“Thank you so much, for everything. What you just said lifted my spirit. I can do this. I can keep going.”
These are more than just words from a customer, Akouwa, who lost her husband to cancer and called TruStageTM to file a claim on his life insurance policy. This powerful sentiment is a reminder of the empathetic role insurance companies can play – a force for good that empowers the people they serve.
In that same conversation, the caller told our claims representative, Dawn: “You’re my superhero, because I just feel so lost right now.” That’s the peace of mind insurance should offer, the kind of experience every customer should have and the kind of support every customer should feel.
Now, imagine a world without the ability to transfer the personal financial risks we face each day – a world where the full weight of every misfortune in life falls on you and your loved ones. That’s the reality many people experienced before insurance companies were created to serve as a buffer for unexpected expenses. And that remains a reality for too many individuals today who face a variety of unfortunate circumstances, such as job loss or disability.
Perhaps no experience is more emotionally jarring and financially burdensome as losing a loved one, especially in unexpected fashion. And yet according to LIMRA’s 2024 Insurance Barometer Study, just 51% of U.S. adults have some form of life insurance coverage, which represents a 12-point drop from 20111 and reflects a downward trend over the past 50 years2.
Even those who carry life insurance often don’t have enough coverage to replace the average income they bring to their household. In all, you’re looking at 102 million adults who face a gap between their life insurance needs and their actual coverage.3
Why is there an insurance gap?
It’s concerning that people who most need protection – young, low-income people and historically marginalized groups – are the ones with the largest coverage gaps.4 And when you look across all income levels, Hispanic and Black consumers tend to be more uninsured or underinsured than other groups, and women are less likely to be insured than men.5
The coverage gap cannot be written off as a lack of interest. In fact, consumers’ risk aversion spiked during the pandemic6. And many of the consumers who are least protected state they need it. Unfortunately, barriers for consumers – including limited access to financial products, services and education – still exist.
If insurance is only available to the well-off, we’re missing our mark as an industry.
The widening income and wealth disparities in the U.S. have fed into the long-term trend of fewer households safeguarding themselves and their possessions. To help today’s middle-market consumers create financial security and position future generations for success, they need better access to insurance. And the industry must evolve to meet consumers where those consumers are today.
First, we must understand why this insurance gap exists.
The No. 1 reason people don’t have enough – or any – life insurance is the perception that it’s too expensive7. People may consider it a luxury, when, in reality, it could be the only lifeline people have from falling off a financial cliff – or keeping their family from doing so.
I believe a key reason for this misconception stems from a harsh reality: the industry’s historic focus on higher net worth customers and higher face value policies sold through an advisor – producing more premium and more profit for the companies.
Affordability remains an opportunity
Insurers must do what it takes to keep costs affordable, so policies can fit within an average household’s budget. Inflation continues to pressure budgets and remains consumers’ most important economic issue8 – making affordability top of mind.
Although many people would face substantial financial difficulties if they lost a family member, their interest in life insurance is tempered by perceptions about cost. Most Americans greatly overestimate the cost of life insurance – perceiving it to be two-and-a-half times more expensive than it is9.
It’s true that affordable coverage hasn’t always been an option for people. While many insurers remain focused on the higher-face policies that cost more for individuals and make more money for the company, more options than ever exist.
Smaller face-value policies can cover final expenses and help keep a family from falling into a financial abyss. Higher net-worth consumers might not place value in a $15,000 policy, but many middle-market consumers view that policy with pride, helping ensure peace of mind for the people they love. So when I see comments like “the rates seemed more competitive than I thought they would be,” I’m motivated to change the perceptions among those consumers who may feel outpriced by life insurance products.
That does not mean we should sell products to people for the sake of selling products. In fact, insurance is not for everyone; the coverage should be needs-based and suitable for each person’s situation. That’s best for consumers but also the company, because ill-fitting policies lead to more service interactions and cancellations. For that same reason, it’s important to recognize when people need to put food on the table before paying for insurance.
Complexity creates a roadblock and erodes trust
Many people say that it’s unclear how much or what type of insurance to buy. Navigating the complex web of the financial system and understanding your place in it can be overwhelming. Historically, buying life insurance was a convoluted, time-consuming process. There’s a clear opportunity for insurers to educate consumers and simplify language, processes and user experiences.
Another customer who just lost her husband told us, “The handling of my late husband’s claim was the most efficient I’ve experienced – I also had policies with other companies and they were tedious to work with in filing the claim. You are doing it right!” That’s the kind of impression we aim to make for the people we serve.
However, there’s an uphill battle when people don’t trust insurance providers. Only 29% of consumers10 say they have “extreme/quite a bit” of confidence in insurance companies. Research also shows most consumers have negative opinions of banks, other financial institutions, and large corporations.11
Confusion erodes trust. And consumers tell us there is confusion at every step of the buying process. They fear the application process, they don’t feel as if they have someone trustworthy to guide them, they get overwhelmed by information overload and they doubt themselves even after making a decision, wondering whether or not they are truly protected.
As an industry, we have an opportunity and obligation to reverse this trend.
Accessibility & marginalization create barriers
We must confront some of the exclusionary practices that prevented marginalized populations from accessing affordable coverage, or in some cases, any form of coverage. Practices that would rightly be cast as predatory today—such as redlining and price discrimination—were common over the last century. But if financial institutions can reckon with their past in the context of how we will do better in the future, we can open doors for countless customers to gain protection.
Being culturally aware and inclusive isn’t just the right thing to do morally; it’s necessary to stay relevant as demographics evolve and consumer expectations change. Additionally, ethnic and cultural diversity leads to outperformance from a business perspective. According to McKinsey & Company, organizations in the top quartile of ethnic and cultural diversity among their leadership teams outperform those in the fourth quartile by 39%, in terms of profitability.12
To move forward on this front, start with a critical assessment of your end-to-end processes. In our world, that includes marketing, application requirements, underwriting standards, service and billing options, and claims. Do you see cultural biases and blind spots?
Next, ask yourself whether the composition of your workforce reflects the people you’re trying to serve. Representation matters, to ensure your organization is prepared to address these communities’ needs.
In our 2022 What Matters Now research report (download required), TruStage identified that DEI practices are especially important to young and multicultural consumers13. That includes everything from culturally sensitive policies to a workforce that has a common lived experience. Unfortunately, less than 7 in 10 Black (69%) and Hispanic, Latino or Spanish (68%) survey respondents are satisfied that their primary financial institution has staff who represent their culture. That number dropped to less than 6 in 10 (58%) for Asian consumers.
Without a trusted financial advisor, many people aren’t equipped with the knowledge to make the best choice to fit both their needs and budget. These types of educational and financial barriers – both real and perceived – have made it hard for people to obtain life insurance. In addition, the fear of getting denied for pre-existing conditions or getting discouraged by extensive exams has made people want to avoid the application process altogether.
We now have the technology capabilities to help remove major barriers that would prevent people from seeking protection – capabilities that range from educating customers about options throughout the buying process, and during service touchpoints, to offering the ability to instantly quote and purchase insurance.
While these capabilities exist, many companies have not yet implemented or optimized their use.
Building trust among underserved and underinsured populations
Where some companies produce material objects like a microwave or clothing, insurance companies sell an intangible product – a promise to pay for protecting something or someone against life’s unexpected events. That promise requires trust between the two parties.
As an industry, we can’t ignore when consumers tell us to solve for the confusion and information overload. If we expect to build trust and expand access – particularly for younger and nontraditional customers – we have a responsibility to meet people where they are by modernizing and simplifying the experience. In many cases, TruStage products are a family’s only form of financial protection. That’s a privilege we don’t take lightly. Delivering on our promise fosters trust for generations to come.
That means affordable products must be available at the click of a button, in-person or on the phone – sometimes in 10 minutes or less. It also means insurance leaders should use the most advanced pricing levers to more accurately rate policies, use simple language to demystify products and processes, and challenge themselves and their teams with the question: “What would it take for us to lower a monthly premium from $40 to $30?”
Cutting expenses doesn’t have to come at the expense of investing in innovations and the communities you serve. For example, we’re active with legislative advocacy efforts that help expand access to insurance, we give back to nonprofits that align with our mission, and we connect credit unions and other small financial institutions with innovative fintech solutions. Also, the TruStage Foundation funds community projects that address systemic shortfalls, supporting those who are underserved and creating pathways to financial progress.
And a purpose-driven mission makes it important to partner with and invest in companies that share your organization’s values. For example, we partner with thousands of credit unions, which were founded to serve people of modest means who had been ignored or priced out of the traditional banking system. If you have distribution partners, they also should mirror the ethical experience your brand aims to establish – from the quoting process to sales tactics. It’s equally important to educate and train those business partners on how to serve the growing base of multicultural consumers.
Building trust among consumers – particularly those who’ve historically been marginalized – is foundational to protecting more people, in more ways, across all their life stages. The industry hasn’t always gotten it right. But we have a historic opportunity to shift how people think about insurance.
When people have a long-term plan and are less worried about their day-to-day existence, they have more time for their family, their community and society at large. And the more lives that are better protected translates to a better world and future for us all.
