How the COVID-19 pandemic raised interest in life cover

It’s not surprising, given the pandemic’s economic fallout, that 55% of all consumers agree that COVID-19 has made them re-evaluate how they can protect their future and financial wellbeing. Of that 55%, almost half (48%) agree they have taken action (e.g., buying additional products, raising their contribution to saving plans, or increasing coverage). Among all respondents, 25% agree that the pandemic has affected their attitude towards protection, with 58% of those feeling more positive towards life coverage products. 

What survey participants said:

Implications for insurers

It’s clear that insurers must solve a few overlapping challenges if they are to take advantage of the uptick in consumer interest in their products. Products must be made simpler, so they are easier for customers to understand and easier to sell through digital channels. They must also feature more flexible pricing so individual consumers can find affordable coverage.

With little or no face-to-face interaction, insurers must find ways to inform and empower consumers to take action via intuitive and seamless digital self-service channels. Hybrid distribution models will make human advisors available if and when consumers need one. Beyond digital and traditional channels, they must find other ways to make their products available. For instance, they could consider partnerships with adjacent sectors, including health insurance, wellness companies and even certain types of retail, that have more access to consumers as the pandemic lingers.

Additionally, insurers must find ways to break into ‘money tribes’ so they’re not filtered out by informal advisors or networks of friends and families. New thinking and fresh approaches are necessary for insurers to build trust and gain entry into these tribes. Clear articulations of the value and purpose of specific types of products is a good place to start. Rather than emphasising the risk of leaving one’s family destitute or touting strong records of claims payments, insurers could focus on the friends and families that give informal advice via highly targeted messages to niche audiences on social media. The goal is to find resonant messages distributed by trusted influencers. Insurers could also look to link products to changing customer needs and specific life events, as well as provide planning tools, practical tips and financial education.  

What survey participants said:

Implications for insurers

Growth will be extremely difficult to achieve from this lagging position. A large gap persists between what customers are looking for today and what insurers offer and how those offerings are perceived. Here again, insurers must refresh their market positioning to gain more mind share among consumers thinking about financial wellbeing.

Insurers must find ways to provide consumers with the right information at the right time and through the right channel or media. Enhanced communications will offer tailored, relevant and thoughtful messaging for each customer segment at every interaction along the customer journey (e.g., applications and acquisition, rejection letters, policy documents, claims).

It’s also important to identify the right digital entry points to the customer journey to reach both customers and non-customers with appropriate messages about financial protection in general and life insurance products in particular.  Financial education is critical. Insurers must help consumers learn how their products support a range of financial goals. For example, they can highlight how life policies can supplement retirement savings far beyond the proceeds from selling a home. Ideally, insurance will be known for enabling – not just protecting – financial wellbeing.

The research clarifies how much work the industry has to do to get on the radars of and build trust with consumers. Again, the results include both good and bad news. On the positive front, 71% of existing customers agree they need life insurance protection. That equates to about one-third of the overall population, given that 46% of surveyed consumers have coverage for life, critical illness or income protection. 

The bad news is that consumers without insurance don’t see the value or need for it; of the 54% that don’t have protection, only 13% think they need it, equivalent to 7% of the overall population. Among those without insurance, the top three reasons for not holding protection are:

• I don’t think I can afford it (31%)
• I think it’s a waste of money/I don’t need it (30%)
• I have other immediate priorities, such as meeting my day-to-day outgoings (23%)

There are significant concerns about the industry among all survey respondents, with 46% believing that insurers will attempt to find loopholes to escape payment of claims; another 29% believe that life coverage products aren’t aimed at people like them. Perhaps most troublingly, only 34% agree that most life insurers are honest and transparent in the way they treat customers.

For an industry that has long positioned itself as ‘being there’ when its customers are in need, these numbers would appear to be cause for serious concern. However, other research has shown that although consumers are sceptical towards the industry as a whole, they trust many individual brands. Indeed, large organisations that provide both life coverage and pension products are among the most trusted in the UK. The suggestion is that the industry needs to tell a more compelling story about the concept of insurance and why its offerings are particularly important now. 

What survey participants said:

Implications for insurers

Individual insurers must recognise that lack of trust in protection is at minimum a barrier on their products as they seek to reach new consumers and increase wallet share with existing customers. As such they should seek market and consumer insight into where their brands stand today and what it will take to reposition or reinforce messaging. Figuring out how to use existing customer data to initiate conversations about financial wellbeing is a good first step. 

To overcome customer questions about value and affordability, insurers should design dynamic protection products that enable them to ‘kick the tyres’ and experiment. Ideally, consumers could modify features, personalise services and tweak coverages via online channels without the need for additional underwriting. If insurers can induce their customers and affinity partners to share more data, they can increase the level of personalisation and, ultimately, the overall value – they offer. 

To be clear, solving brand and trust challenges are not easy. It requires concerted and sustained effort in multiple dimensions, from brand strategy and marketing, to product development and sales. As a starting point, insurers should aim to expand their value propositions to include broader definitions of financial wellbeing. Ideally, consumers will associate life insurance with ‘quality of life,’ viewing it as a powerful tool for helping them achieve financial security and live the life they want to live. The shift in consumer perception must move from ‘insurance is a product for a term’ to ‘insurance is a service for life.’

Pivoting to growth in a time of uncertainty

The rising interest in life, critical illness and income protection policies caused by COVID-19 presents a clear upside for insurers. However, to take advantage, they will need to address a range of longstanding issues – from back-office automation and better digital distribution, to a more clearly articulated value proposition and more attractive products. The boldest and most forward-looking insurers will use the COVID-19 pandemic as a launching pad for new product offerings, new business models (including subscriptions and ecosystems) and other innovations. They are looking to enhance digital channels, personalise experiences and become more sophisticated in using APIs to connect and share data with partners.

New product classes (e.g., more flexible and affordable lifetime savings products) should focus on the reasons consumers don’t buy them. For example, they should be designed for simplicity, so consumers can find them online, understand the value they offer and purchase them via self-service channels.  Insurers should also find intelligent and timely ways to engage with existing customers (e.g., around key life events) to boost their cross-selling and up-selling efforts, even as they clarify why and how they are adding value for consumers. Executing against those objectives will require more sophisticated omni-channel communications and well-defined customer journeys. Certainly, insurers must develop strong hybrid channels so consumers can ask questions or seek guidance when they need it.

It’s also a moment for insurers to live their purpose – providing protection and peace of mind to individuals, families and communities. As such, they should not be shy in sharing stories from their long histories helping consumers and societies recover from great crises. Financial education – perhaps in collaboration with regulators and public authorities – can also help people feel more confident about meeting their financial and retirement goals. Insurers that can take these actions effectively in the coming months are likely to find that the path to success runs through an increased commitment to purpose.