The digital revolution in insurance

The insurance industry is undergoing profound change. But this disruption is not just digital — harsh market conditions, demanding customers and innovative new market entrants are just some of the forces transforming the insurance industry. But where there is a challenge, there is an opportunity. And all these sources of disruption can be harnessed.

As the traditional business model of insurance firms is disrupted by external and internal forces, insurers are facing increasing pressure to innovate and adapt. Customers of today are fundamentally different from their parents and grandparents. Not only did their needs, knowledge and expectations expand exponentially over the past decade, but the blending of technology with our everyday lives has created a new kind of consumer: a digital native.

Customers became the disruptive force in the insurance industry. With so much focus on instant gratification, endless choice and consistent change are omnipresent. And with comparison sites, ratings and testimonials just a click away, customers are quick to leave sign-up processes as soon as they encounter friction.

According to Deloitte, by 2024, nearly 33% of the premium insurance volume will come from brand new propositions. That means that the industry is rapidly shifting from product-led to service-led offerings that deliver a holistic experience to customers. It also means that technologies are quickly maturing. While AI, IoT and big data have been buzzwords until recently, today, it is difficult to imagine the future of insurance without these technologies.

Insurance always had the reputation of a very conservative industry. This, too, is rapidly changing. In an effort to push their digital transformation initiatives forward and satisfy the demands of modern consumers, insurers today became early adopters of the latest technologies. Digital-first insurers and tech giants entering the insurance space are one of the forces pushing the industry as a whole toward an innovative mindset.

Personalization is the name of the game. Laser-focused personalization capabilities are the new competitive edge when it comes to acquiring and keeping customers in 2021 and beyond. Customers are well aware that digital communications mean that their insurer collects their personal data — everything from behavioral data to their location or any information they have submitted. In return, customers expect a business to use this information in order to improve and personalize their experience.

From the moment a potential client lands on an insurer’s website, it is up to the insurer to use the treasure trove of data they have on each user in order to improve their experience. The ability to deliver personalized, well-timed offers is a primary driver of conversions in the digital realm. Offering a specific person a tailored product at a perfect price point can significantly increase a policy sale probability, customer retention, as well as lifetime value.

This shift toward digital journeys reveals how insurers are building and maintaining their customer relationships. From your website and your mobile app to your social media profiles and your email campaigns, insurers must always deliver the best customer experience. To build deeper relationships with customers throughout the entire customer journey from application to cross-selling, insurers must build engaging, personalized journeys at every step of the way.

Life insurance isn’t an investment, but it does have that savings component. Life insurance is a conservative portion of your investment portfolio that allows you to put in dollars on a tax-deferred basis, and unlike other vehicles, you get to control the flexibility and the options. If properly put together and funded, you can take out a tax-free income over a period to supplement your retirement.

Life insurance can also be used to replace income from your pension or Social Security. Lastly, it can be used to cover long-term care costs. A lot of modern policies even have benefits for long-term care. With life insurance policies with cash value, the cash value grows tax-deferred within the contract, and beneficiaries are paid federal income tax-free.

Using life insurance and buy-sell agreements upfront can help guarantee continuity of the business. There are always going to be expenses that come along with an estate. Life insurance provides liquidity to pay for some of those expenses and estate charges.

While purchasing life insurance, term insurance, also known as ‘pure’ insurance, is popular because it’s easy to understand and considerably less expensive than other types of permanent life insurance, such as universal-life or whole-life insurance policies. A whole-life or universal-life policy may cost 5 to 15 times more than a term insurance policy with the same benefit. It’s no surprise the most popular type of life insurance is term insurance. It is important to explore ways to use life insurance as part of your financial plan.