenient, user-friendly policies, tools, platforms, and even processes. The Life Insurance Marketing and Research Association (LIRMA) has identified an estimated life insurance gap totaling $12 trillion in the U.S. Insurers can help close this gap through improved engagement with underserved segments, which can help encourage more profitable growth. The disease crisis has posed significant challenges for life insurance companies, but technology and the invention of new tools and preventative measures, including digital advances, point to opportunities that will be of benefit to providers and consumers alike.
Life Insurance Industry
The outbreak has had a number of consequences for the supply of life insurance policies. It has first put life insurers’ capacity to underwrite and price their products in jeopardy. For life insurers, the pandemic has brought additional risks and uncertainties, such as the potential impact of COVID-19 on death, morbidity, and life expectancy rates. In addition, the pandemic has altered many consumers’ risk profiles by altering their travel, lifestyle, work, and health behaviors. Because of these reasons, life insurers now have greater difficulty estimating insurance premiums and evaluating the risk and profitability of their products.
In order to comply with health and safety laws, life insurers have been pushed by the epidemic to modify their operations and procedures. The epidemic has affected the conventional methods of servicing and marketing life and health insurance plans, including in-person consultations, examinations, insurance claims, and paper-based applications. In order to facilitate remote selling, online verification, electronic signatures, and automated underwriting, life insurers have had to implement digital online tools and solutions. In addition, in response to the pandemic, life insurers have had to improve their lines of communication and enhance the user experience in order to give their clients accurate and timely information and assistance.
The rapid digitization of the life insurance business is set to continue as insurers strive to meet the changing needs and expectations of their customers. As the economy recovers, industry analysts anticipate a surge in the number of life insurance policy sales, and online purchases will play a crucial role in driving this growth. To appeal to customers, insurers are exploring new tactics that leverage emerging digital trends.
Life Insurers and Personalization:
As more people are diagnosed with chronic health conditions, insurers are looking for ways to encourage customers to adopt healthier lifestyles. Wearable technology and other home health tools will make it easier and faster for customers to share important health data with their insurance providers in exchange for potentially lower premiums. Insurers can also use gamification to incentivize customers to use these devices. With greater access to data and connectivity, underwriting life insurance can be a continuous process that accounts for lifestyle changes. By offering more flexibility and customization through such tools, insurers can enhance customer service and improve acquisition and retention in a competitive marketplace.
The pandemic has also created new opportunities and challenges for life insurers to innovate and differentiate their products. Shopping for life insurance due to the pandemic has increased the demand for new types of life insurance products that can address the specific needs and preferences of consumers in the post-pandemic era.
For example, some customers may prefer term life insurance over permanent or universal life insurance because it is cheaper and more flexible. Other consumers may also look for hybrid or linked products that can combine life insurance with other benefits, such as health care or investments. Moreover, consumers could also expect more value-added services from their life insurers, such as wellness programs, telemedicine, or financial planning.
What Are the Trends and Innovations That Are Shaping the Future of Life Insurance?
A number of trends and technologies that are developing or becoming more efficient throughout the pandemic are probably going to have an impact on life insurance in the future. Among these developments and tendencies are:
- Data-driven underwriting: To underwrite their policies more precisely and effectively, life insurance providers may make use of a greater number of data sources and analytics. For instance, they might evaluate data from social media sites, wearable technology, or home health equipment using artificial intelligence (AI) to determine the health and behavior of their clientele. Blockchain technology may also be used by them to safely verify and distribute data among many parties.
- Customer-centric design: To improve the user experience and satisfaction, insurance companies may choose to design their products with a greater focus on the needs of the consumer. For instance, they might provide more individualized and customized goods that can be tailored to the requirements and tastes of certain market niches or people. Additionally, they might provide simpler, more transparent solutions that make it obvious what they cover and don’t.
- Partnerships within the insurance ecosystem: To provide their clients with more complete and integrated solutions, life insurers may collaborate with other members of the ecosystem. For instance, they might collaborate with insurtech businesses to make use of their technological prowess and advances. They might also collaborate with lodging facilities and ride-sharing businesses to provide their clients with short-term or demand-based life insurance.
To differentiate themselves from competitors, insurers may offer non-monetary benefits and value-added services. For instance, some companies in Asia and Europe provide administrative support for medical visits, health management, and telemedicine. In the future, many companies may partner with rideshare companies and hotels to offer transportation and lodging during times of need. Other life insurance providers may provide guaranteed placement in senior living communities, in lieu of financial payouts, to customers concerned about retirement costs. These trends could soon be replicated by U.S. providers as they seek to increase sales momentum for life insurance policies.
As digital transformation accelerates, insurers have an opportunity to expand their service offerings and provide customers with more options. By embracing emerging digital trends, insurers can enhance customer satisfaction and improve their bottom line in the years to come.
Changes at Experior Financial Group Inc.
During the time of the pandemic, our life insurance agents’ focus was on serving the customer. Experior agents adapted their process of doing a financial needs analysis in the home and moved to online meetings using technology such as Zoom in order to carry out the work and ensure customers received the value they expected when meeting with our agents. Experior made sure our clients could buy insurance products from our agents as they normally would. It was especially important to protect older people, who we knew were more susceptible to the risk posed by COVID. Using the online tools played a major role in ensuring that staff and customers alike were protected.
The head office became a work-from-home environment for the most part, long before they issued orders for companies to send employees home where possible. Experior Management made the difficult decision to be proactive to help keep our employees and agents as safe as possible and alleviate the concerns of so many people about the risk the pandemic posed. Experior’s clients would still be well served, and the agents and staff would be safe.
Looking back on the many factors and implications that governments used to determine safe ways forward, we can see using insights that perhaps not as much consideration was given to the real cost to businesses or consumers or other long term challenges that would result from lockdown during the pandemic as compared to staying open. Thankfully, most insurance related businesses were able to make technology and other investments in order to keep supporting clients, agents, and staff through it all.
FAQ: Frequently Asked Questions About Insurance in the COVID-19 Pandemic
Due to the pandemic, more people are looking to protect their families by purchasing life insurance. However, it also made it more difficult for life insurance businesses to operate. They had to use more internet resources, adhere to new regulations, and alter how they assessed people’s health. They were also required to give the families of individuals who perished in the pandemic additional money.
Businesses can benefit from pandemic insurance in the event of a pandemic such as COVID-19. It can pay for things like cancelled events, missed wages, employee compensation, and court costs. However, because pandemics are so difficult to forecast and quantify, pandemic insurance is extremely uncommon and costly. Following the outbreak, a few insurance companies announced they would no longer offer pandemic insurance or discontinue providing it altogether.
Insurance has numerous ties to the economy. When catastrophes like fires, vehicle accidents, and illnesses strike, insurance policies can help cover the costs. It can also promote economic growth and development by making it less difficult for individuals and corporations to save, spend, create, and trade. By shielding individuals from catastrophic losses and offering other societal advantages, insurance can also contribute to a more stable and equitable economy.
There are several potential influences on the insurance market such as:
New rules: Insurance practices may need to adapt to accommodate new restrictions. Changes to laws protecting personal information, consumers’ rights, financial planning, taxation, or the environment can have far-reaching effects on insurance providers.
New technologies: Insurance firms may face both new opportunities and threats posed by rapidly evolving technological trends. Insurance providers can benefit from technological developments in areas such as AI, big data, blockchain, cloud computing, telematics, and customer service. Cyberattacks, data breaches, and ethical concerns are just a few examples of how they might amplify existing dangers.
New customers: The demand and expectations for insurance coverage may be affected by the introduction of new consumers. Customers may expect insurance businesses to provide greener, more environmentally friendly, or more individualized services. In addition, demographic shifts, urbanization, climate change, and even pandemics can all have an impact on how businesses interact with their customers.
New competitors: New rivals may affect insurance companies’ revenue and market share. New companies, like insurtech startups and digital platforms, can challenge insurance companies’ standards and practices. Competition from financial institutions and retailers can also put pressure on insurance pricing and distinction.
Inflation can have both good and bad effects on insurance companies. On the good side, inflation can make insurance companies earn more money from premiums and investments, as they can adjust their prices and returns according to the inflation rate. On the bad side, inflation can make insurance companies pay more money for claims and liabilities.
More people purchased life insurance to safeguard their families as a result of the pandemic. However, it also forced life insurance providers to increase the amount of money they gave to the relatives of coronavirus fatalities. New regulations and modifications also made it more difficult for life insurance businesses to conduct business.
Health insurance companies made money during the outbreak, but not as much as they expected. They saved money because people did not go to the doctor or hospital for other things. But they also spent money on COVID-related testing, treatment, and vaccination. They also gave some money back to customers and providers because of new rules and competition. They also lost some customers and income because of the bad economy.
The risk of a future pandemic is high and growing, according to experts from the Centres for Disease Control and Prevention. Future pandemics could happen more often, spread more quickly, cause more damage to the world and people, and kill more people than COVID-19. Some of the things that make the risk of future pandemics higher are:
Bad environment: Bad environment, such as cutting down trees, losing animals and plants, and changing climate, can make it easier for germs to move from animals to humans and make diseases worse or different.
More connection: More connection, such as more trade, travel, migration, and living in cities, can make it easier for germs to spread across countries and regions, and make people live in crowded and dirty places that help diseases start and grow.
Less medicine: Less medicine, such as using too much or the wrong antibiotics and antivirals, can make it harder to treat and prevent diseases and make germs stronger and harder to kill.
Younger and older consumers were impacted by the pandemic in different ways. Some of the ways are:
Health: Compared to younger customers, older consumers had a higher risk of contracting COVID-19 or passing away from it. During the epidemic, they also had more difficulty accessing healthcare and maintaining their well-being. Younger consumers experienced higher levels of stress, worry, despair, and substance misuse due to the pandemic, but they also had a lower risk of major complications or death from the coronavirus.
Money: Older consumers were more likely to have stable or more money during the epidemic. In addition, they had greater savings and other resources to help them weather the financial shock. During the pandemic, younger customers were more likely than older consumers to lose their employment or money. They also possessed fewer financial resources and coping mechanisms.
Spending: Older customers were more frugal and spent less during the epidemic. They cut back on their spending on entertainment, dining out, travel, and clothes. Their expenditures on groceries, medical care, and utilities increased. During the epidemic, younger consumers spent more and were more optimistic than older customers. Their expenditures on gaming, streaming, online shopping, fitness, and cosmetics increased. They made more online purchases than in-store purchases.
Behavior: Older consumers were more likely to follow the rules and limits during the pandemic than younger consumers. They also had less social contact and movement to protect themselves from COVID-19. Younger consumers were more likely to break the rules and limits during the pandemic than older consumers. They also had more social contact and movement to deal with outbreak stress or boredom.
Preferences: Older consumers were more likely to care about safety, convenience, quality, and loyalty in their choices during the pandemic than younger consumers. They also liked traditional or familiar brands that they trusted or used before. Younger consumers were more likely to care about newness, personalization, greenness, and support in their choices during the pandemic than older consumers. They also liked new or different brands that they found online or through social media.
The insurance sector adapted in many ways to survive and succeed during the pandemic. Some of the ways are:
New products: The insurance industry created new products or changed existing products to meet the new needs and demands of customers during the pandemic. For example, some insurance companies offered pandemic insurance, travel insurance with COVID-19 coverage, health insurance with telemedicine services, or life insurance with simplified underwriting processes.
New services: The insurance industry improved their services or added new services to enhance the customer experience and satisfaction during the pandemic. For example, some insurance companies provided rebates or premium relief, waived deductibles or copays, extended grace periods or coverage, or offered free or discounted services to customers and providers.
New channels: The insurance industry adopted new channels or increased their use of existing channels to enable their business operations and interactions during the pandemic. For example, some insurance companies shifted to remote work, online sales, and digital claims. They also used more technologies, such as artificial intelligence, big data, blockchain, cloud computing, or telematics, to improve their products, services, processes, and customer experience.
