Many clients find the information from insurers too focused on sales instead of helping them understand the policy.grivina/iStockPhoto / Getty Images
Insurers may need to rethink how they market life insurance to younger people. That’s because many decide not to buy a policy after starting the process, or to discontinue coverage within three years of buying a policy, according to a new report.
The World Life Insurance Report, published by Capgemini and LIMRA, is based on analysis of more than 6,100 consumers worldwide, says Samantha Chow, global leader for life insurance, annuities and benefits at Capgemini in Tampa, Fla.
The report’s authors note the disconnect between consumer interest in finding life insurance solutions and the industry’s ability to “create relevance, trust and lasting engagement.”
Among Canadian consumers surveyed for the report, 35 per cent found life insurance unaffordable and 43 per cent found the information from insurers too focused on sales instead of helping them understand the policy and the differences between the various products available.
Globe Advisor spoke with Ms. Chow about how advisors need to engage with younger clients and how ChatGPT is changing the sales process.
What is the biggest complaint younger generations have about life insurance?
Younger generations understand the value of life insurance, but affordability comes up as an issue. [Younger consumers] tend to overstate the cost of insurance by up to 12 times [the actual premiums].
They’re also telling us the terminology is too technical. They don’t understand it. They may say insurance is not relevant to their life stage. But that’s because the technical language creates that barrier.
What happens when more consumers use ChatGPT to understand life insurance?
The difference is the conversational aspect of it. They choose to not just type in cues. They choose to have a conversation, so the same questions they might ask an advisor are the same questions they’re going to ask ChatGPT, in a verbal way. And they’re going to get a verbal response, so they’re going to be more highly involved in that conversation than they were in the past.
Half of consumers say they’re going to use ChatGPT or other tools to investigate [insurance]. That’s the next financial advisor, but it’s only a partial financial advisor. They’ll do their research, they’ll use that to help guide their conversations, but 84 per cent are then going to go and speak to a financial advisor to get confirmation of that being the right decision for them.
Agents and advisors need to be up to speed on how those [AI] tools recommend life insurance and financial products to their consumers.
According to the report, half of those who discontinue their policies do so within three years. Why would a client let their policy lapse?
For affordability reasons. There are usually signs of a lapse and those signs are not typically reacted upon proactively from the insurer’s side. There could be some proactive outreach that talked about whether they still need the same [policy] face amount they signed up for. [The insurer] could drop the amount down based on what [the client] needs and reduce the premium. Then, you don’t lose your customer.
Did it surprise you that 40 per cent of consumers surveyed for the report say they rarely hear from their advisor once the policy is in place?
That’s the way it’s traditionally been. Life insurance is mostly ‘set it and forget it.’ In the past, the thinking was that if the insurance advisor talks to the [client] later, they may decide to cancel. By staying out of their hair, then maybe the policyholder is less likely to let the policy lapse.
Today, consumers expect more. The younger individual who’s going to be paying into this policy for numerous years wants to know [the advisor] is there. They want to know that you’re thinking about them. It’s more important to have that engagement, especially in those first three years during which a lapse is most likely to happen.
Younger agents are doing their best to stay connected with these individuals. In some cases, orphaned accounts, which are owned by the insurer, end up just sitting in limbo without any new advisor assigned to them. Insurers don’t take the time to do that and, as a result, you lose the connection.
Your report refers to ‘best-in-class’ insurers. How do you define that?
We view best-in-class life insurers as the top 10 per cent of the industry. They utilize consumer-led strategies, use AI to help personalize approaches and generally make things easier for their agents, advisors and brokers to do business. They have a 12 per cent lower lapse rate, while average life insurers spent the first third of their year recouping the losses from the previous year.
Did any Canadian insurance companies demonstrate those characteristics?
Yes, Sun Life and Manulife. They’re recognized for their work around the use of AI for personalization and their educational materials.
This interview has been edited and condensed.