Making Life Easier With Better Data

Compared to other sectors, the life insurance industry has been hesitant to embrace digital change. Many companies in this line of business still rely on an outmoded sales process that follows the legacy broker-to-consumer model. This approach fails to empower customers to make their own decisions and act as participants in the process. Such a failure to meet the expectations of the modern consumer puts traditional life insurance companies at risk of losing their market share to a more future-ready competition.

But it’s not too late. By acting now and investing in advanced analytics, life insurance companies will gain a significant advantage in terms of customer intimacy, product-service portfolio reinvention, and cost optimization.

Still, it will require more than just action on the part of traditional organizations who are looking to modernize their business approach. These companies must not only act but act intelligently. Our data demonstrates clear vulnerabilities among companies that sit outside the vision-driven quadrant. For life insurance companies that make errors in their digitalization approach, they still risk falling behind digital disruptors as consumer lifestyles change.

>Digital Transformation in a Highly Competitive Market

Top Concerns for CEOs in the Life Insurance Industry

While some factors affecting the life insurance industry may not be alleviated with the help of digital transformation, there are still many ways the industry can reinvent themselves. Here are the top six concerns life insurance CEOs will need to address in the digital era:

Reaching New Generations

Reaching New Generations

Gen Y and Gen Z are demonstrating weak interest in life insurance. This is a large demographic that will soon begin participating in the market, and life insurance companies risk losing their business without a sufficient value proposition.

Reward-based Models

Reward-based Models

InsurTech and other new insurance models are transforming the value proposition through lifestyle rewards and dynamic premium pricing. Incumbents in the life insurance industry must adopt and deliver new value add-ins to compete with digital disruptors.

Higher Life Expectancies

Higher Life Expectancies

Advances in medicine and medical device technologies are reducing the health burden on the population, leading to a sentiment that life insurance is unnecessary. This is driven by higher life expectancies and reduced instances of early mortality. Life insurance companies need to offer more than compensation or support, expanding the product-service value chain to capture a wider audience.

Direct-to-Consumer Model

Direct-to-Consumer Model

The direct-to-consumer sales paradigm is altering the sales pipeline. Brokers are increasingly viewed as “dead weight,” increasing costs and offering little value to customers. Life insurance companies must embrace the direct-to-consumer model, delivering better value and more comprehensive end-to-end service delivery with their internal expertise.

Changing Lifestyles

Changing Lifestyles

Alcohol and tobacco consumption have long been factors in life insurance premium calculations. Now, increased usage of cannabis is adding another factor for consideration. Life insurers must adopt progressive frameworks for calculating premiums, without penalizing Gen Z or Gen Y consumers for personal lifestyle choices.

Comprehensive Packages

Comprehensive Packages

There are few avenues for life insurers to add non-transactional value to the product-service chain. Compensation after death or injury is not enough, meaning insurance plans need to integrate a more comprehensive range of services and offerings. This will keep customers in regular contact with the company, enabling further upselling opportunities to drive the bottom line.

A Changing Approach to Life Insurance Calculations

The life insurance industry has traditionally been focused on risk-based insurance premium calculations. This is no longer viable as life expectancies rise and lifestyles or demographics become more diverse. Instead, a focus on life-based calculations is needed, integrating wearable monitoring data and lifestyle decisions into the calculation framework. As consumers are more health-conscious now, these changes will reward their efforts and revitalize the value chain.

The end-state should be the adoption of actuarial models that focus on real data rather than estimates. Product or service differentiation is also vital, as health insurance companies are encroaching on the life insurance industry with their own comprehensive service propositions. Individual plans are being forgotten in favor of more end-to-end family insurance plans, requiring a shift in product-service delivery approach. Finally, life insurance companies must leverage mobile applications, telematics, robotic process automation (RPA), blockchain, and AI or machine learning, as well as adopting a data-driven approach to life insurance to deliver better product-service value and overhaul the customer experience (CX).

The Most Successful Digital Transformations Are Powered by Analytics Capabilities

Our benchmarking services are powered by over 1.5 million data points in addition to our primary research and data collection capabilities. With access to leaders across more than 40,000 companies in various size segments, industries, and geographic locations, we can quickly gather additional data to address how your business is performing against the competition.

A graph showing which industries are investing the most in digitalization.

Source: Trasers

Data analyzed in this report comes from 4,000+ responses. For the life insurance industry, data from 225 companies have been used.

Our life insurance industry experts can offer insights into the following sectors:

  • Direct Life Insurance Carriers

  • Protection Policies

  • Investment Policies

  • Agencies and Brokerages

  • Claims Management

  • Insurance Support Services

  • And More


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Life Insurance Has the Lowest Investment in Research and Development

The life insurance industry has the lowest recorded investment in research and development among all the industries we have studied. This puts incumbents at immense risk from digital disruptors both inside the life insurance industry and from external industries. An aggressive approach from disruptors via digitalization and product-service portfolio expansion mandates an equally aggressive approach from legacy life insurers. This is the only way to combat FinTech and Healthcare companies who aim to eat up massive market share by delivering comprehensive product-service portfolios that integrate family-based life insurance as standard.

As a result, reimagining the customer value proposition and driving innovation around the product-service portfolio will be the foundation for value-chain reinvention in the life insurance industry. Companies must leverage sensor-based technologies and increase the use of automation or AI to develop a stronger understanding of the insurance market. The irony here is that, despite these imminent threats, nearly 45% of life insurers across the globe are doing nothing of significance to digitalize their operations.

Only 7% of Companies Are Delivering on Their Transformational Initiatives

Our research has shown that 30% of companies will fail to survive this decade due to an inability to evolve digitally. To address this negative trend, we have developed the Digital Enterprise Evolution Model™ (DEEM).

Digital Enterprise Evolution Model™

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DEEM allows our clients to recognize digital evolution patterns, implement benchmarking and prioritization strategies, and initiate application management protocols to satisfy stakeholder and market requirements.

Life Insurers Outside the Vision-Driven Quadrant Are at Risk

Many life insurance companies sit outside the vision-driven quadrant in the context of digital transformation. This puts them at immense risk of falling behind or into dissolution. The perceived urgency of digitalization is driving continuous action with the goal of transformation, but a lack of organized approach is undermining their efforts.

Many life insurance companies plan significant investments in the cloud and advanced analytics. Additionally, investment in process digitalization and robotic process automation (RPA) will be essential in improving operational efficiency. Overall, there is plenty of room for improvement among life insurers, where they need to adopt an end-to-end strategic digitalization approach to succeed.

Human Capital Management (HCM) in the Life Insurance Industry

Life insurance companies are failing to recognize the value of human capital management (HCM). This prevents them from acquiring and retaining the right talent who could be vital assets in a complex and highly regulated industry like life insurance. The response has been external acquisition of talent from other industries; however, these external personnel lack specific experience in life insurance.

As digital disruptors find their footing, incumbent life insurers will struggle to convince and integrate talent into the workforce. Tech-savvy and modernized business models among digital disruptors are much more lucrative to job candidates than the old, bureaucratic operations among life insurance incumbents. To revitalize the company image and product-service portfolios, CEOs must shift into the vision-driven quadrant and prioritize reinvention of the value chain. This will require direct involvement and a comprehensive approach to digitalization using internal talent.

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