By Sarah Parker, Senior Director, Financial Health Network
In the midst of the economic crisis brought on by the COVID-19 pandemic, consumers are realizing that insurance is not a nice-to-have; it’s a must-have. Life insurance carriers report a marked increase in interest from new customers who want to purchase policies, as people recognize the importance of protecting their families. Insurance products that protect against potential income loss, such as disability insurance, have taken on new relevance, while health insurance continues to be recognized as critical to one’s physical and financial health.
Yet the reality is that people have always known that insurance is an important way to protect themselves and their families. Our insurance research found that over 50% of people without life insurance knew they needed it. The challenge has always been that, with limited disposable income, the cost of an insurance policy is competing against other important necessities in one’s life… car repairs, childcare costs, even groceries. The pandemic is now simply pushing people to act in the face of a crisis, the likes of which we’ve never seen before.
This crisis, therefore, presents a unique opportunity for the insurance industry. Consumers are eager for protection. They are ready to make the financial trade-offs necessary to feel secure. But insurance products need to evolve to meet this moment.
We see three opportunities for change in the insurance market:
- Increase Flexibility: People’s financial lives are complex and messy. Insurance policies shouldn’t be. Leading insurtechs like Metromile and Hugo recognized this early and designed products that had protection people actually needed, making coverage more affordable. The industry developed the pay-as-you-go model of auto insurance to respond to how people live and drive, especially for those who often can’t afford even the minimum required coverage. In light of the COVID-19 crisis, large carriers are also offering more flexibility by looking for ways to extend the coverage of employer-sponsored policies during work furloughs and waiving the waiting period for coverage upon rehire.
- Offer Income Protection: COVID-19 highlighted that many people are vastly unprepared for a loss of income, even a partial or temporary one. Most people currently suffering from the economic impact of COVID-19 are healthy but have been laid off or furloughed. And while states provide unemployment insurance as a public good, there is an opportunity emerging for a new market for supplemental unemployment insurance or other kinds of wage insurance. The industry should double down on the product lines that protect against income loss, including life insurance and short- and long-term disability insurance. But it should also look for ways to create new products that cover income loss not associated with death or illness.
- Reach Out to the Mass Market: Since insurance companies are in the financial resilience business, they can offer struggling customers the peace of mind and protection that only insurance products can provide. People themselves understand better than anyone else the risks in their lives, and they’re looking for protection now more than ever. Now is not the time to double down on the mass-affluent customer base, fearful of falling interest rates as a threat to business viability. Now is the time to embrace the mass market, listen to what they’re telling you about their risks, and provide them with the protection and resilience they deserve.
With more people financially vulnerable than at any other time in recent history, physical health and financial security are on the minds of many. A colleague from a large insurer summed it up well during a virtual insurance roundtable discussion we hosted recently: “We are currently all experiencing the financial anxiety that financially vulnerable customers experience all the time.” How can this moment in time help the industry serve these customers better going forward?
Join us at EMERGE Live on June 25 for a special session on “Exploring the Role of Insurance in Financial Resilience,” featuring panelists from MetLife, AXA, Metromile, and Ladder. Please reach out to Sarah Parker at sparker@finhealthnetwork.org to be more engaged in our ongoing work promoting financial health in the insurance industry.
