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2012: Opportunities in Reaching the Middle Market with Life Insurance - New Pathways to Growth

The life industry has tried to tap the potential of the middle market for many years, but that market remains underinsured, and overall life insurance ownership has reached historic lows. The recent recession has eroded household financial conditions, making life insurance protection even more important. Demographic trends point to increasing opportunities for life insurance, but unless the insurance industry makes significant inroads with the middle market and younger customers, it risks missing those potential customers as they enter their prime insurance-buying years. Over the past several years, insurance companies have begun using predictive modeling and social media as ways to reach the middle market. Current life insurance products and distribution methods do not fit well in those vehicles, but progress is being made and insurers are making the first tentative steps to reaching the middle market.

1. Introduction

2. Executive Summary

3. Is Life Insurance Missing an Opportunity?

  • The Opportunity for the Life Insurance Industry
  • Are Life Insurers Missing the Opportunity?
  • Recent Performance Is Not Encouraging
  • Summary

4. Some Reasons Why the Life Insurance Industry Is Missing the Opportunity

  • Demographic and Societal Changes Shift Needs
  • Increased Policy Size Despite Low Growth
  • Impact of Current Economic Conditions on the Ability to Purchase Insurance
  • Implications for the Middle Market
  • Summary

5. Are Insurers Abandoning the Middle Market?

  • Middle Market Identification
  • Middle Market Profile of the States
  • Summary

6. Estimating the Protection Gap

  • Quantifying the Middle Market Protection Gap
  • Alternative Estimates of Insurers Falling Behind Market Growth
  • Retirement and Health Care Gaps
  • Summary

7. Analytics and Data Mining: New Solutions for Middle Market Sales

  • Cycle of an Increasingly Complicated Product Driven by Distribution?
  • The Cost and Complexity of Underwriting
  • A Possible Solution in Underwriting with Predictive Modeling
  • Two Cautions
  • Summary

8. Distribution Challenges of Penetrating the Middle Market, and Current Alternatives

  • Distribution Barrier in Reaching the Middle Market
  • Marketing Benefits of Predictive Modeling
  • Persistency Benefits of Predictive Modeling
  • Alternative Distribution Strategies to Reach the Middle Market
  • Summary

9. The Internet May Be the Best Path to the Middle Market

  • Website Traffic
  • Website Quality
  • Which Companies Are Online?
  • Social Media
  • Social Media Compliance Concerns
  • Compliance and Data Mining Services
  • Meshing the Internet with the Entire Company
  • Resolving the Needs Gap and Penetrating the Middle Market
  • Putting It Together
  • Summary

Appendix

  • Middle Market Portrait of the States 
Introduction

The life industry has tried to tap the potential of the middle market for many years, but that market remains underinsured, and overall life insurance ownership has reached historic lows. The recent recession has eroded household financial conditions, making life insurance protection even more important at exactly the time people have less money available to address the need.

Demographic trends point to increasing opportunities for life insurance, but, unless the insurance industry makes significant inroads with the middle market and younger customers, it risks missing the potential customers entering their prime insurance-buying years. With the simultaneous downturns in the equity, credit, and housing markets, coupled with employee benefits being squeezed by the recession and rising health care costs, the middle market protection gap—already large—has grown.

However, over the past several years, some new tools have become available to help life insurers reach the middle market. Predictive modeling, which has become prevalent in property-casualty insurance, is beginning to be applied in the life insurance market; it brings the possibilities of making underwriting faster, less expensive, and more accurate, in addition to the benefits it can bring to marketing. Social media have exploded in popularity, and life insurers and agents are starting to establish a presence in social media, now that the compliance picture is becoming more clear.

Social media and the Internet are important ways to communicate with GenX and GenY. Current life insurance products and distribution methods do not fit well in those vehicles, but progress is being made. Online tools are becoming more robust, and insurers are beginning to approach the Internet and social media as a primary channel, rather than just another place to post material developed for other media. This change in approach, while subtle and still not prevalent for life insurers, may be the first tentative step to making progress in reaching the middle market.

In 2006, Conning’s Penetrating the Middle Market—Clearing the Distribution Hurdle calculated an estimate of the middle market protection gap. The current study updates that calculation to reflect the current economic climate and explores other changes since that study was completed. 

 

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