Typically, life insurance lagged behind property and casualty – and even health insurance –when it came to innovation because of the complex, sensitive, and long-term nature of its products.
Today, however, new technologies are changing the innovation paradigm by helping life insurers catch up with other sectors and to become more embedded in customers’ lives. The change is measurable, with the proportion of life and annuity insurers driving transformation in their business jumping from 13% in 2010 to 43% in 2018.
Moreover, startups in this sector are leveraging InsurTech capabilities based on the latest technologies to transform the design and delivery of life insurance.
How? Insurance industry newcomers are leveraging digital and analytics tools to develop more dynamic and granular life insurance products that feature flexibility and agility in execution.
For life insurance incumbents to stay relevant, they must invest in the core systems needed to innovate and introduce changes. Clearly, attracting revenue-enhancing new customers will be reliant upon the design of innovative products that cater to millennial and tech-savvy segments that want immediate coverage benefits without being locked into a long-term commitment.
Enter InsurTech firms; nimble startups prepared to focus their unique technological capabilities to develop and offer more granular and flexible policies. The new InsurTech models driven by them are making life insurance more affordable to lower-income customer segments and more appealing to millennials who are used to on-demand services.
What types of new polices are being offered? The Top-10 Technology Trends in Life Insurance: 2018 report highlights a variety of new, InsurTech-driven life insurance offerings.
Micro-duration coverage – With the help of mobile apps, on-demand life insurance coverage can be delivered for short, specified time periods, which is making coverage accessible to individuals who may have been discouraged in the past by lump-sum premium amounts and pricey long-term policies.
Such products also hold appeal for millennials who often prefer flexible options and want to purchase life insurance coverage only when needed. For example, New York-based digital insurer Sure offers a mobile app that allows customers to purchase insurance when they want it, and where they want it. The company’s Episodic Insurance targets air travelers who can purchase coverage up to the time of departure for the duration of their flight.
Mobile-based micro-insurance – Allows customers to buy small packages of life insurance coverage with low premium amounts and for shorter durations through convenient mobile payment options. Such products are especially useful for emerging markets to make life insurance accessible to lower-income populations.
Stockholm, Sweden-based BIMA leverages mobile technology to provide affordable insurance and mobile health services for low-income families around the world. BIMA’s mobile insurance solution allows customers to purchase accident or life coverage for less than a dollar a month with a rolling monthly cover. BIMA’s offerings are available across Africa, Asia, and Latin America and the firm collaborates with mobile operators in these countries to enable mobile premium payments.
Life Insurance Innovation
Source: Capgemini Financial Services Analysis 2017
Targeted Products for Specific Segments – Life insurance coverage can also be made more flexible and granular by unbundling the coverage and designing more customized products for specific segments.
Launched in early 2017, US InsurTech firm Fabric caters to the needs of individuals aged 25–44 and starts buyers out with Fabric Instant because the company says accidents pose the single highest risk of death for people in this age band. Fabric Instant may be purchased online in only a few minutes. No health information is required, and acceptance is guaranteed.
The Fabric app allows customers to add illnesses to their policy by upgrading to Fabric Premium, a 20-year term life policy priced according to the customer’s health and lifestyle. Fabric’s mobile app streamlines the purchase process to a matter of minutes.
More and more, unbundled and customized products are becoming popular among younger customers versus traditional broad coverage with higher premiums. Granular life insurance products enable firms to drive organic revenue growth by expanding their footprint in newer and emerging markets by delivering customer satisfaction through agile offerings.
However, it will be important for life insurers to develop advanced actuarial and underwriting processes (by leveraging big data, open-source and third-party data) and to deploy a scalable technology infrastructure that can adapt to micro-duration products.
The World Insurance Report 2018 explores how collaboration with InsurTech firms is one of the ways that can help insurers efficiently and cost-effectively build today’s necessary InsurTech capabilities. Enabled by their innovative and entrepreneurial culture and unburdened by legacy baggage, InsurTech firms can nimbly experiment with new technologies and business models.
A range of collaboration options is open to life insurance incumbents – approaches from solution support and co-branding to the acquisition of a startup.
When we checked with insurers during surveys for the World Insurance Report 2017, partnership was the most popular approach with 52.9% of respondents saying they would like to partner with InsurTech firms.
And, today as incumbents and InsurTechs acknowledge their complementary advantages, we can look forward to this trend gaining greater traction as insurers collaboratively focus on eliminating the pain points that put consumers off buying life insurance coverage. As the InsurTech landscape expands and evolves, it is critical for life insurers to tap into the right partnerships and new business models that can ensure their continued relevance and competitive success with the customer of the future.
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 Digital Insurance, “Three ways L&A insurers are smarter than P&C insurers,” Karen Pauli, April 17, 2018, https://www.dig-in.com/opinion/three-ways-l-a-insurers-are-smarter-than-p-c-insurers
 The Digital Insurer, “Sure – Insurance On-Demand,” https://www.the-digital-insurer.com/dia/sure-insurance-demand, accessed May 2018.
 Bima website, http://www.bimamobile.com/about-bima/about-us-new, accessed May 2018.
 Nerdwallet, “Fabric Insurance Review 2018,” February 7, 2018, https://www.nerdwallet.com/blog/insurance/fabric-insurance-review