It's been a long time since I took chemistry as a undergraduate student at the university – yes I was a mediator before I switched to a math and computer science degree! I loved science and I remember the experience. I do not remember many of the formulas or compounds. But I remember the labs – especially the ones all night. I remember mixing chemicals and I remember the role of the catalyst. No matter what you had in the tube or the beaker, we always had to be careful when adding the catalyst. It was the game changer. It was he who could light the classroom. The catalyst took all the primary chemicals and created a faster reaction. Poof.
A catalyst, by definition, accelerates a chemical process without itself being affected. If you think about it, COVID-1
In our last blog, we talked about reading the signs of what will come in the life insurance industry and we talked about connecting the dots. If we look at the trends, we can get a picture of where the life insurance industry seems to be heading. Too much changes to not notice it. COVID-19 has added an extra variable – a catalyst – that has accelerated and driven insurance to the reaction point.
No test scenarios could have achieved what COVID has achieved in six short months. In fact, Microsoft CEO Satya Nadella said in April, "We've seen two years of digital transformation in two months." [i] COVID has compressed timeframes for digital use because it has ignited a rush for digital functions. It accelerates a demographic change and customer engagement that was already in process. It's a catalyst!
We have not seen such a rapid change in our lifetime, one that will require core systems that will adapt to customer needs and behaviors – move between jobs regularly, seek offers on demand, look for value-added services, buy benefits which can end up in individual insurance and full digital commitment. These trends are linked to the new dominant insurance buyer of the digital age .
Who are the new dominant insurance buyers? How will they change the nature of the insurance?
In Majesco's latest thought management report, Review of life insurance: From a transaction to a customer, life, health and welfare customer experience we use our latest consumer survey to paint a picture of this dominant insurance buyer when we maps similarities and differences between demographic groups. For our reporting, we place the segments in two large "Super segments." Gen X and Boomers fit into one segment – the older generation that has been the foundation for growth for the past 50 years. And the younger segment – Gen Z and Millennials representing the next generation of buyers who expect digital first engagement, products and business models.
Some interesting insights about the younger generation create the stage for a different view of expectations and commitment. Currently, the younger generation rents twice as much as the older generation and is twice as likely to live with parents / family or friends / roommates, as seen in Figure 1. But they are also 80% more likely to have children under 18 in their households. Nevertheless, they represent a strong segment that is becoming increasingly ready for insurance as they form new households and raise their families and replace the older generation as the coveted insurance purchase segment.
Figure 1: Demographic profiles for the generational super-segments  These segments identify how insurance-dominated buyers change, especially their expectations, use and perception of life insurance. The urgency to adapt to Millennials and Gen Z reaches a critical tipping point. Next year, Millennials will surpass the older generation. And by 2025, the combined Gen Z and Millennial generations will dominate the 30-60 year old sweet spot of insurance – a complete turn in dominance for the next five years.
Insurance companies unprepared for this new dominant insurance buyer and their extremely different needs and behaviors will increasingly find that they are no longer relevant.
Opportunity in the Dominant Market
As we have recently pointed out in our webinars and blogs, the shift in insurance focus from transactions to experience will result in a wide range of growth opportunities. The younger generation seems to understand the value of insurance and want it. However, they expect something that is adapted to them. To achieve this, they are more willing to share personal information such as health and exercise data (including real-time) to overwrite their policies. They want value-added services. And they expect a seamless, digital process.
You may not realize it yet, but it is the generation we have all been waiting for! The only downside is the lack of preparedness and how fast this is developing … now accelerated by COVID-19.
While L&A insurance companies needed to improve operationally before COVID-19, they are now more pressured to do so, both during and after the crisis. The pandemic is rapidly exposing less than desirable customer experiences when insurance companies handle paper-based processes, non-digital postal service transactions, an increase in "liquid" life insurance purchases online through new competitors and the need for extra caution due to fraud. At the same time, new risks have arisen that require new products such as a “pay gap” for employees who cannot work during suspension, new health products and simple life cover – either as individual products or voluntary benefits.
To retain the customer and revenue, insurers must rethink their scope away from a life insurance transaction to a broader lifestyle experience of health, prosperity and wellness that includes:
- Insurance product: Product (risk, services, experience) redefined but requires insurance to participate and play in ecosystems, rather than just existing as an ecosystem in itself.
- Lifestyle – Health, Prosperity and Well-Being: A Unified View to Cover All Aspects of Their Lives from Health, Prosperity and Well-Being to Banking, Insurance, Wellness Activities, Brokerage 401K Accounts and More in a Holistic Way Instead of separate transactions or insurances for each.
- Value-Added Services: Provide value-added services such as wellness discounts, preferred access to gym memberships and access to online broker accounts that provide a powerful, single engagement, eliminating points of friction between different participants ts of the ecosystem.
- Continuous and liquid-free guarantee: Constantly updating the risk profile of an individual or thing that changes the terms and pricing affected by the continuous flow of data and the use of data to avoid liquid-based guarantee for a range of life insurance products.
Highly networked, data-driven, value-added business models emerge, within and outside insurance. They redefine the customer journey, and the entire customer relationship, across a broader set of options for health, wealth and wellness.
The vitality of the insurance industry is very much linked to demographic and market trends, customer expectations and their introduction of new technology. The combination of these factors will push the insurance industry to develop products and services that are more affordable, tailored to very specific needs, digital-first, simpler and rooted in trust that not only protects lives but also enhances those lives in a wide range of areas beyond insurance, which is reflected in Figure 2. They will also look for consolidation. "Can I meet more than one need with this relationship?"
Customers expect a different experience that brings together solutions to all these needs.
Figure 2: Elements of a holistic lifestyle ecosystem
Protecting oneself and their lifestyles
Many research studies, including our own primary consumer and SME research, have highlighted customers' views on insurance is complex and difficult and uncomfortable to handle. From multi-faceted, fluid-oriented applications to multi-faceted contracts full of confusing legal terms and exclusions, and a variety of riders, traditional broad policy exacerbates the problem. To understand what is covered and how much can be like a labyrinth, where the "truth" is difficult to determine, which creates frustration and lack of trust.
However, newer coverage options remove complexity, as they are simple, specific coverage for specific needs and time frames. Simplifying the life insurance process and policy has been a major focus for InsurTech startups such as Ladder Life, Haven Life, Bestow, Fabric, Health IQ and others – which drive their growth and customer loyalty. But simplification can also mean a broader approach.
As we mentioned in our recent blogs on mobility ecosystems, organizations are expanding their brands to offer simplicity through tools that meet multiple needs at once. With life insurance companies, this type of ecosystem will begin to look much more like a comprehensive process for life, health and lifestyle. "Insurance" will always be a part of it. However, the experience created by the insurer can look dramatically expanded and radically simplified. The end result will be uncomplicated – insurance companies will contribute, not only for the safety of individuals and families, but to a holistic improvement of life.
Connecting to Better Life, Health and Wellness
Technologies such as IoT and wearables have matured rapidly. from new technologies over the past five years. Fitness trackers and other connected wearables become important connections and hubs for new ecosystems that provide value-added services or insights for people to proactively manage their health and well-being. A study from 2018 commissioned by Vitality found that adults who used exercise trackers tied to a reward system could on average give two years of life. [ii]
Researchers and technology companies realize the potential of these devices in addition to their original fitness tracker role to predict possible adverse health conditions, including COVID-19. At the 2020 Innovation in Insurance Awards sponsored by Efma and Accenture, a submission by PZU in Poland used a portable device to measure oxygen and heart rate in real time to reduce transmission infections of COVID to medical staff in hospitals.
Michael Snyder, chair of genetics at the Stanford School of Medicine, found that smartwatches and other similar connected devices make at least 250,000 individual measurements per day. This continuous stream of data fed into powerful predictive algorithms can be more effective than traditional methods of detecting health problems. For example, the Scripps Research Institute found that changes in heart rate caused by an infection can be detected four days before a conventional temperature control detects a fever. Recognizing the health and well-being of these devices, Apple has explored how its watch can be used to detect heart problems, and Fitbit is conducting 500 research studies on issues such as cancer, diabetes and respiratory conditions. [iii]
These innovations suit the younger generation. Gen Z and Millennials who own a connected device are almost three times more likely to say they received an insurance rebate or free / discounted products or services as part of the device, as reflected in Figure 3. Whether these rebates are real or perceived, it is clear that the younger generation wants a stronger connection between these units and related products and services – an example of ecosystem thinking. Just as these generations grew up with digital technology as a crucial factor for their youth, ecosystem engagement is a crucial influence on their behaviors and expectations (see only Apple and Amazon engagement) as they become the dominant buyers of products and services to protect life, health and wealth.
Figure 3: Discounts and benefits of smart devices
But the use of these devices is not only for laptops, it also extends to IoT home, offers an opportunity to create a bridge from P&C and Home Security to Home Health and Wellness. As health awareness technologies emerge, IoT home devices can add value to those who choose to age on the ground and create an all-in-one connected home and health offering.
So if we follow the digital thread closely, the same capabilities that the younger generation desires will be used to help the older generations with their health, safety and lifestyle during retirement. With more than 10,000 baby boomers retiring every day, this is a huge market opportunity. The "new profession" of life insurance can be much broader and much more useful than insurers had ever imagined. When insurance companies focus on Millennials, they can be better prepared to meet the needs of all generations.
The Mood to Move
Motivation is the key to insurance sales. Is the new dominant generation motivated to apply for life insurance or are our sales processes advanced enough to catch them when needed? In my next blog, we will learn about trends in voluntary benefits as well as key indicators from our survey data. For a deeper look, be sure to download, Consider Life Insurance: From a Transaction to a Life, Health, Prosperity and Well-Being Customer Experience .
[i] Spataro, Jared, "2 years of digital transformation in 2 months," Microsoft Blog, April 30, 2020, https://www.microsoft.com/en-us/microsoft-365/blog/2020/04/30/ 2-years-digital-transformation-2-months /  [ii] Donnelly, Laura, "Apple Watch Can Add Two Years to Your Life, Research Suggests," The Telegraph, November 28, 2018, https: //www.telegraph. co.uk/news/2018/11/ 28 / apple-watch-could-add-two-years-life-research-suggest /
[iii] Liver, Rob, "Scientists call technology eyes technology as a virus alert system, "Techxplore, June 7, 2020, https: //techxplore.com/news/2020-06-eye-tech-wearables-virus-early.html