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What is the Future of the Life Insurance Industry? 

Interview 22 September 2022 following keynote on the future of the life insurance industry for Equisoft in Las Vegas

As one of the world's leading Futurists, I have worked with many of the world's largest insurance companies, companies like Aviva, Prudential, Munich Re and Swiss Re, advising them on a wide variety of global trends, giving keynotes on the future of Life Insurance and many other related issues at their most important global events.

Key issues include these: How will the Life Insurance market change across the world? What is the future of Life Insurance agents, with rapid grow in mobile applications and instant automated underwriting?  How can we improve the application process? How can we expand rapidly in new regions? What about future changes in life expectancy?  

One thing is certain:

Life Insurance will see huge growth globally over the next three decades for a number of reasons....

Why are you so passionate about the importance of Life Insurance?

A close friend of mine dropped down dead in the street one day, at the age of 43, leaving 7 young children.  He had no life cover, and their tragic situation was made even worse by a financial crisis.

In my first training as a cancer physician, I worked in a hospice and then in a community care team, enabling people to spend their last days at home.  

Believe me, I have seen many at the end of their lives who expected to live a much longer time.

Life insurance is really important, yet most people in the world who need it are not insured.  

Even in a developed market like the US, 48% of adults have no Life cover. That’s millions of families across America.

So what’s the barrier to take up? To growth of Life Insurance?

The answer in most cases is lack of awareness of why it really matters, plus lack of clear information - and an application process that’s far too complicated.  

In a 2021 global survey by GCS of 22 key markets, 72% of adults said they wanted more information about health and life insurance.  

They are fed up of being “sold to”: they just want to learn about how these products work, and how to get them.

How did COVID impact the demand for Life Insurance?

The COVID pandemic made people far more aware of their own mortality.  33% in America said recently that they were more likely to buy life cover since Lockdown.

COVID also triggered a huge shift in how people buy life cover, with 100% increase in online applications and a dramatic fall in sales via agents.

But most Life Insurance companies are failing customers online.  

The same GCS survey showed that while 85% of buyers are online at some point in their purchasing journey, 56% complain that Life Insurance websites are had to understand.  

42% said that they were being asked too many questions.

What about cost comparison Life Insurance websites?

Yes it is true that one way for customers to save time is to enter all the questions into a comparison site, so they only have to apply once.  

Expect a boom in comparison sites for Life Insurance over the next decade, following the trend in car and house insurance.  

30% of consumers select the cheapest policy on such sites, and a further 60% select one of the five quoting the lowest cost.

The most important thing that any Life Insurance company sells is TRUST: confidence that the company will be still be around if disaster strikes, and will pay out as promised, without undue delay.  

You've talked about how comparison sites are a powerful way to measure trust in different brands

That's because TRUST is what makes a customer choose a more expensive, well-known brand for Life Insurance on a list over a cheaper one.  

Indeed, you can put a precise financial value on the brand with a simple test on comparison sites.

These cost-compare sites are great for customers and also a good way for CEOs to work out the precise the value of their Life Insurance brand compared to competitors.

If you have two brands in a list, the cheapest offers Life Insurance cover for $500 a year, and the most expensive well-known brand offers identical cover for $750,  then we can see that every time a customer chooses the well-known brand, they are telling us that the added value of the company name worth is $250 in that sale.

How can Life Insurance companies best reach future customers?

65% of buyers of Life Insurance over the next 20 years will be under 45 yeasrs old, yet most Life Insurance companies are using marketing tools which are more suited to 60 year olds.  

Take personal agents and call centres for example.  

Most 30 year olds hate using their smartphones for voice calls and don’t have landlines.  

They don’t like email either.  

They communicate primarily by text, and learn mainly by surfing online.  

So the traditional sales model for Life Insurance is broken and needs to change rapidly.

So how can Life Insurance companies improve their online sales platforms?

The web is making us very impatient.  

Most people press the back button on any web page that takes more than 5 seconds to load, and 25 year olds do so even faster.  

I see this in my audiences around the world.  

During my keynotes I often ask for a show of hands of those who press the back button in 5 seconds, 4 seconds, 3 seconds and so on.  

The five second test is absolutely critical for Life Insurance companies to understand.

It means that every mouse click loses customers, every additional question on a Life Insurance form, every time a page refreshes or you have to click onto another page.  

All these are fast ways to kill your business.  

Keep things simple, fast, easy.  That’s the future of Life Insurance.

How can we make the underwriting process easier for Life Insurance companies as well as for new customers?  

Focus on what matters most to offer instant quotes for limited Life cover, generated after only 2-3 questions.

Then you can go back later (soon after) to encourage an upgrade to a larger Life Insurance policy, asking for additional information.  

Automated underwriting increased fast during COVID, rising in the US from 64% to 82% of Life policies issued.

What nations will see most growth in Life Insurance premiums over the next decade or two, and why?

Most growth in Life Insurance will be in emerging markets because that is where 85% of humanity lives.  

Emerging markets are responsible for 52% of global growth in premiums, and 84% of global growth in annuities.

1 billion people will migrate from rural areas into cities in the next 30 years, just as 1 billion did in the last 30 years.  

And as they arrive, they will follow a well established pattern.  

Many will stay with people they know, or fight for survival at first in some very deprived area.

The usual story is that people do find jobs, and start sending money back home, while gradually climbing up the social ladder.

The greatest new market for Life Insurance is the emerging middle class in these rapidly growing nations.

Middle class consumers will grow by 1.1 billion from 2020 to 2030, most of them in the age bracket most likely to be interested in Life Insurance, because of dependent children.

What other factors will drive growth in sales of Life Insurance?

Another major driver of Life Insurance in emerging nations will be the collapse in family size.  

Across emerging markets as a whole, average number of children per couple fell from 6 to 3 from 1950 to 2000.  

In Bangladesh, family size has halved in the last 20 years.  

In South Korea, the average number of children born to a typical woman in her lifetime has fallen from 6 to 1 in 40 years

The key to this collapse in fertility rates is average earnings in a nation.  

When this rises above $8000, birth rates tend to collapse, and this is what is driving the fall right across the world.

So why does family size matter for Life Insurance?  

In the past, very large, extended families tended to take care of themselves.  

In a remote village, where most people in any case are likely to be related in some way, relatives look after each other in times of need, and those who travel to distant cities are relied upon to send remittances home.

But smaller families are more vulnerable to economic shocks or health challenges.  

What is more, they may now be living in a relatively anonymous city, with neighbours they hardly know, and few other social networks.  

So insurance becomes a substitute for traditional community support.

Here's another trend: by 2030, 1.4 billion people will be over the age of 60, up from only 900 million in 2015.  

All these massive demographic shifts are of huge importance, and will be a mighty force affecting every type of insurance including health-related products.

What about the role of wearable health devices in Life Insurance underwriting? 

Over 25% of all applicants for Life Insurance cover globally are owners of wearable health devices such as FitBit, Apple watches and so on.  

250 million people have bought them.  This will be a $70 billion a year market by 2025 and is one of the greatest new opportunities for innovation in Life Insurance underwriting.  

The key to the future of life insurance is finding new and innovative ways to identify health risks, and digital devices will be central to this.  

People often ask me about Big Data but the key to effective, fast, efficient and accurate underwriting is LITTLE Data.

Amongst a hundred million pieces of information, what are the three most important factors which will in 95% of cases give a highly accurate estimate of life expectancy – in addition to things like age, where someone lives, occupation, gender?

For example, as I am writing this, my own iWatch is sampling data ranging from my heart rate to blood oxygen level.  

The watch sees every step I make, every mile I run.  

It knows how rapidly my heart rate recovers from exercise and has an ECG monitor built in which can see the electrical currents going through my heart muscle with every beat.

We are only in the first five minutes of the wearable MedTec revolution. Companies like Abbot have already developed skin sensors that can monitor a wide range of substances inside the body. And all of this is in real time, with results appearing on the user’s smartphone.  

What if people applying for Life Insurance know more than their physicians or insurers about their health conditions?

It's already the case that many patients know more about their condition than their physicians, because the data is in their own pockets.  

MedTec devices can detect, diagnose and advise on immediate treatment, as well as alerting emergency services if needed.

So how does this related to Life Insurance underwriting?  

Well for a start, any customer that is willing to share data from their own medical devices is going to reveal a lot of very useful information, and the more the insurer knows, the more willing they may be to offer Life Insurance at a low rate.

Surveys suggest that in some countries around 60% are indeed willing to share regular personal information in return for lower Life Insurance premiums.

What do you think about the future of dynamic Life Insurance pricing, based on lifestyle?

Expect a boom in “Pay as you Live” Life Insurance and Health Insurance policies.  

The whole emphasis will shift from “We pay out if you die” to “We want to help you have a long life”.

This is already happening.  

Take Vitality for example, which is based in South Africa, offering products in 22 markets.  

They are linking MedTec devices to premiums, and have seen a 35% reduction in mortality in their most highly engaged clients.  

What is more, they are also seeing 15% reduction in policy lapses.

How can we manage the risk for Insurers from customers who have more health data than Insurers are aware of?

There is a serious downside to all these new sources of medical data, a real threat to Life Insurance companies.  

A nightmare for underwriters is that the person applying for Life cover may be aware of a health issue that their own doctor knows nothing about.

It’s already happening with genetics.  

Anyone these days can go online to order a totally confidential gene screening kit to send back to the lab in the mail.

Within a couple of days they will get all kinds of data, which could be hugely significant in predicting future health or disease.  

Someone might get some really bad news one day and only a few hours later, take out a massive amount of Life Insurance cover.  

It’s a form of fraud, but increasingly difficult to prevent.  

Essentially what is happening in such situations is that someone with privileged "inside" information is taking a one-way bet on their own life expectancy against the rest of the community - other policy holders and shareholders too.

This is not a new issue. But it can be very sensitive with all kinds of ethical dilemmas.

When AIDS first hit our world in the 1980s, HIV tests were considered so sensitive and confidential that in some nations there were rules that test results would NOT be sent to the patient’s own physician unless the patient gave formal permission.  

As a result, insurers became very nervous about paying out for a death linked to AIDS / HIV.  And some started to exclude HIV / AIDS altogether from cover, or capped their liabilities for that cause of death.

What about delayed ageing and the future of life expectancy?

Many of my global insurance clients are intensely interested in life expectancy.  

If life expectancy falls, it means more payouts, or paying out earlier than expected, which is a major risk.  

To mitigate against this, most such companies also offer pensions.

Because when people die earlier, it also means less pension liabilities so the two trends balance each other out to a large extent.  

The same happens if people live longer:  pension liabilities soar for these companies, but the amount of life cover they pay out falls.

There are many posts and videos elsewhere on this site regarding the future of ageing and ant-ageing medicine, but here are a few observations.

Firstly, despite all medical progress, before COVID struck we were already seeing a small downturn in life expectancy in many developed nations.  

Now mortality rates are very complicated and hard to interpret.  And they often reflect social changes many decades earlier, or can be affected by short term issues such as access to health care or social support at home.  

And COVID has had a major impact too, not only causing additional deaths during the pandemic, but also a longer term impact on general health and well-being for reasons we don’t fully understand in 2022.  

And it is also true that factors like lack of exercise, obesity, alcohol consumption and drug dependency are having a growing impact on health in nations like the US.

But we need to look at the wider picture.  For most of the last 40 years, on average in nations like the UK, life expectancy has increased by one year in every four, or 15 minutes in every hour.

This astonishing improvement has not been because of some magic drug or a major breakthrough.  It has resulted from a huge number of incremental changes in delivery of health care.  Coupled with that, smoking has become unpopular and most people are far more health-aware.

The genome project alone will be highly significant to future life expectancy.  In the early 2000s it cost many hundreds of millions of dollars to decode a single genome.  

But by 2020 the cost had already fallen to $2000, and by 2040 that may have fallen to no more than $100.  We already have many millions of genomes in global databases which are being matched to health outcomes.  

This is a prime example of the power of Big Data and AI.  We are already able to make a wide range of predictions about someone’s future health from their genetic code.

And we are already designing customised cancer chemotherapy regimes, based entirely on the precise genes in their own tumour cells (pharmacogenomics).

It is easy to take medical progress for granted and forget the past.  For example, in America alone 1 million cardiac catheterisations and 600,000 coronary stents are carried out each year.  

That means inserting a small wire into someone’s leg and feeding it through blood vessels right into the heart.  We can diagnose and treat a wide variety of conditions this way.  

Every one of those 600,000 patients receiving a coronary stent would have needed open heart surgery 20 years ago.  

Instead of a massive operation with high death rates and many complications, a patient can go in and out of the clinic in a few hours.

Another example of astonishing progress is growing new retinas for people who have lost sight due to macular degeneration – a condition affecting over 30 million in the US.  

We are now able to do this using skin cells from the person’s own arm.  These are treated in the lab to persuade them to become more primitive cells, and then bathed with chemicals which trigger them to grow sheets of light sensitive cells.

And then there is the spectacular success story of vaccine development for COVID – which happened four times faster than ever before in human history, due to a wide range of innovations.  

Lessons from COVID vaccine development are now being used to accelerate pharma research across a huge range of other conditions.

Because medical knowledge is doubling every couple of years, it means that in twenty years we will know a thousand times more than today, and in 40 years a million times more than today.  

It also means that almost all medical innovation that you see in your own lifetime is likely to be in the last three or four years of your own life.

So for all these reasons, it is impossible to imagine that life expectancy across the world will fall year on year from what it is today, over the next 50 years.  

The opposite is inevitable.  Expect significant growth in life expectancy - despite blips from things like global pandemics.

This increase in healthy life will be dramatic in the poorest nations as their GDP grows and as they are more able to afford the health care that developed nations take for granted.  

But will also be significant in the most developed nations.

So what will happen to soaring health care costs?

It is often said that health care spending will soar, and indeed they will, for many reasons:

- Growth of global population from 8 billion today peaking at 11 billion in 2060

- Ageing populations – 65% of all health spending is on those over 65

- Growth of emerging market economies 

However it will also be the case that costs per health care event will fall, often dramatically, over the next 40-50 years.  

I have already given the example of coronary stents replacing open heart surgery, but we will also see this in pharma. The fact is that for most drugs, the maximum patent life is a mere 25 years.

But it takes typically a decade and over $1 billion to bring a new drug to market, which means that at that stage only 15 years remains before the patent expires.

Once that happens, drug prices tend to collapse.  So a medicine that was launched at a price of $10 a tablet in 2015 may cost as little as 50 cents a tablet as a generic by 2030.  

I don’t know of any other type of business which sees such catastrophic price falls, hard wired into the future every new product.  

Expect to see many new announcements to extend patent life for an extended range of therapies, especially for rare conditions.  But the 25 year patent cliff will remain for most drugs.

So what's your summary message to Life Insurance company boards and senior teams?

Your mission really matters.

You have a moral duty to society:

To grow.  And there are huge opportunities to grow.

To reach every adult with clear, convincing messages about why Life Insurance really matters to the future of those they love.

To make basic Life Insurance much easier and faster to buy using mobile devices, at an affordable cost.

To pay out rapidly and compassionately, and to do all you can to be supportive when disaster strikes.

And that will help make the world a better, safer place, especially for those with young families who are at greatest risk.



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