The Life Insurance World is a Changin’ – Better Get Ready for The Ride

For more than a century, life insurance was one of the most static businesses in existence. This is partly because the very nature of life insurance is extremely basic. The consumer pays a certain amount each year in premiums, to provide a windfall for their dependents in the event of their death. And the entire flow was largely controlled by the insurance companies.

But fundamental changes are sweeping through the life insurance industry, and changing the very nature of the business. In most respects, the consumer is now in the drivers seat. That should be good news, not only for consumers, but for anyone working in life insurance as well.

Here are some of the changes that are revolutionizing the industry in the last few years.

Computers and the Internet Are Changing Everything – Including Life Insurance

Today just about every insurance company and business is marketing their products on the web. The explosion in the number of life insurance comparison websites has made the web the natural starting point for life insurance purchases. In the process, it has also increased the competition between insurance companies for the consumers business. That dynamic has brought about a decline in premium rates compared to where they were just a few years ago.

Fortunately for life insurance providers, computers and the Internet have also greatly reduced the administrative costs in the industry. That cost reduction, plus more intense competition, has forced premium rates down. It is entirely possible that a consumer can find a less expensive policy today than what was available 10 or 20 years ago, despite being older at the time of application.

Age Is Becoming Less of a Factor With Life Insurance

This isn’t to say that age is no longer a factor in the life insurance underwriting decision, but it is no longer the holy grail that it once was. Where only a generation or so ago, many insurance companies were reluctant to issue policies on people past the age of 65, you can now get a policy well into your 80s.

As covered above, computers and the Internet are playing a role here. Greater competition between companies is causing providers to expand into nontraditional markets. But an even greater factor may be longevity. Not only is the average lifespan increasing, but people can be reasonably predicted to live longer even at older ages. For example, a healthy 65-year-old can easily live another 20 years. Issuing a 10 year term policy on such a person can be excellent business.

There’s also a third development that is reducing not only the traditional life insurance bias against age, but also against certain health conditions…

No Medical Exam Policies

Until a few years ago, life insurance policies that did not require a medical exam were somewhat rare. They were even considered something of a no other way policy for people who were unlikely to be able to pass a medical exam for traditional life insurance. A person would take one of these policies, with a greatly reduced death benefit, and a steep premium rate.

No more. Over the years, the performance of these policies turned out to be better than expected. As a result, more of these policies are being issued by a larger number of insurance companies than ever. And with that expansion has come both an increase in the size of policies that can be purchased (into several hundred thousand dollars), as well as a moderation the premiums paid for them.

Consumers are responding favorably to the trend. This is not surprising considering that many people are adverse to the idea of undergoing a medical exam in order to get a life insurance policy. In addition, applications can be approved much more quickly than is the case with fully underwritten policies. Many consumers are willing to pay a higher premium for that combination.

Life Insurance Policies With Living Benefits

Some people are understandably reluctant to invest much money (or any at all) in a plan that only pays out upon their death. As some see it, it’s almost like betting against yourself. There’s a trend afoot in the insurance industry to remedy that connection, by offering living benefit rider’s to life insurance policies.

As the name implies, these riders provide certain benefits to policy owners while they are still alive. And in a time when health insurance plans can easily leave a person with tens of thousands of dollars in uncovered medical expenses, these living benefits are likely to become even more important in the future.

Examples of living benefit riders that can be attached to a life insurance policy include:

  • Accelerated death benefit.This rider allows you to collect a certain percentage of your death benefit in the event you have a terminal illness. For a person who has little in the way of financial resources, or who has already been drained by the illness, this could be a critical provision.
  • Critical illness.This rider allows you to collect a certain percentage of your death benefit (as high as 90%) in the event that you contract a major disease or disability, such as blindness, loss of use of two or more limbs, cancer, heart attack, stroke, or end stage renal failure. Though the event may not be terminal, it can create ongoing medical costs, as well as major lifestyle adjustments that will require a large amount of cash.
  • Chronic illness.This rider is closely tied to long term care, in that you can collect the majority of your death benefit if you are unable to perform at least two of the six widely recognized daily requirements (bathing, continence, dressing, eating, going to the bathroom on your own, and transferring). Only a few insurance companies currently offer this rider, but we can expect more to join in going forward.

It’s not an exaggeration to say that the addition of living benefits has the potential to change the entire nature of life insurance, in a way that consumers are likely to respond to very favorably.

The Decline of Face-to-Face Contact

Earlier we talked about how computers and the Internet are changing life insurance. But that extends beyond the mechanics of the industry, in that it gets down to how consumers interact with the industry. And that is changing fundamentally.

The days of consumers buying life insurance through a face-to-face meeting with an agent or broker are rapidly fading into history. People make all sorts of purchases through the Internet today, including booking vacations, buying home entertainment, computer hardware and software, and even cars and business services. Life insurance, as an intangible product, has adapted well in the online economy.

In today’s environment, consumers prefer to shop before speaking with anyone about moving forward on an actual application. Much of the sales process is now being handled over the web, and by the web. The nature of the agent’s job is changing, from that of sales, to facilitating the life insurance application process.

Is also seems to be a consumer preference. No one ever wants to be sold anything – they prefer to buy, and to do it on their own terms. They don’t want to be pushed into a compromise package by in overzealous, commissioned salesperson. The Internet is enabling that change to take place in almost every industry, including life insurance.

The combination of all of these changes is leading to an industry that is more streamlined, efficient, and consumer friendly. If life insurance is your business, then the best strategy is to ride the trend, and make it work in your business. If you’re a consumer, the life insurance industry now all about you. Don’t let shady life insurance agents take advantage of you.  Instead, take advantage of the change, and get the best policy for your situation.

Jeff Rose is a certified financial planner and Iraqi combat veteran.  He is the author of Soldier of Finance and also blogs at and

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