According to the U.S. Census Bureau, millennials are now the largest living generation.  As the generational makeup of customer bases evolve, so too do customer expectations in how they apply for and obtain insurance.  Emerging technologies are revolutionizing traditional business models used in the insurance industry to stay aligned with the rapid pace of evolving customer expectations.  These advancements come at a critical time for life insurers, who have seen the market for life insurance decrease in recent years.

While the initial focus of InsurTech activity was concentrated in health and auto insurance markets, there has been a surge in the life insurance sector. A few new players in the life insurance market are focusing on providing new customers with instant-approval term life insurance and accidental death benefit policies. Media reports indicate that one new company is offering to underwrite a term life insurance policy without a medical exam.  Instead of using blood tests and in-person evaluations as a part of the application process, it reportedly relies on historical data, such as prescription database and driving record searches, to underwrite its policies.  Another company is offering to insurers a new technology that uses facial analytics distilled from “a selfie” to estimate life expectancy to assist in determining premiums and policy approval.

The goal of these new technologies is to significantly shorten the application process to meet customer expectations.  However, these innovations must comply with existing insurance laws and regulations. Encouraging the use of these technologies, some states have recently introduced legislation to provide insurance commissioners with the authority to waive or vary existing laws to permit companies to test innovative products, services, business models and delivery mechanisms.  These laws are necessary to facilitate “regulatory sandboxes,” which are specifically created to provide a supervised environment where insurance entities, working in a collaborative relationship with regulators, can test these innovative products and technologies.  For example, in recent testimony to support this legislation in Hawaii, Commissioner Ito recognized that “[b]y actively engaging with and encouraging the piloting and testing of new and innovative products, pricing and ways of delivering insurance to businesses and consumers, the State can… expand insurance markets… by making insurance transactions more accessible for first-time insurance buyers.” However, until states formally implement insurance regulatory sandboxes or provide further guidance on the use of these technological innovations, companies will have to carefully navigate the sometimes archaic state insurance regulatory landscapes.  

Despite potential regulatory hurdles, InsurTech innovations present life insurers with the opportunity to expand market growth to new generations.  With some state regulatory officials already indicating support for technological advancements in the insurance market, the future of achievable innovation is on the horizon for the life insurance industry.