Navigating Customer Expectations and Life Insurance Digital Transformation

By Eileen Potter, VP of Insurance Marketing at Smart Communications 

The life and annuity (L&A) sector—once defined by steady, long-term relationships and predictable revenue streams—is now transforming rapidly under the weight of evolving customer expectations, regulatory changes, and technological advancements.

In this first part of our two-part blog series, we'll look at how digital transformation is reshaping the life insurance industry, posing both challenges and opportunities for L&A organizations.  

The Rise of the Digital-First Customer in Life Insurance

Today's customers are more connected, informed, and empowered than ever before. Digital technology has fundamentally altered how individuals interact with financial services, including life insurance and annuities. Policyholders now demand seamless, personalized experiences across all touchpoints, from initial research to policy purchase and ongoing customer service. 

One of the most significant shifts is the expectation for a digital-first approach. Policy shoppers prefer to research life insurance products online before speaking to an agent. And, most policyholders express a desire for digital channels to manage their policies. While this varies by age, the use of digital channels is increasing with 39% of customers preferring mobile and web-based channels to manage their insurance needs. This demand for online accessibility and self-service options is pushing L&A organizations to rethink traditional business models. 

However, many L&A companies struggle to meet these digital expectations. Legacy systems and processes, often rooted in paper-based operations, hinder their ability to deliver the frictionless digital experiences customers now expect. Bridging this gap requires investments in both Interaction Experience Management (IXM) solutions and modern Customer Communications Management (CCM) platforms, which can help insurers automate and personalize communications, like beneficiary documents, at scale. With these modern technology investments, L&A organizations ensure they remain competitive in the era of digital transformation. 

Learn more about the Benchmark research findings in our latest blog, '2024 Global Benchmark Report: Enhancing Insurance Customer Experience with Technology Investments'. 

Personalization:  A Cornerstone of Life Insurance Digital Transformation 

Beyond digital access, customers now expect highly personalized interactions. Thanks to modern trends, consumers increasingly demand policies and communications tailored to their unique needs, life stages, and financial goals. 

This expectation extends beyond the initial purchase. Policyholders want ongoing engagement , with regular updates and personalized advice that reflect changes in their lives.  For example, a customer nearing retirement may expect tailored recommendations on managing  their annuities to ensure a steady income stream during their golden years. 

Personalization, however, presents a significant challenge for L&A organizations, particularly those with outdated systems that cannot easily integrate customer data across different channels and touchpoints. The key to overcoming this challenge lies in leveraging modern digital tools that streamline data collection and enable real-time insights. This ensures that personalized customer experiences become a core part of life insurance.  

Building Policyholder Trust with Transparency and Simplicity 

Trust has always been a pillar of the life insurance industry, but in the era of digital transformation, maintaining trust has become increasingly complex.  Customers, especially younger generations, demand greater transparency and simplicity in their interactions with insurers according to recent Benchmark research.  

To build and maintain trust, L&A organizations need to simplify processes and communications.  This means demystifying complex insurance jargon, providing clear explanations of policy terms and benefits, and offering transparent fees and fee structures.  

Finally, insurers must proactively address customer concerns and inquiries with speed and precisely. In an era where a single negative review can go viral, providing exceptional customer service is more critical than ever.  AI-driven chatbots and virtual assistants, powered by digital transformation, can help insurers respond quickly and accurately to customer queries, thereby enhancing the overall experience and reinforcing trust. 

Agility is Key to Life Insurance Digital Transformation 

To keep pace with these evolving customer expectations, L&A organizations must embrace agility as a core principle of their digital transformation journey. Agility, in this context, is about flexibility and adaptability. Insurers need to be able to pivot strategies in response to market shifts, whether that means launching digital products, updating existing policies, or reimagining the customer journey.

This requires a cultural shift within L&A organizations, where agility becomes ingrained in every aspect of the business, from product development to customer service. It also necessitates the adoption of modern technologies that enable real-time data analysis, rapid prototyping, and seamless communication across internal teams and departments. 

Looking Ahead

As customer expectations continue to evolve, L&A organizations face an uphill battle to meet these demands while maintaining profitability and compliance. However, those that successfully navigate this by embracing digital transformation, personalization, transparency, and agility can position themselves for success going forward. 

In the second part of this series, we explored how regulatory shifts and technological advancements are further shaping the landscape for L&A organizations and what steps they can take to stay ahead of the curve. 

About the Author 
Eileen Potter is the Vice President of Vertical Marketing, Insurance at Smart Communications. She has more than 25 years of insurance and insurance technology experience with both Property & Casualty and Life & Annuity, including insurance operations on both the agency and company levels. Eileen has worked in independent agencies and MGA operations in a variety of roles, including commercial marketing and underwriting. Her software background includes systems marketing, sales support, and implementation roles with organizations such as ABBYY, Appian, One, Inc., and Duck Creek Technologies.