Life Insurance Predictions for 2H 2023

As an encore to our latest article discussing predictions for the P&C market in 2023, read on for our life insurance predictions and expectations for the second half of 2023. 

Increased Investment in Digital Distribution Channels

The momentum gained in digital transformation over the past years will continue in the latter part of 2023. As customers increasingly seek convenience and accessibility, insurance carriers will expand their investment in digital distribution channels. This includes optimizing user-friendly mobile apps, chatbots for instant customer service (i.e., HiMarley), and seamless online policy purchases. Carriers will look to attract the next generation of life insurance buyers, primarily Millennials and Gen Z, by increasing the percentage of policies they accelerate and make instant decisions on. Insurers that invest in these channels will likely gain a competitive edge by attracting younger, tech-savvy consumers.

Increasing Focus on Nondisclosure and Misrepresentation

As carriers continue to shift more of their business to digital channels, we anticipate an increased emphasis on addressing the issue of the rise in nondisclosure and misrepresentation in digital insurance applications. The unfortunate byproduct of online distribution, particularly in accelerated underwriting and fluidless decisioning, is a rise in risk. Currently, the main weapon used to combat increased risk in digital applications is premium rate hikes. However, by leveraging advanced data analytics, real-time intent data, and enhanced algorithmic underwriting, insurers will be better equipped to detect discrepancies between provided information and external data sources. High-impact questions like smoking, alcohol, weight, medical history, etc. can heavily impact premiums and are difficult to validate. This will prompt insurers to take a closer look at applicants, particularly their digital behavior while they engage with online applications. This allows them to determine who may be intentionally or unintentionally omitting crucial information during the application process.

Increasing Face Amounts for Accelerated Underwriting/Instant Decisioning

Moreover, as accelerated underwriting gains popularity, insurers will also explore increasing the face amounts eligible for this streamlined process. We’ve seen carriers raise their accelerated face amount from $250,000 to $2,500,000 in the last few years, and we expect to see additional carriers follow suit. By utilizing advanced predictive risk models and leveraging nondisclosure and misrep solutions, insurers can provide higher face amounts while maintaining acceptable risk levels. This move aligns with the industry’s efforts to provide faster, more accessible coverage to a broader range of individuals.

Rise of Personalized Policies

In the latter half of 2023, we expect an accelerated shift towards personalized life insurance policies. With the proliferation of data analytics and AI-powered algorithms, insurers will have the capability to not only assess individual risk profiles more accurately but also understand their goals and needs more effectively. This will lead to tailored coverage options that better match the unique needs of each policyholder. As Millennials and Gen Z begin shopping for life insurance policies, expect to see policies considering factors such as health data from wearable devices, social media behavior, personalized financial goals, and customizable riders.

Additional Datasets Leveraged for Underwriting

As the life insurance industry embraces data-driven approaches, the second half of 2023 will witness an expansion in the types of datasets utilized for underwriting. Beyond traditional factors, insurers will tap into diverse data sources to gain a more comprehensive view of applicants’ risk profiles. This could include information from electronic health records and dental records to wearable devices and real-time digital behavioral intent data captured during the underwriting process. By analyzing this broader spectrum of data and better understanding applicant intent, insurers can make more informed decisions, better assessing an applicant’s health, lifestyle, and overall insurability. This shift towards utilizing additional datasets underscores the industry’s commitment to refining risk assessment and improving the accuracy of underwriting processes.

Blockchain Exploration

Will 2023 be the year blockchain technology makes its mark on the life insurance industry? While blockchain’s decentralized and tamper-proof nature makes it an ideal solution for enhancing security in areas like policy issuance, claims processing, and fraud prevention – we don’t believe 2023 is the year it makes a splash. That said, we do think Insurance companies, both carriers and startups alike, will explore blockchain’s potential to streamline processes, reduce administrative overhead, and provide customers with greater transparency in their policies and claims. For example, Lemonade made headlines last year for launching the Lemonade Crypto Climate Coalition to provide climate insurance to African farmers leveraging blockchain technology. We wouldn’t be surprised to see more carriers exploring how blockchain can be integrated throughout their business. 

Concluding our Life Insurance Predictions:

As 2023 winds down and carriers begin road mapping for 2024, it’s critical to position themselves to cater to the ever-changing expectations of modern consumers. These life insurance predictions serve to help carriers focus on both the near-term and long-term trends we’re seeing in the industry. With that said, the focus will continue to be on creating better, more personalized digital experiences and accelerating as many policies as possible without increasing risk. Carriers that invest in solving this challenge will be best positioned to thrive in this challenging market.