Articles - Lessons from lockdown on life insurance products and pricing

As UK life insurers begin their gradual move out of lockdown, it is worth reflecting on how the COVID-19 pandemic is reshaping customer demands. The crisis has seen a shift in customer sentiment toward insurance and has highlighted areas insurers may need to focus on. As the lockdown eases, life insurers can look to maximise on the opportunity that has emerged - increased customer demand for protection.

 By Colin Cummings, Actuarial Partner at PwC and Ewen Tweedie, Actuarial Manager

 We’ve observed a significant increase in the number of searches for life insurance products relative to last year - showing a growing interest in protection products. COVID-19 has clearly increased public awareness of insurance products and highlighted the value they can bring in times of crisis.

 As the focus on health also increases, demand for solutions that offer additional benefits around fitness and wellbeing, in addition to protection, is also rising.

 Many people now have more time on their hands than ever before; no longer commuting to work and spending more time at home over the weekends, some are ready to invest that time in reviewing their financial resilience.

 Areas to prioritise
 Multi-faceted solutions are needed to tackle the issues highlighted by the crisis.Therefore staying close to customers by tailoring and targeting products to meet their needs will be essential.

 Some insurers are creating new customer journeys to access the underserved population, making genuine efforts to start closing the protection gap. The current spike in interest for protection should be used as a springboard to make a further sustained step change in life protection insurance coverage.

 This, as has always been the case, can be achieved by continuing to challenge ourselves as an industry to focus on developing the “right” products (that meet customer needs) and by accessing customers in their preferred approach. Increased customer engagement provides product and pricing teams with information to tailor and target products more effectively. While traditional insurers have limited interactions with customers, innovative InsurTechs have through the use of technologies, such as wearables, shown that it is possible to boost the number of touchpoints to more than a hundred a year.

 Strengthening long-term customer relationships by proactively reviewing policies
 Insurers have responded well as policyholders and regulators looked to them to do the right thing. Responses to the Financial Conduct Authority’s (FCA) guidelines included targeted payment holidays, short term reductions in cover, and rebates on health policies to compensate for the curbs on non-essential procedures. These measures have helped to retain policyholders over the short term, but as customers emerge from the lockdown insurers need to consider their future relationship. Demonstrating product value to customers, who are now likely to be carefully reviewing their current positions will be critical in ensuring retention over the long term. Propensity to lapse at this stage should be closely analysed and could be combated by proactive policy reviews where needed, or by refining communications informed by behavioural analytics.

 Balance agility with accuracy in pricing and product design
 The impact of the pandemic has underlined the value of speed and agility in pricing and product design to meet evolving customer demands. Examples include the provision of in-demand ancillary benefits such as virtual GPs and online exercise classes. In the digitally advanced Asian market, we’ve also seen how it is possible to move from product conception to launch in less than 24 hours. While this exacting timeline might be harder to achieve in the UK, getting to market could still be a lot faster.

 While these quick responses achieve the goal of increased engagement and sales, an increase in customer awareness and usage of these add-on services will ultimately drive up costs. Insurers may need to consider how to account for this in future pricing.

 Taking the next steps
 Crises have historically acted as catalysts for long-lasting behaviour change. The life insurance industry has an opportunity to grow as a result of the increased awareness, by customers, of the need for protection and their renewed focus on health. The industry needs to ensure that it is smart when taking advantage of this opportunity: it talks relentlessly about listening to customers and investing in the right capabilities while keeping sight of profitability, however, these lofty words often remain just that: words. By addressing these goals through their deep technical capabilities, such as pricing, insurers have a real opportunity to make this become reality.

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