Life insurance has lagged other sectors in insurance and financial services in its digital transformation. A 2016 McKinsey report pointed to “diverging views on the pace of change and the threat of digital disruption.” But for Luis Romero (pictured), there’s more to the story, and the pace of life insurers’ digitization has quickened since COVID-19.
“Life insurance has been lagging for all kinds of reasons. One of them is that the business is very complicated, but there’s also a lot of legacy systems to replace,” said Romero, the founder and chief executive officer of Equisoft, a global provider of insurance and investment software products. “As you can imagine, there was a lot of catch-up during the pandemic.”
For the CEO, the pandemic brought two interesting developments to life insurance. “One is that consumers became more aware of their mortality, so sales for most of our clients have gone up in the last two years,” he shared with Insurance Business. “But at the same time, there was a need to accelerate the digitization process as everyone had to work from home.”
Carriers and brokerages quickly adopted to the cloud and online platforms as manual processes became “painful,” according to Romero. “Equisoft has been growing exponentially, doubling our revenue and number of employees in the last two years,” he said, adding that life insurers comprised about 70% of their clients.
Working with many carriers, Romero said he saw long-term digitization plans accelerated by COVID-19. “We saw those 10-year timelines melting into three years for even the largest insurers. Now they're talking a few years [to digitize]. Everyone has become a lot more aggressive in their transformation,” Romero observed.
Engaging the younger generation
According to the 2022 LIMRA study, Gen Z (those aged between 18-25) and Millennials (those aged between 26-41) are the age groups who were more likely to have considered buying life insurance due to COVID-19. But a growing number of them are choosing to buy directly online, rather than through brokers or agents, Romero said.
“I think the time when 20- or 30-something people would go to an agent and say: ‘I want life insurance; what should I buy?’ – those days are fading,” he told Insurance Business, noting that direct-to-consumer initiatives are growing.
Life insurers recognize that they need to have a ‘buy’ button on their website to cater to younger consumers who want to a fully digital experience. Appetite for online financial tools such as customer relationship management (CRM) systems has also increased dramatically in the past few years, according to Romero.
“The younger generation will look online, educate themselves, and when they want to have a deeper conversation with an agent or financial adviser, their expectations will be higher,” Romero said. But that doesn’t mean agents in the life insurance space will be edged out. Rather, the ongoing digital transformation will help to attract new blood to the insurance workforce and produce a different kind of agent.
“Agents are becoming more sophisticated, and that's good, because the younger generation doesn't want to waste time talking to people if they can do it online,” Romero said. “If customers receive good advice, they will see the added value, and that's an opportunity for insurance companies that provide the right support and tools to agents selling their products.”
Brokers and agents can expect to have more time to spend with the clients providing advice rather than accomplishing paperwork. As more tasks are digitized, and processes become further integrated, agents will be able to serve a larger client base and focus on improving the quality of their services.
“Where it used to take agents a month or so to meet a client, quote and issue a policy, and get a commission, we now have clients who are doing that within 30 minutes,” Romero said.
