Over the past year life insurers have had to rethink their strategies, being pushed to adopt greater levels of digital services and underwriting flexibility – an area where life insurers had typically lagged. While the direct channel was already gaining ground before the pandemic, consumers’ preference for life insurance is bound to continue changing even further in the coming years. This will be driven by expectations that are being shaped by their experiences in other industries. Personalisation will become key for assurance.
GlobalData’s 2020 UK Insurance Consumer Survey found that 24.8% of consumers visited a price comparison website (PCW) before purchasing term assurance in 2020, up from 19.6% in 2019. In the non-mortgage-related market the proportion of consumers seeking out comparison services was much higher at 31.6%. GlobalData’s 2020 survey also found that financial savings are increasingly becoming a key priority for term assurance customers, with 69.1% of consumers that would consider wearing an activity tracker and exchanged that data with a life insurance company would only do so for financial rewards, up by 18.6pp compared to 2019.
These findings illustrate how consumers are becoming increasingly self-reliant and financially conscious, especially when it comes to term insurance policies – a market that is heavily tied to the mortgage market. Despite this, non-mortgage-related was the only term assurance product to record an increase, up 2.2% in terms of new contracts sold in 2020. Meanwhile, contracts sold in the mortgage-related term assurance market contracted by 5.1% for the year. Going forward, GlobalData forecasts that new contracts for mortgage and non-mortgaged-related term will grow by 4.0% in 2022.
Growth will be driven by both an economic recovery and the removal of COVID-19 underwriting restrictions. But even more importantly, a greater number of consumers will purchase term assurance policies because the pandemic has illustrated the negative impact of unprecedented events. Ensuring family members are protected upon death remains the key driver leading to purchases in the term assurance market.
Insurers that have already adapted to the fluctuating market environment – including AIG Life, BGL Group, and Aviva – will be less impacted by consumer changes. Those that have gone even further by gamifying or innovating cover will be the ones to further benefit.
These include fully digital insurtech DeadHappy, which offers pay-as-you-go term assurance. Its application process invites customers to create a “deathwish” – something that makes the process more light-hearted and engages with a younger audience who do not normally think about death. In addition, fully digital insurtech Bequest launched a pay-as-you-go term assurance policy in July 2021, providing instant cover that targets parents and families. Bequest has rapidly captured venture capital investment interest, securing £1.7m in seed funding upon launching its new product.
If insurtechs are able to successfully streamline their protection onboarding – delivering a smooth claims process while providing the financial flexibility they are promising – then they will be setting a new standard for service delivery and meeting consumers’ newly established demands. Similarly, to that of personal motor, where usage-based-insurance has become increasing popular among consumers due to the impact of the pandemic. Resulting in incumbent insurers like Covea partnering with insurtech By Miles in order to reach customers.