The Buyer Experience and The Next Generation of Life Insurance Sales

As Baby Boomers and older Gen Xers achieve the kind of financial security that comes with an established career, sound financial management, and fewer kids at home, the sweet spot for life insurance sales is changing. Carriers and agents need to adapt to the buying habits and preferences of Millennials and Gen Z buyers looking to protect their financial interests and the needs of a growing family.

Intent to Buy Life Insurance is High

To say that the life insurance industry is not reaching this market may be an understatement. According to LIMRA, the percentage of Americans who own life insurance has steadily declined from 63% in 2011 to 52% in 2021.¹

There are valid reasons why it can be difficult to convince younger buyers to invest in life insurance. However, the lack of a perceived need may not be as prevalent as some make it out to be. The same LIMRA study found that 36% of Millennials who did not own life insurance felt they needed it. For Gen Z, the percentage rose to 43%.¹

Now is the time for carriers and agents to transform their sales process, as 31% of respondents said they were likelier to buy insurance due to the COVID-19 global pandemic. At 45%, Millennials were the likeliest to be spurred on by COVID-19.¹

The Buying Habits of Millennials and Gen Z

Driven by exponential changes in technology, the buying habits of the next generation of life insurance consumers are significantly different from those of previous generations. Younger Millennials and Gen Z grew up in a largely digital world. Buying products and completing financial transactions online are now expected by these generations.

While Baby Boomers might have checked the Yellow Pages, phoned a call center, or sought advice from a friend or family member when shopping for insurance, younger life insurance buyers are crowdsourcing recommendations. Consider these statistics from a 2020 LIMRA study:²

• Almost half of the respondents said they had used social media to gather information on financial topics, companies, or advisors
• Facebook and YouTube were the most frequently cited, and the use of these sites for financial matters doubled between 2019 and 2020
• Slightly less than two-thirds (62%) had read social media reviews of agents
• More than half (59%) had looked for information on financial products

However, not only is this new generation of life insurance buyers shopping for financial products online, but they are also placing more importance on issues such as speed, intrusiveness, and the complexity of the process.
For example, in LIMRA’s “2020 Insurance Barometer Study”, half of all respondents said they are likelier to buy life insurance if the underwriting process is simplified. Also included as top reasons:

• It’s fast and easy – 66%
• Is unbiased and objective – 66%
• Provides transparent explanations of risks and pricing – 58%
• Avoids medical exams, blood, and urine samples – 56%
• Avoids the need to see a doctor – 55%

Evolving the Life Insurance Sales Process

Many carriers have taken that first step by creating an appealing website, a solid social media presence, and an online application process. That’s a good start, but a digitally savvy life insurance buyer is going to see those elements as table stakes.

The unique reality of life insurance, as opposed to other types of insurance, such as property and casualty coverage, is that once consumers purchase a life insurance policy, they are generally out of the market for several years. Carriers often have one chance to land a new, younger client. The experience must be quick, accurate, and not intrusive to be successful.

In some cases, a life insurance purchaser may even be an impulse buyer. They’re reading a post on social media when they see an ad for life insurance. They’re curious, so they click to request a quote. When they see it’s more affordable than they thought, they decide to fill out the application. The odds of converting these buyers plummet if the underwriting process takes days/weeks or requires applicants to do something extra, for example, submitting to what they may think is an intrusive medical exam.

To create a more satisfying experience for the consumer in 2021, life insurers should look to incorporate immediate point-of-sale decisioning into the sales process. This requires the ability to accurately and comprehensively underwrite at the point of sale whenever possible.

Point-of-Sale Underwriting Decisions Made Possible

Carriers want to insure every applicant, but they know they can only do this if they correctly assess the risk. AURA NEXT transforms the new business underwriting process to make it fast and painless for many life insurance consumers while enabling carriers to manage the underwriting risks.

Even though consumers want a buying experience that doesn’t require a doctor’s visit or a blood test, issuing a policy without a medical exam does bring added risk. No matter how many questions on the application ask about the buyer’s health history, some risk remains that all relevant information will not be disclosed. Historically, it was easy to require the medical exam and lab results to back up the information gathered on the form. However, challenges presented by COVID-19, including temporary lab closures and the fear of letting paramedical examiners into one’s home, have introduced a new set of obstacles.

It is important to note that point-of-sale underwriting decisions don’t eliminate the need for or use of external evidence sources. A late 2020 study found that of the carriers using alternate sources of data for underwriting, 95% were using credit history; another 82% were using risk scores; and 77% were using tools to identify potential fraud.³ This is in addition to traditional data sources, such as medical history, prescription history, and motor vehicle records.

But it’s not just about the data. After all, underwriters already employ many of these same sources. It’s how that data is used at the point of sale that makes the greatest difference in the buyer experience. Let’s revisit the scenario of our young impulse buyer to show what happens when a carrier incorporates AURA NEXT into the business process to support underwriting decisioning.

How Point-of-Sale Underwriting Works

As the buyer fills out the application, AURA NEXT can request, in real time, the required external evidence for this applicant and can analyze the results from external sources while the applicant is completing the questionnaire. The external evidence is typically returned within one to two minutes, which is well within the time range it takes to complete an application. Thus, if there are obvious discrepancies between the external evidence and the answers to the questionnaire, then AURA NEXT can immediately reflex an appropriate question and attempt to obtain the necessary clarification. This ability has a measurable impact on reducing Not in Good Order (NIGO) applications and perhaps even reducing unnecessary referrals.

When the application is complete, AURA NEXT, having already assessed the evidence, combines all the data received to provide a comprehensive, accurate, and consistent decision, reflecting the carrier’s underwriting philosophy. The immediate answers for applicants provide instant satisfaction for the buyer and a higher conversion rate for the agent. Or, if the carrier’s defined risk threshold is not achieved, the application can be flagged for manual review.

Learn how one insurer reduces application processing times from weeks to just minutes and reduces Not in Good Order (NIGO) cases to negligible amounts.
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Does Point-of-Sale Underwriting Decisioning Work?

A point-of-sale decision isn’t appropriate for every applicant. However, it can help carriers convert a higher percentage of young, healthy buyers shopping for additional coverage or their first policy.

The buyer’s expectations for a less intrusive, convenient, and quick new business process will continue to evolve and increase over time. The technology is already available for carriers to start delivering on these expectations.

[1] LIMRA presentation, The Life Insurance Need Gap, 2021
[2] LIMRA, 2020 Insurance Barometer Study
[3] Aite, Rethinking Life Insurance Underwriting: Leapfrog Competition, Delight Customers, February 2021