Spike in Life Insurance Due to COVID-19 Boosts “Insurtech” Adoption
The COVID-19 outbreak has had a negative impact on several industries. The effects include mass layoffs, unprecedented losses for airlines, and an overall stifling of several of the world’s leading economies. However, a report from June 17, 2020 reveals that the opposite effect has been seen in fintech — which is partially due to a boost in the insurance industry.
COVID-19 Reveals the Need for Insurance
The outbreak has now forced financial advisors to pay greater attention to insurance. According to John Yackel, Envestnet’s head of strategic initiatives, clients themselves are increasingly demanding insurance plans. Financial advisors are now having to revamp their offerings to meet these demands.
In response to the growing need for insurance plans such as life insurance and annuities, it was reported that many financial advisory firms are signing up for insurance in droves. Envestnet Insurance Exchange, for instance, has seen more than a dozen new institutions sign up. This has coincided with a sharp turnaround in sign up trends for life insurance.
MIB Group, a risk assessment firm, reported that in the first quarter of 2020, life insurance applications were stalling. In March, the year-over-year activity fell by 2.2% and by another 3% in April. By May, however, that activity had risen by 5.2%.
Rich Romano, the CEO of FIDx, shed some more light on the matter by pointing out that the trends recorded are similar to those seen after the 2008 economic meltdown. This comes, he says, mostly from older citizens who are about to retire or are already retired. The policies taken out are to protect their assets from another possible economic decline.
This time, age once again comes into play. The COVID-19 virus has been recorded to be particularly deadly for older patients and adds another layer of complexity. It also explains why life insurance policies have become more popular, as elderly people will want to protect their loved ones should they become infected.
There has been yet another side effect of this, which is that fintech is seeing greater use within the insurance industry. Because the rise in demand has been so sudden, insurance brokers are turning to innovative technological solutions.
These aid in offering insurance policies to clients and enrolling them through a purely digital means. The industry offers a number of number of cost saving benefits, and has been dubbed “Insurtech” – combination of the terms ‘insurance’ and ‘technology’, and inspired by ‘FinTech’.
Insurance and Technology, “Insurtech”
CEO Mike Kalen of Covr, which deals with insurance technology, has reported a spike in sales. While sales from advisors are up by 70%, sales from self-directed clients have been up by an impressive 300%. Kalen explained that consumers are eager to access insurance information, whether or not their brokers are recommending them.
It is also worth noting that traditional insurance registration processes are complex and involve uncomfortable discussions. Using fintech solutions, digital processes can be implemented and clients can feel more comfortable whilst financial advisors can track activity. That way, both can focus on financial goals rather than products.
There is also the education factor to consider. Many financial advisors do not have experience with insurance and thus, cannot adequately explain it to their clients. Through interactive technological solutions, both the brokers can comfortably integrate insurance and clients can be educated on it.
Fintech Growth Amid COVID-19
The insurance sector is not the only one in which fintech has seen growth in the last few months. Overall, the pandemic has created a climate that relies more heavily on the solutions that fintech provides. It has been estimated that fintech adoption has increased by 72% since the pandemic began.
This is due to a number of factors such as more people working from home. Meanwhile, countries like the United States are gearing up for the impact of their stimulus packages on their economy. In the UK, it has been suggested that fintech could even aid in the recovery of the economy.
Do you think the increase in insurance applications is a good thing? Will this change remain post-coronavirus? Let us know your thoughts below.