According to LIMRA, the proportion of US households with life insurance policies is currently at its lowest point in decades. This underinsurance gap is well known, but has to be addressed in a meaningful way by the industry. Part of the disconnect stems from the fact that many Americans don’t see life and annuity products as relevant to their lives and lifestyles anymore. In fact, they’re so far detached from the product that millennials overestimate the cost of a life insurance policy by as much as 500 percent.

The challenge is to develop innovative products that appeal to the underinsured population and deliver them to market in a way that resonates with consumers. This obviously involves an extensive amount of work across the product development process, as well as a shift in distribution channels for the many customers that view the standard process as a barrier to entry. But beyond that, it requires innovating in a meaningful way, not just for the sake of it. In order to do this, insurers must also have the analytical capability to track, measure, and understand why their products perform the way they do in the market.

Examples of innovation already exist

Despite, or perhaps in response to, this lack of resonance with the un- and underinsured markets, youngers companies have started developing their own unique approach to product innovation. 

Life insurance startup Fabric’s target market of new parents is narrow, and for a good reason. Fabric offers a wide range of free services beyond its core life insurance offering, and they’re all specifically designed to address the specific needs of its target market. Customers aren’t required to purchase life insurance in order to access Fabric’s other services, but 70 percent do so within 10 minutes. 

On the annuities side, Blueprint Income is using a careful and strategic combination of targeted communication and refining its offerings to offer a range of products in a way that makes it easy to compare, shop, and purchase. In addition to this approach to its product offerings, Blueprint is also developing a subscription approach to annuities that’s focusing on a younger target market.

Key considerations when developing a relevant product

It’s never been more important for life insurance and annuity carriers to develop and distribute products with their customers in mind. Not only is it easier than ever for customers to shop and compare products, or decide they don’t need them at all, but some regulators are increasing the pressure on providers to prove they’re acting in the customers’ best interest. 

New York’s recent Insurance Regulation 187 requires life insurers and annuity providers to sell their products in a way that reflects the consumer’s best interest. While the new rule has only gone into effect for annuities, it begins early next year for life insurers, some major carriers are already being forced to suspend products in the market.

This isn’t a good look, but it reflects a deeper problem within the industry. Many providers have gotten so comfortable with business as usual that they haven’t caught up with the needs of modern day consumers. Ensuring that you’re approaching potential consumers with product recommendations that are suitable and relevant to their situation and needs is vital, even in states where it hasn’t been required. 

Using data analytics to get to know your target audience’s needs and wants before beginning the product development and distribution process enables you to demonstrate the relevance that so many modern consumers aren’t seeing. Delivering consistent value, expanded services, and health oriented programs are further examples of ways for carriers to provide clear, consistent value across the customer lifecycle. 

The change also has to come from within

According to McKinsey, just over 10 percent of insurers believe their processes deliver strong product innovation, even though over 80 percent of providers consider product development a core competency in their business. This disconnect begs the question, what’s missing in this process that’s making providers feel this way?

We believe the answer lies in a robust analytical capability that helps guide decision making in a way that makes the entire product development process incredibly intentional, measurable, and reflective of consumer priorities. It means having a firm grasp on what you're doing, as well as why you’re doing it. By harnessing the power locked in your internal processes, you can empower your product development and improve its delivery to market, using data to gain a more complete view throughout the process.

True power lies in intention

Using data analytics to get the big picture enables you to be incredibly intentional when focusing on product innovation and delivery to market. It also gives you a clear vision of how the changes you make directly affect retention, competitive position, and customer satisfaction, ensuring your procedures and processes aren’t hindering your business performance, but enabling it.

In the end, it’s far more powerful to be able to say you ‘know’ something will work instead of saying you ‘think’ it will. Developing a clear understanding of what does and doesn’t work, and adjusting accordingly, empowers your product innovation and development from top to bottom. This is vital to developing relevant products and bringing them to market with the highest likelihood of success.