The protection gap for the US’s middle income market is estimated at $10.2 trn, representing a huge opportunity for life insurers, according to a new study by Conning Research & Consulting.
“Over the past five years the missed opportunity in the middle market for life insurers has grown significantly, and our latest estimate is that it has reached $10.2 trn,” said Terence Martin, director at Conning Research & Consulting
Martin said there is a huge demographic bulge of consumers in the US entering their prime insurance-buying years, but the recession, combined with soaring healthcare costs, has caused the protection gap to balloon.
“Add downturns in the equity, credit and housing markets, and you get a sense of just what insurers are up against,” said Martin.
The Conning Research study, “Opportunities in Reaching the Middle Market with Life Insurance”, recommends insurers drastically increase their use of online channels and social network marketing to overcome challenges relating to distribution costs, access to insurance products and financial planning availability.
For insures struggling with the cost of underwriting, the implementation of predictive modeling and a more automated underwriting process holds promise, says the study.
Already popular in the property-casualty market, advanced predictive modeling technologies are beginning to be applied on the life side as well.
Conning’s study urges insurers to couple predictive modeling with social network marketing as a means of tailoring messages to online customers.
Whereas in the past, life insurers to date have viewed the channel as a supplemental communication and marketing tool, for much of the middle income market, the internet and social media are the primary channel for financial planning and advice.
“This change in approach, while subtle and still not prevalent for life insurers, may be the first tentative step to making progress in reaching the middle market,” Martin wrote.