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The life insurance industry has long grappled with numerous challenges. Complex application processes, lengthy underwriting times, lack of personalization, and high costs have made life insurance products difficult to sell and even harder to understand.

However, the advent of advanced technologies is transforming the sector, providing innovative solutions to these persistent issues.

Here’s how insurers are harnessing technology to overcome these obstacles and enhance the customer experience.

Key challenges in life insurance

Complex & lengthy application processes

Traditional life insurance applications often involve extensive paperwork, invasive medical exams, and numerous questions, making the process cumbersome and time-consuming for applicants.

Inefficient underwriting

The underwriting process, which involves assessing risk and determining premiums, has historically been slow and labor-intensive. This leads to delays in policy issuance and frustration for customers.

Lack of personalization

Life insurance products have often been one-size-fits-all. This means that conventional products fail to cater to the unique needs and preferences of individual customers, resulting in less-than-optimal coverage.

High costs

The administrative burden and inefficiencies inherent in traditional insurance processes—like costly medical exams and data entry—contribute to higher costs for both insurers and policyholders.

According to the National Association of Insurance Commissioners (NAIC), administrative costs can account for approximately 10-15% of premiums in the life insurance sector.

Poor customer engagement

For many years, there has been limited interaction between insurers and policyholders, leading to low customer engagement and satisfaction.

This, in turn, has increased policy cancellation rates and reduced renewal rates, especially in the case of term insurance policies.

Insurtech solutions

While you can’t enthusiastically sell the idea of death—which, in essence, is what you are doing when selling life insurance—technology has made life insurance products easier to understand, more affordable, and tailor-made for each customer.

Most importantly, technology has revolutionized the industry by simplifying processes and enhancing the customer experience.

This transformation is made possible through:

 1. Artificial Intelligence & Machine Learning

Problem addressed: Inefficient underwriting & lengthy application processes

Solution: AI and machine learning algorithms are revolutionizing the underwriting process by analyzing vast amounts of data quickly and accurately. These technologies assess risk based on factors like medical history, lifestyle, and even genetic information, enabling insurers to offer personalized premiums and faster policy issuance.

Example: Haven Life Insurance uses AI to automate underwriting, allowing customers to receive term life insurance quotes and coverage decisions within minutes, without the need for medical exams.

 2. Wearable technology

Problem addressed: High costs & lack of personalization

Solution: Wearable devices like fitness trackers and smartwatches collect real-time health data, which insurers use to monitor the health and activity levels of policyholders. This data enables insurers to offer dynamic pricing models and reward healthy behaviors with premium discounts or other incentives, thereby reducing overall costs and encouraging healthier lifestyles.

Example: United Healthcare integrates wearable technology into its policies such as health and term life insurance, offering discounts and rewards to policyholders who meet certain fitness goals, promoting healthier living and reducing claims.

 3. Blockchain

Problem addressed: Lack of trust & poor customer engagement

Solution: Blockchain technology enhances transparency, security, and efficiency in the insurance process. It allows for the secure sharing of data between insurers, healthcare providers, and policyholders, reducing repetitive paperwork and ensuring data integrity. Additionally, smart contracts on the blockchain automate claims processing, making the entire process faster and more transparent.

Example: MetLife’s LumenLabs uses blockchain to enable instant verification of policyholder information and automated claims processing, reducing administrative overhead and speeding up payouts, which boosts customer satisfaction.

 4. Big Data & analytics

Problem addressed: Inefficient Underwriting and Lack of Personalization

Solution: Big data analytics allows insurers to analyze large datasets to identify patterns and trends that traditional methods might miss. This data-driven approach helps insurers better understand customer needs and behaviors, allowing for more accurate risk assessment and the development of tailored insurance products.

Example: John Hancock has integrated wearable technology into its life insurance products through its Vitality program. Customers can earn premium discounts and rewards by sharing health data from devices like FitBit and Apple Watch.

 5. Digital Platforms & mobile apps

Problem addressed: Poor customer engagement & complex application processes

Solution: Digital platforms and mobile apps provide customers with easy access to insurance services, from applying for coverage to managing policies and filing claims. These platforms enhance the customer experience by offering a seamless, user-friendly interface and 24/7 accessibility.

Example: Aetna’s mobile app, Aetna Mobile, allows policyholders to manage their health and insurance needs in one place, offering services like health checks, mental health support, and nutritional advice.

Conclusion

The integration of advanced technologies is transforming the life insurance industry, addressing long-standing challenges and creating new opportunities for growth sustainability. These innovations not only streamline processes and reduce costs but also enhance customer engagement, paving the way for a more dynamic and responsive insurance landscape.

As technology continues to evolve, the life insurance industry will undoubtedly see even more groundbreaking advancements, further improving the customer experience and closing the protection gap.