Meeting life insurance beneficiaries where they are
Life insurance is not like other kinds of insurance. For customers, its main attraction is the promise of peace of mind—the reassurance of knowing that your relatives will be taken care of one day. And for carriers, this promise presents a challenge, one requiring an approach that might be considered surprising for a financial services company.
A life insurance policy is different from other types of policies in several important ways. For one thing, while most insurance protects against events that might occur, life insurance (at least in the case of whole life plans) pays out for something that will inevitably happen someday. But an even more significant difference is that the beneficiary of a life insurance policy, unlike that of health insurance or homeowner’s insurance, can never be the same person as the policyholder. By definition, when the policy pays out, the policyholder is no longer with us; the beneficiary is always someone else, usually a grieving family member.
More than just a semantic difference, this unique distinction of life insurance policies represents a significant market challenge for carriers. Like any consumer-facing business, life insurers primarily focus on the needs and desires of the customer, in this case the potential policyholder. But the service that the carrier provides is not for the customer but for their beneficiaries, whose needs are wholly different and may only be relevant years or decades in the future.
In a real sense, of course, what insurance companies are marketing to their customers is not a service but rather the peace of mind that comes from knowing that their loved one will be taken care of after they are gone. The dollar amount of the payout, however, can only provide so much assurance to a potential policyholder when it comes to a future they cannot see or predict. To distinguish themselves in the market, therefore, carriers are looking for other ways to demonstrate that they will be there to support beneficiaries when the time comes.
Life insurance beneficiaries make their claims at what is usually a particularly challenging moment in their lives. The recent passing of their loved one is often hugely costly—and not just financially. They may be facing massive burdens in terms of time, emotional and physical health, impacts on work, and more. Stepping up for these beneficiaries and really providing them with the support they need at this time means understanding just what they are going through, and offering solutions that address these specific challenges head-on.
This is why every January, we release our annual report on the Cost of Dying: to document in detail the situation that the bereaved find themselves in today. We collect data on the various issues they face, from how much various loss-related expenses cost them, to the mental and physical health symptoms they suffered, to the difficulties they experienced when going back to work. It is only by understanding the multiple burdens that are placed on families after a loss that we can begin to determine what sorts of care and support will be most helpful.
As in previous years, Empathy’s 2024 Cost of Dying report shows clearly that by every measure the average family is dealing with far too much stress and hardship after a loss. Their daily lives and their careers are usually impacted—and these effects last for quite some time.
For example, the average person took 15 months to complete all of the administrative tasks, or 18 months if they were executor of the estate. Meanwhile, 92% of executors said they suffered negative impacts at work from the stresses of their loss.
Nearly half of those we spoke to, 47%, experienced at least one specific negative impact at work, and 21% had to deal with at least three. The most common effects were trouble concentrating and being less productive, but significant numbers were also scared of losing their jobs or considered quitting. Over half of respondents said additional paid leave would have been helpful, and 38% said they would have liked more flexibility in their hours.
With so many dealing with issues both at work and at home, it is little wonder that 94.5% of our respondents suffered from at least one physical or mental health symptom, with 45% saying they persisted for over a few months. A total of 84% reported that these symptoms had negative effects on their daily life, with nearly half stopping everyday activities, 35% withdrawing from their social circles, and 21% becoming estranged from family members.
Taken together, these numbers paint a portrait of the state of bereavement that should guide every life insurance company when dealing with its beneficiaries. To provide real care for beneficiaries that goes beyond the payout, carriers should be offering services that meet them where they are—holistic care that takes into account and even anticipates their specific needs at this challenging time in their lives.
The challenges of loss, as detailed in the Cost of Dying report, place massive pressure on families, communities, and workplaces. They also represent a significant opportunity for insurance companies to show their customers that they care about and understand their beneficiaries. This is a win-win-win: beneficiaries get services that go beyond a payout and provide support how and when they need it; policyholders receive peace of mind knowing they have taken care of their beneficiaries’ true needs when the time comes; and life insurance carriers not only distinguish themselves from competitors, they demonstrate the kind of caring and personalized attention that today’s consumer is looking for, so when beneficiaries are thinking about buying their own policies, they know exactly where to turn. When you create and promote solutions that address real-world problems, you earn loyalty that continues through generations.