There is no correct age at which to buy a life insurance policy, and whilst it might be worth considering at 18 most people start to think about taking out a policy once they have dependents such as a spouse or children. Policies are cheaper for younger people, as they are less likely to suffer illnesses and are generally in better health, but policies can be taken out at almost any age.
Taking out a life insurance policy seems like a sensible decision for people as they progress through life, but with the variety of economic pressures on working people today, fewer and fewer have been taking out policies in recent years and the industry has started to adapt in inventive ways.
According to one study published in the journal Economic Perspectives, “life insurance ownership has declined markedly over the past 30 years”, with figures from the US showing that between 1989 and 2013, the percent of families with such policies declined from 77 per cent to 60 per cent. This rapid decline has caused those in the insurance industry to rethink how they are trying to attract new customers, and some have come out with some iterative and inventive ideas.
What was putting people off?
The first thing the industry examined was why people were put off from taking out life insurance policies, and feedback from customers showed that people did not enjoy the requirement of taking a full invasive medical exam before being accepted onto any plan.
Another element that has put people off buying life insurance was the way they were traditionally purchases, through a convoluted scheme of brokers and agents. Almost like buying a house, the process could take weeks or months and many people would not complete the process or would just balk at the complexity of the entire business.
Many policies still include the requirement for a physical exam and as insurance is a risk-based business, such plans can sometimes work out more cheaply, many insurance firms have started to offer life insurance with no medical exams. These policies base their risk assessment on the answers customers provide in their sign up questionnaire rather than a doctor’s assessment, and without this step life insurance policies have been found to be faster and more convenient to purchase than traditional policies with medical exams.
Other changes have focused more on the process than the policy, with various shiny new insurance firms now offer life insurance via a quick sign up online or via an app. Others have gamified the entire process of health and insurance, where customers would complete exercise or healthy-eating challenges on their smartphones to bring down premiums and engage with their insurers on a more regular basis, reducing the number of policy dropouts.
Other insuretech startups have rebranded the questions around life and death to make them feel less like a high school maths exam, with one player asking customers “What do you want to happen when you die?” instead of how much coverage they want. And others still have turned the entire industry on its heads by letting people take out life insurance for short periods, down to just 24 hours, so that they know they are covered when they are doing something risky – like skydiving – but not paying day-to-day.
These young businesses already have thousands of signups, but the questions remains – will young people commit to paying for life insurance when they are already struggling with rising costs of university, housing, and now food? Only time will tell.