Authors: Petr Vaclav, Vice President, Decision Science, Reinsurance Group of America, Incorporated (RGA); Braam Kruger, ACIA and Vice President, Business Development, RGA Life Reinsurance Company of Canada (RGA Canada)
In the world of insurance, digital distribution has become a critical avenue for growth and customer engagement. However, the life insurance industry has faced significant challenges in establishing successful digital direct-to-customer (D2C) propositions. What are the key features of a sustainable digital distribution model? And how do you optimize the end-to-end customer journey using a customer-centric approach?
Challenges in life insurance digital distribution
The insurance landscape in developed markets, including Canada, has seen stagnation in life insurance growth over recent decades. In fact, life insurance ownership rates in Canada have declined from 60% in the 1980s to less than 45% in 2019. While other insurance products, such as car and home, have thrived in the digital space, life insurance sales have struggled to gain momentum, and direct sales channels account for only 3% of life insurance sales (by face amount) in Canada – a number that has remained steady over the past five years. One of the primary reasons behind this disparity lies in the end-to-end customer journey.
Most digital, direct-to-consumer journeys are basic versions of advisor-led journeys, where the absence of “human touch” results in a lack of emotional and persuasive context to bring meaning to life insurance and awaken the need for it. Customers are often confronted with confusing interfaces, complicated jargon and difficult decisions, leading to poor customer experiences and very low conversion rates.
Similarly, most insurers are rightly focused on simplifying the customer journey and experience. But making things simple is hard, and many get simplicity wrong. Too often, making something shorter, quicker or frictionless is used as a proxy for making it simpler. Simplicity is about more than just the removal of clutter; it is about bringing order to complexity.
“The best user-experience practices from other industries do not wholly translate to the life insurance journey, and this can lead insurers to inadvertently create more complex journeys.”
In addition, simplified issue products have resulted in higher decline rates, further affecting the overall business model. The presence of commoditized products with limited differentiation has fueled strong competition on price, making paid advertising an expensive and inefficient method of customer acquisition.
Keys to success in life insurance digital distribution
Life insurers must leverage digital, data and behavioural science to create simple solutions based on a true understanding of human behaviour. By adopting a much more customer-centric approach to designing, implementing and nurturing digital journeys and experiences, insurers can balance the absence of human touch and create multi-channel acquisition strategies and messaging that resonate with different audiences.
Below are seven foundational features that life insurers need to implement and continuously refine to succeed in digital D2C distribution.
- Optimizing for mobile phones: With more than 80% of digital traffic and conversions coming from mobile phones, it is essential that insurers design and optimize websites to meet the expectations of mobile users. This involves optimizing the landing page, correctly structuring and tagging pages, using next-generation image formats, ensuring call-to-action buttons are visible and much more. Google and other platforms also reward mobile-friendly sites with higher search rankings and better visibility, which translates into better conversion rates at lower costs.
- Bringing meaning to life insurance: Appreciating the need for life insurance can be challenging – death and finances are some of the most uncomfortable topics for people to think about. Our research at RGA also reveals that for many people it is difficult to make a connection between a life risk and insurance as a solution to address that risk. To overcome this, insurers must develop clear and empathetic value propositions that resonate with customers’ context, emphasize the risks and offer an easy-to-understand solution.
- Awakening the need for life insurance: By combining clear messaging, captivating visuals and evocative captions, insurers can awaken the need for life insurance across different digital channels, engaging target audiences and driving organic, high-intent traffic to their websites. RGA experience shows that insurers can reach and connect with hundreds of thousands of customers on social media and search platforms without spending loads on paid advertising.
- Providing helpful, jargon-free content: Offering informative, personalized content while avoiding jargon and simplifying technical terms can further awaken the need for life insurance and help customers make informed decisions. Moreover, well-written and organized content that engages customers can improve search engine optimization (SEO), increasing website visibility and attracting organic and high-intent traffic. Content and SEO can be a sustainable customer acquisition strategy at much lower cost compared to paid advertising.
- Personalizing life insurance to lifestyle needs: Selecting sum insured is one of the biggest drop- off points in the customer journey. While some insurers have introduced financial calculators, these often ask many difficult questions and spit out a number that does not mean much to the customer. Instead, insurers can adopt tools like RGA’s Face the Future, which simplifies and yet personalizes the process, helping customers understand the sum insured needed for the lifestyle they want their family to have – further bringing meaning to life insurance.
- Striving for a seamless customer journey: From the first interaction to the policy purchase, the customer journey should be designed with customer experience in mind. By applying behavioural science, user interface and user experience principles, insurers can guide customers seamlessly through each step of the journey. This, together with removing negative friction points (e.g., scrolling, typing, too many options and decisions) and streamlining the underwriting process, can considerably reduce drop-offs and boost conversion rates.
- Leveraging data and behavioural science: By responsibly tracking and analyzing customer interactions and behaviours, insurers can gain valuable insights into their target audience, optimize user experience and streamline underwriting. Machine learning models can detect non-disclosure and predict sales conversion or early lapse based on behavioural and contextual signals. These insights can be then combined with behavioural science principles to design effective communications and tools that foster customer honesty, confidence and loyalty.
Canadian case study
Research shows that raising policy prices by as little as one dollar causes drop-off. Therefore, life insurers should explore different strategies to optimize trade-offs between risk, price and sales conversions. More importantly, they should ensure underwriting enhancements will really make a difference from both risk and sales perspectives.
“Again, customer experience is key. Optimizing the customer underwriting journey – but without changing the risk profile – can achieve significant results.”
For example, RGA Canada partnered with Securian Canada1 to design a fit-for-purpose term life insurance product that streamlines the overall customer experience, speeds up the sales process and improves conversions, delivered through a digital life insurance advisor, PolicyMe. Andrew Ostro, CEO and Co-Founder of PolicyMe discussed this technology while diving into the world of insurtech on the Seeing Beyond Risk podcast.
In the evolving landscape of life insurance, a successful digital D2C distribution model is necessary for sustained growth. Life insurers who simply digitize an advisor-led journey and run paid ads will experience limited success, if any, with digital distribution. They will have a poor, friction-filled customer journey, burn through loads of money and, more importantly, end up with little sustainable foundation to acquire, convert and retain customers over the long term.
Instead, by adopting a customer-centric approach and incorporating the features outlined in this article, life insurers can navigate the challenges of digital distribution and unlock its full potential. With a focus on optimizing the end-to-end customer journey and leveraging digital, data analytics and behavioural science principles, insurers can pave the way for a future of accessible and meaningful digital D2C life insurance for all.
This article reflects the opinion of the authors and does not represent an official statement of the CIA.
1 Securian Canada is the brand name used by Canadian Premier Life Insurance Company and Canadian Premier General Insurance Company to do business in Canada. Policies are underwritten by Canadian Premier Life Insurance Company.