This is an evolving article, it was last modified Sep 14, 2021

The user experience in the annuity and life insurance industries ties to the ever-evolving challenges firms are facing, from shifting regulation to perception issues and declining sales. Firms can get ahead with a leading digital experience, allowing them to pivot to new products and reposition annuities and life insurance for Millennials and Gen Z.

Online positioning and education can affect public perception of life insurance and annuities

Annuity firms face a particular challenge, as evolving regulation and public perception create a difficult sales environment. Variable annuity sales are falling as the industry moves away from positioning annuities as investments. Digital positioning can help annuity firms overcome these challenges. A new industry group, the Alliance for Lifetime Income, repositions annuities as guaranteed retirement income for life or protected lifetime income, notably avoiding the word “annuity” in many cases. Corporate Insight (CI), which continuously monitors the digital experience across a number of industries to deliver in-depth, unbiased competitive intelligence, tracks both the public- and account-owner-facing online annuity experience. Firms in CI’s Annuity Monitor coverage group vary in adoption of this phrasing. New York Life advertises annuities as retirement income and Lincoln does so as protected income, but other firms still adhere to annuity. Digital resources can also help educate prospects on the role of annuities in insuring retirement savings against longevity. CI’s best practice reports establish that leading firms promote annuities within a full suite of digital retirement planning resources, including calculators, to educate prospects and increase sales.

Firms face similar challenges in the life insurance space, with digital expectations, shifting regulation and consumer education presenting challenges. Surveys find that the top reason for not purchasing life insurance is the price, in part because consumers overestimate life insurance premiums by 300%. Research from CI’s Life Insurance Monitor service pinpoints that firms can counteract this with digital quote tools and needs calculators to close the life insurance gap. Industry leaders also stay atop sales trends by emphasizing the products that remain popular. Sales of hybrid life and long-term care policies rose from 15,000 in 2007 to 404,000 in 2018, and more than half of Americans say they are somewhat likely to buy a combination policy, despite a lower percentage of people purchasing life insurance overall. Though these policies remain popular, firms can struggle to provide resources on hybrid life and long-term care insurance. Annuity and life insurance firms must offer a strong end-user digital experience to keep ahead of their competitors.

Consumers overestimate life insurance premiums by 300%

Firms should communicate early and often about COVID-19 and market volatility

The largest challenge facing the life insurance and annuity industry currently is the coronavirus crisis and accompanying market volatility, which have dramatically affected insurance issuers’ bottom lines and the way they do business. Life insurance and annuity firms, often slow to evolve, suddenly face the difficult task of communicating to prospects, clients and financial professionals about how they are adapting to rapidly changing crisis-related needs. To this end, firms must employ every possible channel of digital communication to reach constituents—from personalized emails to digital press releases to notifications before and after login. Indeed, early and effective communication about coronavirus can bolster the digital customer experience and foster client loyalty during this challenging time.

TIAA Email to Customers (Truncated)

Coronavirus has already impacted life insurance and annuity sales and will likely continue to for the foreseeable future. In an April 2020 study of U.S. and Canadian life insurers, LIMRA found that although the overall number of life insurance sales has remained constant since before the virus, the crisis has radically changed how companies sell policies. In March, 33% of firms surveyed noticed a decline in in-person applications, while 25% reported a surge in online applications. The trend away from in-person life insurance sales and toward online purchasing is likely to continue as the pandemic spreads and communities adjust to shelter-in-place orders.

This makes the digital user experience in annuity and life insurance even more important. A decline in face-to-face interactions between customers, financial representatives and employees of insurance firms makes digital communication essential. Firms have used emails; press releases; and public, account owner and advisor site notifications to communicate about coronavirus. Most life and annuity issuers have added messages from their CEOs affirming their commitment to customers during the crisis and/or encouraging investors to stay calm in the face of market volatility. Commonly, such as in releases from Transamerica and Lincoln Financial Group, firms will promote their donations to non-profit groups to fight coronavirus, or they will offer advice about financial planning, such as in releases from TIAA or MassMutual. Some firms, such as State Farm, even introduced new pages collecting insights on the crisis. Equitable stands out for launching a social media campaign, #PlanWhatWeCan, which promotes financial planning during the crisis. The firm also introduced a new microsite that collects pictures from participants.

Equitable #PlanWhatWeCan Microsite Landing Page (Truncated)

Messaging for advisors often focuses on how to continue selling products without in-person interactions with clients. Specifically, MassMutual and Guardian have both released guides for selling insurance from home.

As the situation evolves with vaccines and new variants, firms must continue adapting to the challenges that the pandemic presents. Maintaining active, prominent communication channels between prospects, clients and financial professionals will be key to maintaining relationships during this crisis. Our Life Insurance Monitor and Annuity Monitor teams are continuing to document new digital capabilities and communications from firms through blog posts and biweekly updates, while a dedicated section of our authenticated site collects coronavirus-related collateral across all industries we track.

Direct-to-consumer offerings provide digital innovations in the annuity and life insurance space

Established annuity and life insurance firms face new competition from insurtech startups offering direct-to-consumer products, bypassing the traditional advisor-sold model. CI’s survey of life insurance advisors found that 49% of respondents felt that startups could become a significant competitive threat to their businesses. Firms that do not track digital innovations in the direct-to-consumer annuity and life insurance space will fall behind. Startups often provide an innovative user experience in annuity and life insurance.

Many traditional annuity and life insurance firms have responded by teaming up with insurtech startups. Blueprint Income, a fiduciary startup that positions annuities as “personal pension[s],” offers annuities from many established firms, including 10 firms in CI’s coverage group. Where the traditional annuity-buying process is opaque, Blueprint provides an illustrative 32-day timeline and promises to guide prospects through the buying process. Established firms have inched toward this innovative approach, with Pacific Life offering a modern product page for the Next Deferred Income Annuity, available through Blueprint.

Established life insurance firms face similar competition from insurtech startups offering direct-to-consumer term life, often with expedited underwriting. Firms such as Ethos, Fabric and Ladder promise that prospects can apply and receive a decision in five minutes, compared to the lengthy application times for traditional life insurance, a weeks-long process that often includes blood and urine tests.

Traditional life insurers are responding with their own direct-to-consumer offerings. Haven Life, a direct-to-consumer life insurtech firm in CI’s coverage group, is backed and owned by MassMutual. The partnership allows Haven Life to leverage the established firm’s financial strength and underwriting data, while MassMutual can use Haven Life’s modern technology to serve another group of customers.

Firms also seek to offer new digital products and services to attract Millennials and Gen Z to life insurance. Insurtech startup Life by Spot offers short-term hybrid injury and life insurance to thrill seekers. Other startups focus on post-life services, providing digital personalization that extends beyond the traditional life insurance experience. Annuity and life insurance firms must keep abreast of digital trends, as user expectations are set by the smoothest application processes and perks, whether offered by established firms or insurtech startups.

The coronavirus crisis has significantly increased consumer interest in direct-to-consumer online life insurance. Searches for life insurance coronavirus were up 400% in March 2020. In particular, searches for online life insurance distributors Ethos, Ladder and Haven Life were up 100%, 90% and 50%, respectively. In April 2020, John Hancock added a new banner to its public site homepage inviting prospects to apply for term life insurance with “no labs required.” These examples demonstrate the increasing importance of broadening access to online life insurance during the coronavirus crisis.

Expedited life insurance application processes help traditional insurers keep pace with tech-savvy startups

Today’s consumer expects purchases to be fast and simple. In fact, nearly half of Americans said they would be more likely to purchase life insurance with simplified underwriting. Additionally, firms can improve their reputation by offering an expedited and simplified application process, as 11% of Americans say they have avoided buying life insurance due to confusion. Eleven of the 15 firms in CI’s coverage group provide alternatives to traditional underwriting processes, placing themselves in a competitive position against more technologically advanced startups. This not only makes them more appealing to prospects but eases advisors’ worries, as advisor survey respondents cited startups’ quick underwriting (56%) and simplified application processes (50%) as competitive threats to their businesses. Balancing advisors’ expertise and technology’s efficiency serves all parties.

Firms vary in their implementation of accelerated application programs. In our July 2019 report on accelerated application programs, we delve into the individual approaches firms have for decision timelines and program promotions. The time between submitting an application and receiving a decision can range from an instant to a week. While this is a pretty vast range, it is an improvement over the standard several weeks a traditional process can take. Some firms have touted the successes of their processes, including higher percentages of in-good-order applications and reductions in required medical records. All firms promote their programs with advisor-facing materials, encouraging advisors to use the processes with prospects and existing clients and offering guides or flyers to walk them through it. Firms fail to promote accelerated applications on their public sites, increasing the chances that a self-educating prospect will opt for a direct-to-consumer brand that actively promotes its fast underwriting turnaround.

Annuity and life insurance providers fail to service mobile users

In order to retain users, firms must deliver outstanding mobile app features that compete not just with the leading apps in the annuity and life insurance space but with the apps that users engage with every day. CI’s survey of brokerage mobile app users found that the more satisfying users found an app, the more frequently they used it. Annuity and life are low-touch areas, but if usage in high-touch industries such as brokerage are so affected by satisfaction, it stands to reason that these industries will be as well. Unfortunately, annuity and life insurance mobile apps currently lag behind those from other financial services sectors, often failing to offer even basic account capabilities or information.

Brokerage mobile app usage by user satisfaction
How often do you log into your brokerage firm’s mobile app, typically?

The Life Insurance Monitor and Annuity Monitor services have found significant room for improvement in the mobile space. Among the 17 life insurance firms we track, only 11 offer a mobile app with life-insurance-specific capabilities. These capabilities are often limited. For example, only half of these life insurance apps offer contact information updates. Annuity mobile app capabilities are similarly limited, with only 61% of the annuity firms we track offering an app with annuity capabilities—a number that is actually shrinking after Jackson discontinued its iPad app and MetLife’s app stopped offering annuity capabilities. Equitable is a leader in both the annuity and life insurance mobile app spaces, providing an app that mirrors its mobile web account owner site. The firm has remained a mobile app leader despite mainly focusing on design and branding tweaks over the last four years, highlighting the industry’s glacial pace.

Firms should be mindful that lackluster annuity and life insurance apps do not set user expectations. Rather, the apps that users frequent most—Uber, Instagram and Amazon—set users’ expectations. Annuity and life insurance issuers must improve their mobile app experiences, as users expect that changing their address in their life insurance app will be as simple as uploading a picture to Instagram.

Some firms outside the traditional space stand out by offering unique features within their apps, heightening user experiences and encouraging increased engagement. John Hancock partner Vitality rewards users with lower premiums for meeting health and fitness goals, incentivizing policyholders to log their information, providing an additional touchpoint with the firm. JennyLife, a startup marketing life insurance to new mothers, promotes itself as the only life insurance firm to offer in-app life insurance applications, making it a quick solution for busy caregivers. Because the industry lags so far behind, firms can separate themselves from competitors simply by providing basic features that augment user experience, such as account customization options.

As the life insurance and annuity industries respond to rapidly evolving challenges in an increasingly online world, firms that offer leading digital experiences will have an advantage over less nimble firms. Research from Life Insurance Monitor and Annuity Monitor can help firms track innovations in the digital user experience in annuity and life insurance and stay ahead of the competition.

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