Selling Life Insurance

Justifying Death & Taxes

A 2020 spike in life insurance sales shines a new light on reaching customers virtually

by Patrick Flood

Mr. Flood is an analyst on the Life Insurance and Annuity Monitor teams at competitive intelligence firm Corporate Insight. Visit here.

Ben Franklin, founding father of the U.S. insurance industry, among other things, in a 1789 letter popularized an aphorism that the only certainties in life are death and taxes. And while the past 232 years saw both the independence of the colonies and a significant public opinion shift on the morality of insuring one’s life, death and taxes remain certainties.

They also remain a problem for modern-day life insurance firms.

Life insurers should be on the upswing right now, with double-digit increases in the number of policies sold last year and significant search interest in wake of the pandemic. Yet firms continue to face a long-term decline in sales, in part driven by a struggle with word-of-mouth advertising. The reason: Life insurance has a death and taxes problem. That is, the only certainties for policyholders are death benefits and premiums. Neither is a positive experience for policyholders.

Death is famously poor at garnering word-of-mouth recommendations, surpassed in unpopularity only by paying bills. While policyholders may revel in the security of life insurance and even have warm feelings for their insurer, they may not necessarily want to bring up the inevitability of death or their reasonably priced insurance premiums during a Zoom happy hour. Life insurers that can solve this problem and foster positive engagement while policyholders are alive will reap the benefits of word-of-mouth advertising.

A Digital Approach

Several life insurance firms are attempting to do just that with new, digital benefits for their policyholders. Firms tracked by Corporate Insight’s Life Insurance Research Services now offer free app subscriptions, discount programs and wellness trackers to benefit policyholders while they are alive—and thus able to offer recommendations to friends and family without a Ouija board. CI’s tracked firms are also taking a renewed interest in creating fully digital application processes, to turn these recommendations into new customers.

Wellness programs, as seen from John Hancock, Principal and State Farm, are currently the most popular method for creating positive engagement with customers. Firms offer a financial reward—lower premiums or gift cards—to policyholders for completing healthy activities, which users record in an app. These behavior-change platforms, developed with a third party, seek to gamify life insurance while creating healthier policyholders, a win-win for insurers.

John Hancock’s Vitality program, which CI has monitored since 2017, remains the clear leader and innovator among wellness programs. Available on all life insurance products, the program allows policyholders to earn premium discounts and rewards, such as a Fitbit or Amazon Halo wearable fitness tracker, for engaging in healthy habits like exercise, sleeping well and eating healthy foods. Other rewards, including retail discounts, an Amazon Prime subscription and a subscription to the meditation app Headspace, are available to users when they meet certain criteria. The firm also offers a version of the program, called Aspire, for policyholders with diabetes. The Aspire with Vitality program includes access to the third-party Onduo program, which offers free testing supplies, virtual consults and personal health coaching.

Principal offers its own wellness program, My Principal Lifestyle, which offers gift cards to policyholders for completing fitness challenges. Principal’s app specifically focuses on cultivating word-of-mouth advertising. The firm makes the app available for anyone to download as a free fitness tracker—the program’s FAQ page specifically encourages users to invite their friends, family and co-workers to use the app—but only Principal policyholders can earn gift card rewards. This strategy encourages existing users to tell friends and family about the app and then entices those new prospects—who are presumably healthy exercise enthusiasts who the firm would want as policyholders—to apply with the promise of gift cards. State Farm offers a similar program, called Life Enhanced, although it remains invitation-only and is not heavily publicized. Both apps were developed by third-party Sureify Labs.

Direct-to-consumer insurer Haven Life, which CI has tracked since 2016, takes a different approach to encouraging word-of-mouth advertising. Instead of a wellness program, the firm offers policyholders a group of freebies it brands as the Haven Life Plus rider. Available at no additional cost to policyholders in eligible states, the rider includes an online will-making service, subscriptions to fitness and jetlag-fighting apps and access to an online document vault, as well as discounts at CVS MinuteClinics. In a panel at the 2020 SIR Annual Conference, Matt Myers, the head of customer acquisition at Haven Life, and Newman H. Rochester Jr., the vice president of business development at Prudential, agreed that the life insurance industry needed to generate word-of-mouth advertising with new living benefits. They also agreed that the industry was struggling to innovate beyond wellness programs with wearable fitness devices. Haven Life Plus represents a first step, but like wellness programs, it makes firms reliant on third parties to provide value to policyholders.

How COVID Spurred The Digital Sale

Life insurance startups exist because traditional firms failed to meet customer expectations around the life insurance application process...

While the COVID-19 pandemic sped up digital adoption throughout the financial services industry, CI did not see a rise in new insurance-branded wellness apps or benefit riders similar to Haven Life Plus in 2020. Instead, life insurance firms focused resources on creating or expanding digital application processes—another area in dire need of positive customer experiences.

As with the policyholder experience, the life insurance application process can be antiquated. Applicants need to fill out paper forms, submit blood and urine samples, and wait weeks for a decision. Leaving aside the issue of marketing a product that requires a customer’s blood and urine, life insurers are still failing to meet customer expectations with a reliance on paper applications. Nearly every other financial product—bank accounts, car insurance, credit cards and investment accounts, to name a few—can be opened digitally, and often using only a smartphone. Meanwhile, only 65% of the life insurance firms tracked by CI even offer an app, none allow users to apply through one.

New Digital Tools

In the last year, CI saw several life insurers roll out new digital tools to help advisors and prospects complete applications online. MassMutual and Principal expanded existing programs to allow for more eSignature or for policy submission without a medical exam. John Hancock took several steps to speed up its application process, introducing an electronic application platform and announcing two partnerships last year to speed the application process: Human API helps the firm’s prospects share medical records in real time, while Clareto offers access to 5.2 million patient records through regional, state and national electronic medical record vendors, eliminating paperwork and speeding the application process. Firms are leaning on digital medical records to help prospects avoid invasive blood and urine tests, following the old sales adage that prospects prefer to buy financial products that do not require blood.

But these remain baby steps. Life insurers have long been capable of offering short, simple application processes, as insurtechs have demonstrated. Firms like Bestow, Ethos, Haven Life and Ladder Life offer streamlined applications, and from a customer’s perspective, these fully online processes are the only meaningful difference between startups and traditional firms. Life insurance startups exist because traditional firms failed to meet customer expectations around the life insurance application process. While traditional firms have closed the gap somewhat during the pandemic—Principal now offers a fully digital term application process, for example—insurtechs remain clear leaders in the digital application process. As such, CI recently added Bestow, Ethos and Ladder to our coverage set as examples of innovative application processes and account owner sites.

Closing The Application Gap

Of course, after the policy issue, even insurtech firms face the same death and taxes problem as traditional insurers—and once traditional insurers close the application gap, insurtechs will need to find new ways to stand out and gain all-important word-of-mouth recommendations. So far, insurtechs have decided that paying for word-of-mouth recommendations is the optimal strategy, with firms offering money or Amazon gift cards through referral programs.

All four insurtechs tracked by CI offer payment or gift cards for successful referrals, demonstrating that these firms are at least aware of the importance of word-of-mouth advertising for a product that struggles with it. Still, this is a half-measure. One imagines a genuine, positive experience with life insurance will prove more persuasive to friends and family than the possibility of earning the referee a $50 gift card.

Wellness programs, free subscriptions and digital applications all make policyholders more likely to recommend life insurance. They also help bring insurers into the 21st century and may help firms reverse life insurance’s long-term decline in popularity. The competition for word-of-mouth recommendations is helping to modernize the industry after decades of failing to join the digital age. Corporate Insight will be eager to track the new methods firms create to foster positive engagement with policyholders, as firms seek to make positive engagement, along with death and taxes, one more of life’s certainties.