Trends and the Evolution of Technology in Life Insurance

These trends are driving new and more efficient ways of doing business.

By Dan Pierson

The insurance industry is undergoing a major digital and technological transformation, and the life insurance sector is in danger of being left behind.

The life insurance industry hasn’t kept the same pace of digital adoption as other financial and insurance sectors. This is due in part to the highly complex and regulated nature of the business where advisors work with multiple carriers, all with different rules, file processes and digital tools, and a lack of standardization among platforms. Additionally, the industry is facing a shortage of human intellectual capital. According to Accenture, only 2% of US university alumni plan to enter the insurance industry.

We’re seeing fewer graduates, who bring fresh new ideas with them, entering life insurance compared to other financial services sectors. Meanwhile, the larger insurance industry is seeing record levels of investment in technology. In 2019, global insurance investment hit $6.37 billion, a 63%, year-over-year increase in funding, according to data from Willis Towers Watson.

And a recent McKinsey report says the average cost of technology increased from 2012 to 2017 in property, casualty and life insurance. Meanwhile, nine out of 10 insurance companies say they’re struggling to develop the technology infrastructure they need, blaming legacy software and the sheer magnitude of their IT systems.

Trends In Technology

While the insurance industry grapples with the demand to keep pace in the age of digital disruption, I want to discuss the dramatic shifts that have already taken place, thanks to technology.

Here are the biggest technology trends that have brought us where we are today and continue to drive new and more efficient ways of doing business:

• Mass adoption of email — This seems rather obvious, but it can’t be understated how the adoption of email dramatically sped up communication between all stakeholders. Until the mid-90s, businesses relied entirely upon fax machines and snail mail to deliver reams of paperwork. Instead of spending hours calling advisors or carriers, we were suddenly able to instantly share information directly with the push of a button.

• Mobile first — In today’s age, brokers expect instantaneous results from interaction: namely, quotes and the ability to convert — even faster than through email. The coronavirus pandemic has only heightened our awareness of how much can be done online. We have seen a shift toward secure mobile platforms where advisors, brokers and carriers have real-time communication tools and access to secure databases of information anywhere and at any time.

• Data visualization and reporting — Through the advent of modern software, advisors are able to use data visualization tools to better illustrate the products they’re selling. Before the adoption of the personal computer and business software, advisors worked with one carrier and carried around a rate book. Advisors couldn’t manipulate the numbers into a complex spreadsheet until the technology caught up. Fast forward to today, and you have all new interactive, personalized, dynamic spreadsheets and reporting available.

• Machine learning/AI — Machine learning has the greatest potential of all the trends to improve nearly every process in our industry. The adoption of machine learning and algorithmic processes has already fundamentally changed the way advisors see their role in the industry in just the last few years. Carriers now use statistical algorithms to underwrite, and machine learning will continue to speed up the automation of basic tasks. Of course, AI isn’t fully mature yet, and a human touch is still required, but companies that fail to evolve with this technology will find themselves left behind.

In the past months, very few could have predicted how much, and how quickly, we would need to reevaluate our relationship with tech to meet the demand of advisors and clients alike. Those advisors who continue to embrace the technological shifts in the industry and find ways to bring value to their customers will find new opportunities and thrive in this tech-driven world.

Dan Pierson is an insurance industry veteran who ran several insurance businesses, eventually selling a nationally recognized insurance agency. He started LegacyShield to help advisors grow and digitize their business.