TransUnion Live: The 2025 Life Insurance Outlook

Andrew Goss/Host:

Welcome everyone to another episode of TransUnion Live on LinkedIn. I'm TransUnion's Andrew Goss/Host, and I'm excited to be joined today by my esteemed colleagues, Karen Malone/Insurance, TransUnion and Stothard Deal/Insurance, TransUnion to discuss the life insurance outlook in 2025. Welcome you two.

Karen Malone/Insurance, TransUnion:

Thank you.

Stothard Deal/Insurance, TransUnion:

Thanks for having us.

Andrew Goss/Host:

Thank you. So before we get started, I always start off with this disclaimer for the audience. We welcome your questions as long as they're related to today's conversation. Just put them in the comments area below, and if they're applicable and we don't get to them during today's episode, we'll respond afterwards.

Now let's get started. To begin with, can one or both of you touch on some of the industry challenges around consumer engagement in the life insurance market?

Karen Malone/Insurance, TransUnion:

Yeah, Andrew, I can start off for sure. There are several engagements around growth in the life insurance markets, and I'll start with the kind of the beginning of the buying journey, and that's where information gathering and seeking is happening. And we see here generational divides, and what I mean by that is younger consumers who are more informed by social media versus older consumers who are more apt to really get information through more traditional channels. And so the challenge here really in marketing for life insurance is to meet the consumer where they are.

Economic factors. There's limited discretionary funds. The life insurance business, it's non-compulsory, right? And so that means carriers are faced with competition for finite pool of money. And so families are deciding whether to spend that money on buying bread to go with the bowl of soup or do I invest in other products such as life insurance over time?

TransUnion's internal analysis shows that younger consumers, and we're talking Generation Z, Millennials, they're slower to becoming homeowners and forming real traditional households. The need for asset protection is not as pressing as it was for previous generations at the same point in time. And that delayed demand may be in part due to economic factors such as housing costs that are really now outpacing income growth.

A positive note in that vein is that developers or contractors are buying smaller plots of land. They're building smaller homes with fewer finishing touches and bringing down the cost of the home. So this approach helps maybe reverse the 40-year low in affordability and may make it easier for younger consumers to buy homes, and I'm sure all of us who are parents of older children would like that. And so having financed assets, that's a key trigger. So if you're buying a home, a mortgage, a key trigger for life insurance.

Another challenge, increasing competition. So compared to three decades ago where we had boomers who were really fueling the life insurance market in terms of sales, we now have all kinds of competition for robust alternative investment vehicles. And so they're also increasingly accessible, and that's important.

And just on a final note, other consumer behaviors that might influence shopping or buying life insurance are lack of consumer education. And this has been kind of longstanding. When you think about it, the consumers out there don't always know the price and misunderstand the price of life insurance as well as the products that are offered. There's procrastination. It's not compulsory, so, "I'll buy life insurance one day." And there's also pace, a need for instant gratification by consumers, and carriers could face the risk of abandonment at point of sale. So those are a few of the challenges that I'd highlight.

Andrew Goss/Host:

Got it. Do you have anything else to add there or shall we move along?

Stothard Deal/Insurance, TransUnion:

I think Karen hit on the macro challenges. I would characterize it as the industry is the penetration rate, so the percent of consumers that have life insurance continues to, I would say, be suppressed or down from where it was decades ago. There was a slight uptick around COVID. But the challenges that Karen talked about are really some headwinds and we'll talk a little later about some opportunities on how to work within those and seek opportunities amongst them. But that's it. I think we can move on.

Andrew Goss/Host:

And in the study that I mentioned earlier, I found it really interesting the fact that many consumers are unaware they even have life insurance, and they do have it. Speaking of the opportunities, how does this actually present an opportunity for those life insurance providers?

Karen Malone/Insurance, TransUnion:

Yeah, Andrew, the study you're referring to is one that was done by LIMRA. They recently reported a change in estimated ownership of group life insurance. And so that estimated ownership went from 29% and that's what consumers self-reported versus group life insurance at a level of 39% ownership. And that was using workplace benefits and enforced data to calculate that percentage or estimate that percentage.

And so it appears from this LIMRA review that consumers receiving group life benefits provided by employers were just not always aware they even had the coverage. And the takeaway here to me is clear, right? Whether the consumer is aware or unaware of the group benefit, the key is there remains a large gap of un and under-insured consumers out there. And the question's really one of identity, right, and which consumers are most likely to need or be in the market for life insurance and how carriers can connect to those consumers.

Stothard Deal/Insurance, TransUnion:

Yeah, I think that's a really good point. And I think when you couple together the headwinds that Karen talked about a minute ago with this mixed consumer awareness on whether or not they have coverage or they have the right amount of coverage, it really points to the need for the industry to invest in and build up a stronger understanding of their existing customers and of their target prospects. And from our perspective, this all starts with a solid foundation of consumer identity, so leveraging sort of a federated source of consumer identity to unify the carrier's view of the consumers, not just of their current customers whose information could be spread across various disparate data sets internally, but also of their prospect customers to get a clearer view.

And so once this unified foundation is set, the insurer can then layer on top of that various types of behavioral or demographic or psychographic information to better understand the potential coverage needs of consumers and the propensity for those consumers to be in market for life insurance, so a knowledge of not only existing and prospect customers, one of those dimensions can really help insurers optimize their marketing spend, find the right consumers to target, ultimately driving up the ROI on their marketing investment.

Andrew Goss/Host:

Okay. Well, that's a good way to start the conversation. We've kind of created the base layer, and I just want to remind before we get on the next question that I have, quick reminder to the audience, if you have any applicable questions, put them in the comments area below. We should get to them during today's episode.

So back to today's conversation, let's get to the why and how people shop for life insurance. What prompts consumers to obtain life insurance? And we talked a little bit about COVID before, but what role has COVID-19 played in that?

Stothard Deal/Insurance, TransUnion:

Yeah, Andrew, I'll take the lead on this one. So traditionally life insurance, unlike personalized insurance that are renewed on a semiannual or annual basis, life insurance is typically purchased less frequently and is generally triggered by specific life events where consumers have a need to protect their assets. This could be when consumers first marry, when they have the birth of a child or the adoption of a child, major purchases of assets, vehicles or homes, but then can also include severe illness, whether it's to themselves or to a close person that they're connected with. Those have traditionally been the moments where consumers purchase life insurance.

Now, we did during COVID see a heightened spike in purchase intent, and not really too surprising. Mortality was more clearly top of mind to consumers during that timeframe. But what we have seen over the last couple of years though is that trigger for intent coming down and sort of the markets returning back to the normal traditional behaviors or triggers that I mentioned around life events.

Andrew Goss/Host:

So sort of the old normal, I'll call it. Okay.

Stothard Deal/Insurance, TransUnion:

Sure, yeah.

Andrew Goss/Host:

Okay. So let's talk about channels now consumers use to shop for life insurance, and this is across a lot of industries, but specifically to life insurance, how big of a role is digital playing? And then talk a little bit about traditional channels like snail mail and landline phones.

Stothard Deal/Insurance, TransUnion:

Certainly. Yeah, so digital is becoming an ever larger channel for consumers to shop in. So TransUnion conducts annually a consumer survey that measures the attitudes and perceptions of consumers related to insurance. And the 2024 survey, which we completed at the, I think it was the fourth quarter of last year, we saw almost half of respondents or a little over half of respondents completed their quote for life insurance in an online channel, whether that's through an online computer or through a smartphone or mobile channel. And that is slightly higher than roughly 45% who shop through agents or phone channels.

Now, if you go back two years ago, it was sort of 10-point flip in the other direction. So phone channels and agents were about 10 points higher than digital channels, but slowly over time, and this is consistent across other business lines as well, we've seen that shift towards digital. And if you look at it across generation, it's probably not too big of a surprise, but you'll typically see younger generations, the Millennials and the Gen Zs favoring the more digital and older generations preferring still that agent contact, whether it's in person or via the phone.

What that means, though, from a marketing medium perspective for insurers that are advertising is we also still continue to see a shift in marketing spend towards digital channels. But arguably direct mail remains to be a very important medium in the channel, but with digital and social making up a larger proportion year over year. Now, marketing medium or channel will also differ based on the actual insurers, so how they distribute or through captive agents, also the type of entity that they are. So are you an online digital agency? You're most certainly going to be pushing a lot more advertising through digital channels, but certainly seeing an overall shift towards digital and that being heavily driven by younger consumers, younger generation consumers.

Karen Malone/Insurance, TransUnion:

And I would just add to that one of the things that I find kind of fascinating is even when you use the traditional old snail mail, we're moving towards the omnichannel or multichannel approach. And so that snail mail might have an embedded QR code or it might have a link to follow the insurance company's mascot, all kinds of things to take that snail mail and now engage the consumer in that digital. So I think that's pretty interesting as well. There's certainly a host of channels worth exploring out there beyond mail for sure.

Andrew Goss/Host:

Yeah, absolutely. I mean, you see omnichannel experience across industries, and that's interesting. Omnichannel may look different in life insurance as opposed to another industry, but it still is there, so fascinating. So let's switch gears now and talk about underwriting. We talked about challenges earlier in general to the industry, but what are some of the challenges facing life insurance underwriters?

Karen Malone/Insurance, TransUnion:

Yeah, so traditionally, life insurance was kind of underwritten with... The full underwriting involved a lot of medical process, procedure, maybe invasives. And so we've had the advent of accelerated underwriting, which is leveraging the use of third-party data to help expedite the underwriting process. And that's of benefit to both consumers and to carriers. And so carriers who are not using third-party data may struggle to compete in a space because of the speed of accelerated underwriting, but also they may face adverse selection due to minimized abilities to segment their risk.

One of the key challenges specifically around accelerated underwriting is ensuring that the accelerated process has balance, I'll call it. You want to reduce the friction, but you still want to maintain mortality performance. And so carriers want persistency, they want to write risks that stick, that remain in place over time. And so leveraging data that is predictive both of persistency and mortality, that's how they can help strike the balance.

Andrew Goss/Host:

Okay. Anything else on this, Stothard, or shall we move on?

Stothard Deal/Insurance, TransUnion:

Let's move on.

Andrew Goss/Host:

Okay.

Andrew Goss/Host:

Yeah. Well, this brings us to delving deeper into fairness in life insurance. So let's talk about how regulations and data factor into fairness. And fairness can mean many things to many people. So what exactly do you mean when you say fairness in life insurance?

Stothard Deal/Insurance, TransUnion:

Yeah, so at its present, the fairness conversation is really generated from the industry's broader adoption and use of external, call it third-party consumer data. And the use of that data is largely the fuel behind the accelerated underwriting processes that Karen just described for the underwriting process. Over time, stakeholders, whether it be regulators or consumer groups and frankly even insurers have raised questions about the potential that external sources of consumer data or traditional rating and underwriting variables could have a close relationship with a consumer's protected class information, so for example, race and ethnicity information, and have pushed the regulators and carriers to begin to look at evaluating how to measure that and show that the use of that data is in fact fair and equitable.

A couple of things here I think it's important to note just sort of foundationally, the first being that regulations regarding insurance underwriting and pricing prohibit insurers from using any sort of protected class information in pricing and underwriting, including race and ethnicity. And consumer reporting agencies, as well as insurers, have not traditionally or don't collect and store information about consumers' race or ethnicity or many other protected classes' information. But that lack of collection or asking for it doesn't preclude the industry from working together to determine how best to help address some of the questions that are coming around the use of the data, ensuring that it's fair and equitable.

So the industry and a couple of states regulators in the industry have been working with carriers and industry groups to put together some fairness testing practices or frameworks that the industry can use to test and quantitatively show, does the use of third-party data show any closer relationship with protected class information like race or ethnicity? And we believe that these tests will ultimately... We've done some work, others in the industry have done some work and preliminary results have shown no close relationship between, say for example, a credit-based insurance score and a consumer's race or ethnicity.

But ultimately, these testing practices and requirements are a good check to have in place to ensure that there's no unintended relationship between that data and protected classes. And ultimately, we believe that this will help solidify and continue to expand the industry's use of third-party data because we have seen that it enables the industry to expand both the availability and the affordability of insurance by improving mortality predictions, helping to accelerate traditional, more expensive, longer tail underwriting procedures, and ultimately improving competition within the industry, which certainly helps consumers.

Andrew Goss/Host:

Okay. So, moving on. We've covered a whole lot so far, and now we're getting to, I guess you can say the end of the journey here. So, we've discussed consumer shopping, acquisition, underwriting, and fairness. And now let's shift gears to policy administration and claims. Let's talk about understanding the mortality status of the policy owner and closing the loop by contacting beneficiaries. What kind of developments have we seen in this area and how has proactively contacting beneficiaries good for business, actually?

Karen Malone/Insurance, TransUnion:

I can take this one if you want.

Stothard Deal/Insurance, TransUnion:

Yeah.

Karen Malone/Insurance, TransUnion:

So first of all, when we shift gears to policy admin and claims, the very first thing that comes to mind for me is the absolute need to verify the identity of the consumer, whether by phone or device. However, that person is transacting that identity is important to understand and validate who's on the other end. Cash value policies are a part of life insurance, right, and those policies are increasingly exposed to attempts at account takeover fraud, for example.

And so once that's buttoned up, I'd make three points on mortality status. The first is, are you as a carrier, are you using a robust deceased database? Know the mortality status of your policyholders. The social security Death Master File has eroded over time. It is no longer a full and complete death repository, and a more full complete repository can help carriers to proactively deliver on that promise to pay.

Now, why is this important? Well, consumers are really counting on the carriers, right? Our survey showed that most consumers, like 59%, don't know how to determine whether or not they're a beneficiary on a life insurance policy. They may not know there's a policy, they may not even make a claim. So each year, tens of millions of dollars are escheated to the states because they're not able to match the benefits to the intended beneficiary. I want to first of all applaud and recognize the great job that's being done by carriers. On their websites, they are publishing the how-to, how to contact and try to figure out if you're a beneficiary to a life insurance policy.

Even with that work effort, there's still a gap. And there's also a challenge around what I call stale data around beneficiary contact. And if you think about it, a life insurance policy may have been written 30 years ago. Someone passes away, that beneficiary information may be on a piece of paper, may not even be digitized, but if it is digitized, it's likely that the person's name may... We'll use me as an example. So I have been married. From 30 years ago, I have a different name because of marriage. I have changed my address five times. I've moved to five different states. I have different phone numbers than I did 30 years ago. And so those constant changes in dynamics, that data hygiene is necessary to really make sure that there's an ability to reach beneficiaries because the information that was provided at the time the policy was underwritten probably is no longer current.

And so the opportunity is really this, to engage in digital and telephonic innovations that can bridge that gap, improving workflow efficiencies and improving contact rates too. So when you call, is anyone going to answer the phone? When you finally get the information on the beneficiary, you really want to bridge the gap and put the benefits with the beneficiary to which they are entitled. And success in this area can really be gauged when we're able to minimize the amounts of dollars that are escheated to the states in the future. And this kind of goes full circle if you think about it. If you call a beneficiary who did not know they were a beneficiary and you're going to make payment to them on a life insurance policy, that's serendipitous, and they are living the value proposition of life insurance. And so you have a net new opportunity for a potential new policyholder and a new policy.

Andrew Goss/Host:

Yeah, it's fascinating, all the steps and all the unclaimed cash. Okay. So Stothard, anything else on that before I have one more thing to tell the audience?

Stothard Deal/Insurance, TransUnion:

No, I think Karen did a good job talking about the opportunity. Yeah.

Andrew Goss/Host:

Got it. Okay. So just a reminder to the audience before I get to my last whammy of a question, just a reminder, please, if you have any questions, put them in the comments area below and we'll answer them during this episode.

So moving on to kind of the gotcha question, if there are two big recommendations you could provide life insurance companies this year, what would they be? And feel free to repeat any points you had before just for emphasis.

Stothard Deal/Insurance, TransUnion:

Boy, Karen, do you want me to go first?

Andrew Goss/Host:

If you have a third one, that's okay. [inaudible 00:25:23]

Stothard Deal/Insurance, TransUnion:

I'll do one. It may be lame, but this is more than one inside of one, but we'll see. But I think the industry has come a long way in the last half decade in terms of adopting advanced data, advanced analytics, making the investments to digitize the policyholder experience from acquisition all the way through claim. And I think imperative is to continue that investment and continue that adoption moving forward. And this really applies across the policy lifecycle from targeting and acquiring customers all the way through the settlement of claims. As we talked about earlier, it's leveraging a solid source of identity and unique behavioral insights to target consumers that have the highest intent to purchase, align with the carrier's risk profile.

On the underwriting side, it's improving the experience while also managing mortality slippage, right? So it's increase in acceleration rates, streamlining the new business process, but maintaining the underwriting discipline. In policy issuance and maintenance, protecting data, guarding against potential fraud. And then at the point of claim, it's what Karen just talked about, which ultimately I think helps improve the speed and the accuracy and completeness of claims payments and processes.

Karen Malone/Insurance, TransUnion:

Andrew, I can add one, and this is one... First of all, I agree with everything Stothard said for sure, but we haven't talked about this one before and it's maybe the elephant in the room. So I'll just surface this one is life insurance represents trust with what I would say is a capital T. And so one of the biggest potential industry disruptors is the threat of cyber attacks. And so just being sure that cybersecurity is in place, and that's from the perspective of adherence all the way through to remediation in this kind of ever-growing risk. And the key is really protecting the financial assets, but also protecting the reputational risk that the carriers might have exposure to as well. And that is what's going to keep the consumer trust factor up, so that would be just another point that I would add.

Andrew Goss/Host:

Okay. Well, anything else that you two have to add?

Stothard Deal/Insurance, TransUnion:

No, I want to be mindful of everyone’s time.

Karen Malone/Insurance, TransUnion:

I could talk about life insurance all day, but I think that we have limited time here, so no, thank you.

Andrew Goss/Host:

Okay. Well, I appreciate both your time, Karen and Stothard. Thank you for joining us. Some really fascinating points, yes, with life insurance. These conversations continue to fascinate me across the business. And of course, thank you to our audience. If you didn't get a chance to ask your question yet and it's applicable to today's conversation, feel free to continue to ask questions within the chat here and we'll be monitoring and get back to you if it's applicable. And to download our study we referenced today, we'll be putting the web address and a QR code up on the screen here at the end. You can also find that URL by going to the LinkedIn live event page description tab. See you next time on TransUnion Live.