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Life insurance products and pricing: Lessons from lockdown

Three priority areas for life insurers

As UK life insurers begin their gradual move out of lockdown, it is worth reflecting on how the COVID-19 pandemic is reshaping customer demands. The crisis has seen a shift in customer sentiment toward insurance and has highlighted areas insurers may need to focus on.

The opportunity

As the lockdown eases, life insurers can look to maximise on the opportunity that has emerged - increased customer demand for protection.

The chart above shows a significant increase in the number of searches for life insurance products relative to last year - showing a growing interest in protection products. COVID-19 has clearly increased public awareness of insurance products and highlighted the value they can bring in times of crisis.

As the focus on health also increases, demand for solutions that offer additional benefits around fitness and wellbeing, in addition to protection, is also rising. 

Many people now have more time on their hands than ever before; no longer commuting to work and spending more time at home over the weekends, some are ready to invest that time in reviewing their financial resilience. 

Areas to prioritise 

Multi-faceted solutions are needed to tackle the issues highlighted by the crisis. Select below to see where we believe you should focus in the short-term:

1/ Stay close to customers by tailoring and targeting products to meet their needs

Close customer engagement helps strengthen customer loyalty and trust – critical both to retaining and making new sales, especially in challenging times. 

Some insurers are creating new customer journeys to access the underserved population, and have been “closing” the protection gap. The Swiss Re Term and Health Watch 2020 survey shows a 5% increase in new protection policies over 2019.  We should consider how to use the current spike in interest for protection to make a further sustained step change in life protection insurance coverage. 

This, as has always been the case, can be achieved by continuing to challenge ourselves as an industry to focus on developing the “right” products (that meet customer needs) and by accessing customers in their preferred approach. Increased customer engagement provides product and pricing teams with information to tailor and target products more effectively. While traditional insurers have limited interactions with customers, innovative InsurTechs have through the use of technologies, such as wearables, shown that it is possible to boost the number of touchpoints to more than a hundred a year. 

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2/ Strengthen long-term customer relationships by proactively reviewing policies

Insurers have responded well as policyholders and regulators looked to them to do the right thing. Responses to the Financial Conduct Authority’s (FCA) guidelines included targeted payment holidays, short term reductions in cover, and rebates on health policies to compensate for the curbs on non-essential procedures. These measures have helped to retain policyholders over the short term, but as customers emerge from the lockdown insurers need to consider their future relationship. Demonstrating product value to customers, who are now likely to be carefully reviewing their current positions will be critical in ensuring retention over the long term. Propensity to lapse at this stage should be closely analysed and could be combated by proactive policy reviews where needed, or by refining communications informed by behavioural analytics.

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3/ Balance agility with accuracy in pricing and product design

The impact of the pandemic has underlined the value of speed and agility in pricing and product design to meet evolving customer demands. Examples include the provision of in-demand ancillary benefits such as virtual GPs and online exercise classes. In the digitally advanced Asian market, we’ve also seen how it is possible to move from product conception to launch in less than 24 hours. While this exacting timeline might be harder to achieve in the UK, getting to market could still be a lot faster.

While these quick responses achieve the goal of increased engagement and sales, an increase in customer awareness and usage of these add-on services will ultimately drive up costs. Insurers may need to consider how to account for this in future pricing.

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Taking the next steps

Crises have historically acted as catalysts for long-lasting behaviour change. The life insurance industry has an opportunity to grow as a result of the increased awareness of the need for protection and renewed focus on health. The industry needs to ensure that it is smart when taking advantage of this opportunity: it talks relentlessly about listening to customers and investing in the right capabilities while keeping sight of profitability, however, these lofty words often remain just that: words. By addressing these goals through their deep technical capabilities, such as pricing, insurers have a real opportunity to make this become reality.

Contact us

Colin Cummings

Colin Cummings

Actuarial Partner, PwC United Kingdom

Tel: +44 (0)7734 607592

Kieran McGing

Kieran McGing

Director, PwC United Kingdom

Tel: +44 (0)7715 487213

Ewen Tweedie

Ewen Tweedie

Manager, PwC United Kingdom

Tel: +44(0) 7483 361988

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