In May of 2022, my colleague Karen Monks wrote a report called Back when in-person sales were a thing. The report was a primer on vendors that offer Direct to Consumer (D2C) sales platforms. In that report, Karen shared metrics of direct sales sourced from III.org and LIMRA. In a nutshell, the data shows a bump from 5% to roughly 8% of all life insurance sales from 2011 to 2022. Now there is a caveat, in that direct sales was not just D2C, but also included telesales where an agent calls you.
In other words, the growth from middle single digits to high single digits.
So what is keep those numbers from being 10, 20, or even 50 percent of sales? We’re seeing a dramatic shift to online sales in P&C insurance. Why hasn’t life insurance caught up? Will it catch up?
That’s a strong maybe, with a dash of probably not.
So why does it work in P&C and not in Life insurance?
The old adage that life insurance is sold not bought really does come into play. This is particularly true when you consider the relative size of policies through the two channel. According to LIMRA, via Marketfacts, the average face amount for an agent sold policy is $420,000. That’s a solid face amount. Contrast that with the average D2C face amount of $72,000. This is likely not a case of different markets, although that comes into play, but more that an agent better coaches the consumer on their needs. Let’s face it, $72,000 would not support your family for very long.
Even the pandemic barely triggered consumers to buy life insurance. There was a measurable bump in sales in 2021 but by late 2022 and into 2023, it appears that sales have drifted back down to pre-pandemic growth levels.
Life insurance is not an impulse buy. Which leads exactly to why D2C does not have the same impact in life insurance. When you buy a car, you have to buy insurance. I recently traded a car for a different one and it was simple to delete the old car and add the new car in the insurer’s app. There just isn’t the same need in Life insurance.
Have you ever sat around with friends and discussed life insurance? Probably not. But have you ever asked a friend for a car insurance recommendation? Much more likely.
So where am I headed with this? Should insurers and distributors abandon online sales?
No. Of course not. What they should do is continue to improve the experience and focus their efforts on educating consumers about the need for life insurance. As profiled in the above report, there are excellent choices to open and support this channel in an insurer.
But the focus should be on the agent. Which leads to current research on which Karen and I are working. At the end of June, we released the report Digitizing the Agent - How Life Insurers Can Support Their Distribution Channels. This report focuses on the areas that Celent believes a life insurer should focus. This is based on both our experience in the industry, many conversations with our insurer customers, and research we've done in the past with agents. It’s a nice primer on the topic and a kick-off to the remaining reports in the series. We’re just finishing up a survey of both P&C and Life insurers with a focus on how they think they are doing with their agent technology tools. It will be an interesting read to see how they self-grade themselves. The final reports, which are a little more rare for Celent, is that we’re surveying agents. What fun it will be to see where the insurer and their agents agree and where they do not. Of course, this is in aggregate, so it is an industry view as opposed to a specific carrier review.
Why did I head down this path? Because the gap in life insurance needs versus life insurance purchased is still enormous. Insurers need to invest their IT dollars wisely to ensure they are positioned properly to grow.