How Life Insurers Can Seize a $4 Billion Growth Opportunity

Diversifying distribution channels and innovating on price can help firms capitalize on growing US appetite for coverage


The pandemic has been a boon for US life insurance sales. The number of new life policies sold jumped 11% in the first quarter of 2021, the highest rate in nearly 40 years, while new annualized premium growth hit 15%. And that was before the Delta variant sparked a fourth wave of infections and hospitalizations and pushed the national death toll to more than 625,000.

Yet life insurers don’t appear to be taking full advantage of today’s opportunity. The Oliver Wyman Forum’s Global Consumer Sentiment survey found that one in four Americans surveyed between September 2020 and June 2021 considered buying life or long-term care insurance, but just over a third of them did not go through with a purchase. The cost of this untapped demand to insurers? Nearly $4 billion a year in potential premium income. 

What’s behind the disconnect between thinking and doing? Price. Overwhelmingly, people say cost is a major factor in their decision of whether or not to buy insurance. More than two-thirds of our survey respondents cited price as important, more than any other consideration, and 44% said it was their top priority.  By contrast, fewer than half cited ease, provider support, or speed as important considerations.

This pattern was consistent regardless of household income, with price ranking as the top priority for all income groups. “I was going to start a life insurance program, but I did not because I could not afford the bill during COVID,” one respondent said.

Insurers can address this issue by adopting some of the strategies of insurtech upstarts. Many of these firms pursue low-cost strategies such as offering so-called micro-duration coverage, letting customers choose the duration of a term policy that fits their budget, and increasing transparency by giving consumers a quote before they provide contact information or enabling them to see how much others pay for coverage.

Price isn’t the only hurdle, though, and especially not during COVID. Consumers need advice. Buying life insurance is a major decision for consumers and the array of products is daunting, ranging from whole life, universal, and variable policies that combine elements of investment and insurance to term life that covers individuals only for a specific period of time.

Yet consumers aren’t turning to professionals as often as insurers would like. Forty-four percent of respondents who considered buying or modifying life or long-term care insurance turned to friends and family for advice. That was well ahead of insurance agents or financial advisors, even though people rated those professionals as much more helpful. Those numbers suggest a clear distribution challenge for the industry. 

To meet this challenge, insurers need to develop more innovative ways to reach out to consumers, some of which are already being used by rivals and startups. Firms can leverage mobile platforms or social media to reach more customers, especially younger ones, for example. They can strike partnerships with related businesses, such as financial planners, to include their life offerings as part of a wider financial plan. Other tactics could include automating their online presence with AI chatbots to provide effective 24/7 customer support and incentivizing agents for good customer service, not just sales. Firms also could draw on the idea of startups that have created application programming interfaces allowing businesses to include insurance offerings on their digital platforms. This has allowed banks to easily offer life insurance on their apps and website at the click of a button.

For insurers, time is of the essence. It’s not often that life insurance is top of mind for many consumers.

Radhika Goyal contributed to this article.