With the life insurance coverage gap appearing to widen, a report from the Geneva Association – an international insurance think tank -has recommended that insurers embrace technology to improve the customer experience and reduce perceived product complexity.
The report noted that over the past three decades in the US, the share of households holding individual life insurance has declined from 62 to 44 per cent.
As a result, the life protection gap in the U.S. has reached a US$20 trillion notional amount of insurance that is equivalent to 135 per cent of the country’s GDP.
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Given that the life insurance protection gap appears to be widening, the report said insurers need to tackle complexity in order to reduce the insurance gap.
The report said: "Products are often loaded with multiple enhancements from the outset without having ascertained the customers’ willingness to bear the associated cost."
It added that reducing complexity would also make distribution more cost-effective.
The report said: "Technology could, for example, enable customers to build the product the way they want.
Based on ‘big data’, insurers could predict what customers need, instead of asking them to answer hundreds of underwriting questions.
"Predictive analytics could enhance customer segmentation and enable improvements in pricing, underwriting and marketing. Complexity would continue to exist but rather internally at the insurers than in their customer relationships."
Key finding from Geneva Association report: Perceived product complexity and opacity is a major roadblock to closing the protection gap.
