There has been a lot of progress in the life insurance industry.

Over the last several years, the industry has expanded the array of products offered to meet different clients’ needs. Life insurance is now easily accessible, and more people are educated about the need for life insurance coverage and how to obtain it.

Advisors should be proud of the headway made so far – but there is more to be done. The life insurance industry is still falling short in two important areas. If the industry doesn’t address these shortcomings, consumers will continue to remain exposed and advisors risk being displaced by technology.

The silver lining is that advisors have the tools to overcome these issues. But they first need to recognize what those issues are.

Issue #1: Lack of Continuing Service for Clients

The life insurance industry has long focused on acquiring clients and providing solutions through different products. As a result, life insurance practices have put most of their technology investments into tools that streamline the sales process, including CRMs and quoting software.

Getting the right policy is the first step, but what happens next? Usually, the advisor hands off the policy and that’s it. There is little to no engagement with the client afterward. Many insurance providers do annual reviews, but is that really enough?

Consumers don’t seem to think so.

There is a growing perception gap between the service that advisors think they’re providing and what consumers feel they’re receiving. According to a study from Engagement Labs, insurance comes in below average in reference to client sentiment, below banking and credit card companies. In addition, our recent blog, “Insurance Agents: Your Clients Don’t See You as You Do,” mentions that 94% of advisors believe they regularly check in with consumers to ensure they’re meeting their clients’ needs, but only 69% of customers reported sufficient communication.

The industry is falling short on communicating, engaging, and nurturing clients who already have a policy. This lack of communication not only hurts advisors, but also their clients and their beneficiaries:

  • Advisors who don’t regularly communicate have less client loyalty, fewer recommendations and fewer additional sales from their clients.
  • Clients may become underinsured as they don’t think to update their policies despite significant life changes, and without ongoing communication, the advisors don’t know about the changes requiring additional or modified coverage.
  • When beneficiaries are not in the loop, it can lead to confusion, family conflict, or even lost assets when it’s time to file a claim.

Gaining new leads is critical for business, but the value of customer retention – which is more cost-effective than acquisition – cannot be understated.

Issue #2: Innovation at the Expense of Advisors

The trend in insurance technology is becoming clear: the vast majority of investment is going into direct-to-consumer insurtechs. These tools aim to acquire customers directly, underwrite personalized policies, and deliver them digitally, all without the need for an advisor.

While speed and convenience powered by technology is great for consumers, the potential displacement of life insurance advisors is all too real and highly concerning – and not just for the advisors.

We believe innovation at the expense of advisors is ultimately innovation at the expense of clients.

Why? Technology cannot replace the personal relationship, experience, and expertise provided by a life insurance advisor. For instance, consumers will almost always gravitate toward the lowest-priced policy. Focusing on price points in the short term can cause people to buy a policy that isn’t worth it in the long term.

Consumers aren’t experts in life insurance, and they don’t need to be. But they do need an advisor’s guidance to find the right policy for them.

Insurtech without advisors involved is not the best alternative.

How to Succeed as We Move Forward

The good news is that the industry can solve both of these issues simultaneously and take advisors’ businesses to the next level. The solution for life insurance advisors is adopting a relationship-focused business model powered by insurance technology.

Continued collaboration and communication between clients and advisors will be critical to success for both parties. When there is more collaboration, clients typically receive better advice and solutions and insurance advisors improve customer retention and referral rates.

Advisors must turn to insurtech to foster more communication, maintain relationships, and better understand when and how to meet their clients’ changing needs. New advisor-rich platforms are coming to the market to help advisors overcome these challenges. Platforms like Link by LegacyShield encourage client-advisor communication in a secure virtual workspace. The platform also allows clients to add their beneficiaries to their accounts, fully closing the life insurance loop.

The time to move away from a transactional approach is now. Relationship-building and transparent, consistent communication will be the path to success for advisors.

To read more about successfully meeting the marketplace, check out our blog, “Insurance Agents: Move Into Change or Be Left Behind.”

Dan Pierson

Written by Dan Pierson

Dan Pierson is an insurance industry veteran, having run several insurance businesses and eventually selling a nationally recognized life insurance general agency. Dan started LegacyShield to help other insurance advisors grow their practices by focusing on the consumer experience.