Will more people buy life insurance if they don’t have to undergo a medical exam?
When researchers from LIMRA and Life Happens polled more than 2,000 adults between the ages of 18 and 75 in January, 70% said they’d prefer a simplified underwriting process when purchasing life insurance. More specifically, they’d like to forgo a physical checkup.
Yet life insurers have long relied on medical records and actuarial tables on life expectancy to underwrite and price policies. Nevertheless, the insurance industry may have to switch to a streamlined digital, on-demand platform to cater to changing consumer preferences.
One Dallas-based insurtech startup, Bestow Inc., is doing just that. It’s betting that consumers will buy life insurance through an online system that uses an algorithm to determine eligibility and rates based on an individual’s lifestyle and demographic profile.
$3.1 Million Raised
Founded by investors Melbourne O’Banion and Jonathan Abelmann, Bestow has raised $3.1 million in seed funding, with $2.5 million coming from New Enterprise Associates, Core Innovation Capital, Morpheus Ventures, and 8VC. Rick Yang, a Partner at NEA, told TechCrunch that his organization was attracted to Bestow’s model because it removes the traditionally high barriers to buying life insurance. “Bestow has a new approach that utilizes technology and unique products to allow more people to easily and affordably get the protection they need from a trusted source,” he said.
Though its app has yet to launch, Bestow’s website promises “six figure coverage in less than five minutes.” Consumers can apply online, obtain a quote, select a coverage option, and purchase a policy. The entire process can be completed online or over the phone with an agent.
Bestow isn’t the only fledgling insurtech company using an on-demand digital platform to simplify purchasing life insurance. Lapetus Solutions, Inc., for example, has developed facial recognition technology that scans a person’s selfie to determine a person’s body mass index, risk factors such as smoking or drinking, and their physiological age, their body’s “actual” age as opposed to their chronological age. It then uses that data and other personal information to calculate policy premiums.
Filling the Life Insurance Gap
Speeding up purchases could prompt more consumers to purchase life insurance. According to the LIMRA/Life Happens survey, 85% agreed that most people do need life insurance, but less than 60% of respondents own a policy.
“Our research shows increasing interest among consumers for speed, ease and transparency in the life insurance purchasing process, including an evolving trend to buy online,” Marvin Feldman, President and CEO of Life Happens, said in statement. He added that this preference spans all generations, from Baby Boomers to Millennials. The 2017 Barometer report further noted that attempts to purchase insurance online have tripled since 2011.
Insurtech startups like Bestow might spur more people to buy life insurance by making the process simpler. Yet established life insurers could also replicate these on-demand platforms to ease the buying process.
Interestingly, when LIMRA compiled its “U.S. Life Insurance Trends 2016” report, 29% of consumers reported buying a life insurance policy directly from an insurer rather than a financial professional, the highest percentage ever recorded. Jim Scanlon, Senior Director of LIMRA Insurance Research, cited technology as the “overriding cause” of the movement toward direct purchases.
Those results don’t necessarily mean the public wants to completely sidestep agents when purchasing life insurance, however. When asked to rate certain factors important during the life insurance buying process, participants in the 2017 Insurance Barometer Study ranked “easy to understand” tops at 83%. Next up was the “ability to chat with a person” at 66%, while “faster sign-up process” at 51%.
So even though your clients demand an easier sign-up method, they still want some guidance from a live agent. Perhaps established insurers could better reach clients and prospects by combining solutions developed by insurtech startups with a human touch