I was able to get a life insurance policy in eight days – a testament to how far the life insurance industry has come. However, a friend and colleague of mine – I'll call her Anne – would really like to buy life insurance, but she can't even start the journey. Why? Because she struggles with weight-related medical issues.
Well aware of her mortality protection gap after nine years of working at Swiss Re, Anne completed a couple of online quote calculators for a 20-year term policy for $500,000. These asked for her health status, and in each case she chose the least favorable option ("average" and "fair"). The first calculator did not ask her height and weight, and it came back with a quote of $63.50 per month or $762 for a year. Not a deal breaker, but almost double the rate quoted if she changed her status to "excellent health." The second calculator did ask about height and weight, and it came back with this message: "Your situation is unique. Based on the information provided we cannot display an online estimate." After that, she was inundated with calls and emails from insurance companies who wanted to sell her insurance policies she really could not afford. Anne has opted not to go through the life insurance process now because she wants to avoid the risk of being denied a policy, which she worries would hurt her chances of ever getting one in the future. She'd rather focus on trying to improve her health first before she applies.
Before the actuaries reading this panic, I want to state plainly that I realize it is not possible to change the price of life insurance. We can't offer high-risk applicants life insurance policies at low rates and then have more claims to pay out than we can cover. It is a medical fact that obese people have higher rates of heart disease, stroke, type 2 diabetes, and certain types of cancer – all of which are leading causes of preventable death. However, according to a 2016 Center for Disease Control report, 70% of Americans are obese or overweight, and these numbers continue to rise each year. Anne's situation is really not so unique.
Insurance companies are working hard to close the $20 trillion dollar mortality protection gap, but I wonder how many people with a gap can afford to buy what they are being sold? Perhaps it is not a coincidence that the rise of obesity in the US over the last decade corresponds to the decline in the number of life insurance policies sold. We generally attribute this decline to a focus on high-net-worth individuals, but could it also be true that we simply have fewer eligible applicants and thus fewer polices? To truly accomplish our goal of closing the protection gap, we have to find ways to cover people who are obese or overweight. Since changing the price of existing life insurance products is out of the question, it seems we are left with two other important options: 1) improve the digital customer journey for this population by providing more information relevant to their situation, and 2) develop new products that are tailored to their needs, giving them at least some life insurance coverage now with the opportunity to qualify for more if their health improves.
One possibility for tackling this issue is to leverage digital platforms that help people to manage their health. See the map of Anne's ideal customer experience journey compared to her actual journey.
An insurer could offer Anne minimum coverage to fit her budget now with an invitation to register for a health app and wearable device to help her improve her health over time. On the app, she could receive recommended goals to track with coaching services and health tips to help her achieve her goals. Upon showing measurable progress toward her health goals over a specified amount of time, she could take a medical test to verify her health improvements in order to be eligible for an increase in the face amount of her policy at no additional cost and an up-sell offer if she is interested. This approach has the potential to motivate Anne to live a healthier life with periodic upgrades to her life insurance policy based on her tracked health improvements.
It may not be possible for Anne to get an affordable 20-year term policy for $500,000, but I'd like to think insurers could offer her a smaller policy now with a solution for helping her to improve her health over time in order to qualify for expanded coverage. When that happens, it will be worth a real industry celebration.
Category: Funding longer lives
Location: United States