The global life insurance gap is currently estimated at 400 – 450 billion dollars*. This is the total sum of premiums that would need to be paid for clients to offset the costs of potential risks. From the perspective of the insurance sector, this represents an enormous untapped potential, and yet the gap keeps growing rather than shrinking. Why is it so hard for insurers to persuade clients to invest in life insurance?
What’s making the insurance gap grow?
The list of arguments invoked “against” individual insurance has not changed for many years. Of course, the growing gap can, to a certain extent, be explained by a general lack of awareness of the importance of insurance cover (including life insurance). However, it is also worth looking at the explicit reasons given by the customers themselves:
- High price;
- Lack of trust in the products;
- Negative reputation of the insurance provider;
- Too many exclusion clauses and abstruse information;
- Fear of meeting with the agent;
- Aggressive hard-selling;
- No access to information before booking an appointment;
- Difficulties in communication with the insurer;
- Lack of knowledge about the sector/lack of understanding of its products;
- A group insurance scheme at work;
- Lack of time.
As we try to crack the riddle of “why are people so reluctant to take out an insurance policy?”, we keep coming across the same patterns of response. For most people around the world, insurance policies are just far too expensive and not intelligible enough. However, another important argument, one that the insurance industry should really take to heart, is that, overall, people really distrust insurance providers. We are often worried that even if we pay high premiums, when push comes to shove, we will never receive any money. There is a widespread belief that insurance providers construct their offers in such a way as to always find a loophole or an exclusion clause that will make us ineligible for a pay-out.
Interestingly, especially in the Polish market**, it is also common to hear that customers are afraid of meeting up with an agent. Polish customers often complain about the lack of access to information before they book an appointment. This brings up associations with hard-sell strategies, and, coupled with little to no knowledge about insurance policies and their intricacies, makes them worried they might leave the meeting with an unwanted policy that won’t even match their needs.
Life insurance and global changes
As the world around us evolves, so do customers’ ideas about how to protect their loved ones in the event of their death. First the pandemic and now, especially in Poland and the neighbouring countries, the war in Ukraine, have made people more likely to take an interest in life insurance. The pervasive sense of danger spurs us to seek protection and it is in such “protective” policies that customers are particularly interested today.
“It seems that the emphasis in life insurance will now no longer be on capital building or peaceful retirement, but on safeguarding your family for difficult times”.
Marlena Wilk, Solution Manager
In Poland, the instability of the financial market and product intervention measures have also reduced the demand for insurance capital funds (ICF): by 40% for those with regular premiums and by 70% for those with a single premium payment***. Today, people prefer to make sure their family will have enough resources to live on if they are no longer there to provide for them, that they have the means to support themselves through a period of illness and recovery, or that they can maintain their lifestyle if they ever lose their source of income.
Life insurance. How to fill the gap in the Polish (and European) market?
It seems that whatever actions insurance providers might or might not take (to combat customer distrust and simplify their products), there is a chance that the gap could be partially filled by enlisting employers to raise insurance awareness among their employees.
- build a framework for insurance offers together with agents/brokers;
- point out and explain insurance benefits;
- subsidise the policy to reduce the cost to their employees.
However, if they do so, they should keep the following issues in mind:
- Consider the situation in the world. For instance, do all insurance providers really have war exclusion clauses? Perhaps some offers are limiting these today?
- Bring the benefits of insurance protection to the attention of your employees. It is not enough to just list the benefits that may seem attractive to your employees (which is becoming a gold standard in the job market these days). It is also important to clearly spell out what such safeguards can do for them (financial continuity, protection not just for the employees but also for their family, etc.).
This approach would help increase the proportion of employees who take out insurance policies and build the image of the employer as a partner who takes care of their human capital.
Other ways to fill the insurance gap
Support from employers can have a significant impact on the market, but that’s just one factor in the game. Simplifying the product portfolio is still the most important step: it may be a good idea to offer all-risk products with clearly stated exclusion clauses or modular products that allow customers to select and personalise their choice.
However, to make such flexibility possible, it is imperative that we bet on advanced technologies, such as:
- Sales network support tools – to visualise modular products and analyse customer needs via surveys customers will actually want to fill out, and which can give us not only their demographic profile, but also reveal the fears that the product should be designed to address. Such hyperpersonalisation is possible with the use of AI solutions supported by the science of psychology. You can read more about this in our article about hyperpersonalisation
- Product factory – a solution that would start from well-defined and implemented legacy system products as a basis for building many different variants/sales packages dedicated for different customer segments.
Insurance gap vs technology
Are you interested in how technology can help fill the gap in life insurance policies (and more)? At Altkom Software, we have joined hands with our clients to search for effective solutions to the problems faced by the insurance industry. The fruit of our labours is a brand-new insurance ecosystem that addresses the challenges we discussed above.
* Swiss Re
*** Data presented at the 11th Congress of the Polish Insurance Chamber