3 min read
The changing wave of time and technology has affected every industry on the planet in some way. Today, we’ll be shedding light on the status quo of the life insurance industry in the UK plus the factors that are creating challenges in it currently.
As per a survey [1] carried out in 2018 and released in June 2019, the largest age group in the UK was 50-54 one. The overall population of the country is ageing pretty substantially. By 2050, the median age of the population is expected to hit 44.5 years. In contrast, the same age stood at 34.9 years in 1950.
With this upward trend of ageing, the OADR is also set to increase. OADR or old-age dependency ratio is the number of people aged 65+ for every 1,000 people between 16 and 64. By 2026, 62 of UK’s local authorities will have an OADR of more than 500. By 2036, the number will increase to 157.
As such, the necessity of life insurance companies and their services will also increase.
However, economic, technological, and regulatory forces have led to major changes and challenges in the industry. Below are three factors that are creating challenges (and hence, new opportunities) for the life insurance industry:
Anna was a business student in London who had just transitioned into working for a startup. Hence, she wanted to buy life insurance. Being an immigrant, Anna had no idea how to go about it. She went through a couple of websites but the process was still confusing.
Ultimately, she settled on a company whose services looked good. However, being her first day at the office, Anna couldn’t get in touch with them to clear her doubts.
The next day she set out half-an-hour earlier and called them up from the office. Again, no luck, though. She had to be on hold for a long time. The same thing happened in the next couple of days. Frustrated, Anna went to a broker recommended by her friend and got in touch with another insurer. Because of their robust technological setup, Anna was easily able to go through policy options and purchase one as per her convenience. She is now securely insured.
Scenarios like these aren’t uncommon. A lot of insurance companies haven’t brought technology into their existing ecosystems due to which they are losing out on potential customers.
Filling this gap, however, can help to better both internal and customer-facing processes through reduced costs, greater efficiency, simplified management, simpler products, and the ability to price risk better.
The internet and the shifting of businesses to it have led to changing customer expectations.
Customers now expect companies to respond quickly and deliver seamlessly. In the above story, Anna made a switch because contacting a particular insurance company was becoming so inconvenient. If she faced problems while getting in touch, how many of them would she face while filing for a claim? Customers- especially the highly-connected urban populace- want information right when they need it.
They also expect increased personalisation since companies are collecting data about their visitors. On top of that, people’s financial situations are unique and demand unique solutions.
While it seems that everyone around us is saving up a storm, the reality is different. The high cost of living is a major hurdle and real earnings have been flat over the last decade. From 2012-2017, household indebtedness and unsecured consumer debt actually increased. The latter is predicted to reach 47% of the household income by 2021.
With such a significant portion of earnings flowing into debt, it is little surprise that any savings or investing in life insurance takes a backseat.
Finally, people with pre-existing conditions have to go through a lengthy and painful process of securing insurance. This acts as a huge deterrent. Factor in an insurance company that hasn’t automated its processes and it is hugely likely that the customer won’t find it convenient to purchase a policy.
In the story of Anna, the policy had been purchased but the lengthy processes would still be carried out. This would lead to a double investment of time for the policyholder.
Just because the challenges seem insurmountable or huge, doesn’t mean they don’t come equipped with solutions. To paraphrase Albert Einstein: you can’t solve a problem with the same mindset that created it.
Thus, next week, we’ll be looking at ways for working through these challenges to create more long-term success. You can subscribe to our newsletter and/ or follow us on LinkedIn to keep updated.