How 'Insurtech' Can Adapt To Serve America's Demographics Better

Forbes

4 hours ago

In these times of economic crisis and uncertainty, people often invest in life insurance, expanded health insurance and other risk-management investment vehicles. And yet today, America's life insurance markets may not be serving the very demographics that growing in the United States today and in the near future. The result is a mismatch between the insurance coverage that people need and the actual risk they are facing.
As we know, America's demographics are skewing older and less white. Some estimate that the United States will be majority-minority by as early as 2045 – just 20 years away. According to the American Association of Retired Persons (AARP), nearly 34% of Americans are over the age of 50 - a number expected to hit 40% by 2030 or so. In addition, America's non-white population has almost doubled over the past four decades, growing from about 24% of the population in 1990 to over 40% in 2023.
The ramifications of this on our political system will be enormous, as resources shift from traditional priorities to those of a changed population. Medicare, a program for the elderly to receive health care benefits, currently serves 70 million Americans and is expected to serve nearly 90 million people by 2050.
Recent legislation, like the OBBBA, reduces funding for Medicare as well as important health care research to improve our quality of life and life span. Indeed, possibly over a trillion dollars will be cut from Medicare. In addition, recent changes to immigration policy reduce the ability of immigrants to secure health insurance, employment and live a long life in the United States.
This is a time for the insurance industry to step up and provide greater insurance and assurance to society – whether its life insurance, health insurance. Looking at life insurance specifically, millions of Americans have coverage—yet few truly understand what they own, and even fewer take the time to review it. Although life insurance may sound like a simple financial product, it is not. In a $1.2 trillion industry where 60 percent of Americans have insurance, the vast majority of policies are 'sold,' not 'sought,' and most consumers have no idea whether what they purchased is the best value available or if the options they were offered were truly in their best interest.
America's aging population is creating record demand for retirement planning, LTC coverage, and legacy tools like life insurance—but the industry hasn't evolved with these demographic shifts. Financial literacy is low, and insurance literacy is even lower. Furthermore, minority, immigrant, and first-generation households are often disproportionately sold unsuitable policies due to language barriers and sales-driven practices. Today, only 45 percent of Hispanic American families have life insurance, and there is little transparency on how many of those policies could be improved through a simple independent review to provide greater coverage, enhanced benefits, or lower costs for the same premiums.
John Nguyen, author of Life Insurance Confidential – Don't Let Yourself Own a Bad Policy, is a Licensed Life Insurance Analyst with over 20 years of practicing experience and the founder of LifeInsuranceReview.com (LIR) Insurance Solutions. Since 2011, his independent firm has conducted thousands of in-depth policy reviews, serving as a trusted advocate for consumers. The company uses in-depth research and collaboration technologies to solve several of the challenges inherent in the sales agent model, including the fact that few agents understand the technical nuances of complex policies like IULs, Whole Life, or VULs and generally aren't required by law to act in the client's best interests.
T
he innovations to the market are not technology innovations, but surround raising consumer awareness about existing tools to make better decisions. The first is the website's financial education around 'second opinions'. Life Insurance Review (LIR) believes that 90% of policies could be improved with second opinions that involve independent review committees, technology to evaluate similar policies, transparency and policy design to serve the unique needs of every individual and their financial plan. No doubt, artificial intelligence, when it's able to learn from millions of policies, will be critical to help in these reforms.
The second area that LIR is a lead voice for is encouraging consumers to use their 'Free Look Period,' which provides 10 to 30 days to have a new policy reviewed and, if canceled, to receive a full refund. This is the only meaningful consumer protection law in the life insurance sales industry, yet most consumers are unaware of it because their agent, broker, or financial advisor often glosses over it when delivering policies for life insurance, annuities, long-term care, or disability coverage.
According to LIMRA, the industry association, nearly 102 million Americans don't have any, or enough life insurance. Of those, households making less than $50,000 annually were more likely to want it but less connected to insurance companies. The gender gap is present here as well, with 46% of women having life insurance vs. 57% of men. Opportunities like this – for insurance companies to sell product, but also for companies like LIR to improve the quality and relevance of life insurance company products (life, annuity, long term care and disability) for all consumers using technology and AI, might be the next big thing that also improves the lives of millions of Americans.