Embracing Emotions in Life Insurance Part One: Create A New Model of Customer Engagement

The emotions involved in seeking life insurance are in direct conflict with the transactional nature of the process. Part one of a two-part series, this blog post explores why carriers must acknowledge the emotions involved in purchasing insurance and why using a people-centered approach to customer engagement benefits them. In Part two, I’ll lay out the steps life insurance companies can take to shift their model.

Several years ago when our financial advisor began talking to us about retirement planning, college savings for our infant daughter and the importance of life insurance, he said, “It’s not cheap, but you need to do it.”

He advised us on which provider to use, began the paperwork and explained how to continue the application process. While I didn’t look forward to the cost or the administrative aspects of applying for life insurance — “You’ll have to answer questions about health and income,” he told us — there was something oddly fulfilling about it.

Life insurance wasn’t a fun topic or process — “You’ll need to have physicals,” our advisor said — but it represented a milestone in our lives. I had a family and was ready to think about someone other than myself.

The woman processing my application asked some questions that caused me anxiety and defensiveness (drinking, exercise), while others I answered proudly (no smoking, healthy eating). However, I wasn’t prepared for one question: “Are your parents alive or deceased?”

My dad had passed away a few months earlier. She expressed sympathy as I detailed his battle with pancreatic cancer. I started crying, and apologized, explaining it was recent and I was still getting used to talking about it.

While purchasing life insurance involves “cold” elements — policies, premiums, risk, assets — for customers, the process can be very personal. The driving concept behind life insurance — your loved one’s security — coupled with a variety of potential emotions, whether it be mourning a deceased parent or reflecting on one’s own health and lifestyle, can make the process of buying life insurance emotionally charged.

The emotions involved in seeking life insurance are in direct conflict with the transactional nature of the process. When you couple that conflict with a variety of other hurdles — the need for a physical, the complexity of coverage types, the paperwork and the cost — it’s not surprising many people quit during the process and never purchase a policy.

Even if someone converts to a policyholder, lapsing policies significantly impact carrier revenue and growth. Most policyholders believe once you buy life insurance, you can “set it and forget it.” And carriers — who do little more than send premium reminders and administrative updates — do nothing to change that perception.

The opportunity for reinvention

So who’s scooping up these unconverted customers and lapsed policyholders?

Insurtech disruptors are capturing a portion of the $16 trillion in missed coverages that LIMRA identifies as being “stuck shoppers” who don’t finish the quoting process. Companies like Ladders are touting simplicity and ease, taking the complexity and burden out of purchasing a policy. In addition, banks and financial institutions are increasingly expanding their services to include annuities, leveraging their relationships with existing customers.

Meanwhile, life insurance companies are grasping to better engage policyholders to protect against these competitive forces. They’re often unsuccessfully creating Amazon-like portals and mobile apps in the hopes that self-service and digitization efforts will create more loyal customers.

Building a portal where you can upsell and cross-sell policyholders and expecting them to proactively visit it is false hope. Why? Because life insurance isn’t part of their daily lives.

Like it or not, life insurance companies have trained customers to believe the cold, transactional experience they’ve created is acceptable. However, this relationship can be improved by reinventing how life insurance companies do business using a people-centered approach that acknowledges how consumers actually make decisions.

Why more people don’t buy life insurance

Purchasing life insurance seems like a “no brainer,” so why don’t more people do it?

Decisions around purchasing life insurance can stir up negative emotions because of the nature of the topic (loss of life), while the complexity of the products and services can confuse potential policyholders. In addition, the benefits are intangible and long-term.

When reviewing online applications for 13 large life insurance carriers, 90% of their combined 269 questions asked prospects focused on coverage requirements, medical and health assessments, and administrative details, such as beneficiaries and current financials/assets. Meanwhile, only 3% – 8 total questions – are positive in nature or goals-focused with questions about future needs.

Life insurance companies must begin to change the core perceptions that influence people’s decision-making.

Reimagine your role as an advisor in life (not just life insurance)

Life insurance is ready for re-invention, and the key is a business strategy that re-imagines your relationship with policyholders.

• Focus on the Life Between — There’s a life in between policy inception and retirement or death. That life can include kids, college financing, health improvements and declines, salary shifts, second homes, care-taking of parents or grandparents. The definition of “security” for your policyholders will inevitably evolve, so all of these life milestones are potential touch-points with them to re-assess needs and determine upsell and cross-sell opportunities.
• Redefine Your Customers — Your policyholders may be the ones paying the premiums, but your customer base doesn’t end there. The beneficiaries are as important as the policyholder because they are the reason your policyholder is doing business with you in the first place. When you think about how you communicate to policyholders, consider the broader system of influencers and loved ones who are important to them. When you’re there for families in life – and in death – you not only develop a relationship where cross-sell and upsell opportunities are fulfilled, but also a pipeline of loyal, future life and annuity policyholders. According to LIMRA, claimants who are extremely satisfied with the claims process are four times as likely to do business with the carrier themselves compared to those claimants who are just satisfied with the process.
• Take on an Advisory Role — Not everyone can afford a financial advisor or wealth manager. The middle class represents an under-served life insurance customer segment, and they need guidance to find the right policy. You can play a valuable role in helping them understand what’s right for their family, what others do in similar situations and what value and security they will receive.

Changing people’s perception about life insurance is the goal of re-imaging your role and relationship with customers. Adopting a customer engagement model that is people-centered ensures you’re making business, technology, process and communication decisions that support this goal.

Learn more about how NTT DATA can help you guide the customer experience for your current and future policyholders.