Nineteen million Americans are interested in buying life insurance, but have gotten stuck somewhere in the process. Clunky forms, fine-print PDFs, inconvenient medical exams, seemingly high costs—the list of headaches is long and frustrating. Perhaps as a result, the individual life insurance market has been roughly flat in the U.S. for over a decade, with total premiums landing around $120 billion each year, according to S&P Global Market Intelligence. Since the 1980s, sales of individual life insurance policies have plunged over 40%.
A batch of young companies wants to take a bite out of that market, and potentially grow it. With backing from some of the insurance giants, they are reinventing life insurance in the same way that robo-advisors have reinvented wealth management, by replacing human agents with an online experience. And as millennials start families, they see an opportunity to capture a new generation of consumers and form lucrative, lifelong financial relationships.
Most of these new players are focused on term life insurance, which is cheaper (and simpler) than whole life insurance, doesn’t accumulate cash value, and lasts for a fixed term (10, 20, or 30 years, for example). Term life typically requires an in-person medical exam, conducted by a third-party partner—but even that piece of the application process is starting to move online. Here are four of the startups taking the lead.
For Ladder cofounder and CEO Jamie Hale, the need for life insurance hits close to home. “My dad died when I was 11,” says Hale, who spent over a decade working as an investor in San Francisco. “He got a simple life plan, and out of that act of love he helped take care of my mom, keep us in our home, and get us through college.”
Hale launched Ladder in California this past January, offering term life policies of up to 30 years that pay out between $100,000 and $8 million. Ladder is able to generate quotes for different terms within seconds, and approve some customers in less than six minutes. The company is also encouraging customers to reduce their coverage over time, as children grow older and mortgages are paid down. “It can save consumers literally thousands of dollars over the lifetime of owning a policy,” Hale says of the adjustment options built into the product. “It’s your choice as the consumer.”
Brooklyn-based Fabric, cofounded by former Simple chief operating officer Adam Erlebacher, launched in March with two product tiers. Fabric Instant, which costs as little as $6, is an attempt to resurrect a little-known product called accidental death insurance. Fabric Premium, the “upgrade” option, is a more standard 20-year term life offering.
“The really amazing thing about [accidental death insurance] is that you don’t need a health exam, you don’t need to do very much underwriting at all for it,” Erlebacher says. “If you connect to the right external data sources that are now available, you can verify someone’s identity and mitigate fraud, and get someone insured in two minutes.” (There are downsides, however: Proving a death was “accidental” is more complicated than it may at first seem.)
Over time, Erlebacher hopes to see customers migrate via smartphone to Fabric Premium, which has been designed with first-time parents in mind. Indeed, young parents are the company’s primary target, with blog posts like “The Guide To Budgeting For Baby.”
For Tomorrow, which launched this week, life insurance is just one piece of a larger story. Cofounder and CEO Dave Hanley wants to help Americans set up wills and trusts, for free, and then recommend term life insurance policies that fit their needs. Offerings from nine different carriers are available within the Tomorrow app. “We see them as things that were always meant to be together,” Hanley says of the decision to combine insurance with end-of-life legal products.
Within Tomorrow’s app, it takes just minutes to identify key assets and photograph personal valuables. Family members or friends named as guardians are invited to agree to the role via Tomorrow-generated text or email. When the process is complete, Tomorrow generates a will that can be exported, signed, and notarized.
Haven Life is the outlier in this realm. The company is a startup division within MassMutual, wholly owned by the incumbent insurer (MassMutual is also an investor in PolicyGenius, a website that provides insurance quotes). “I think the relationship is one of our key strategic advantages,” says Haven Life founder and CEO Yaron Ben-Zvi. He argues that Haven Life has more freedom to experiment with its application and underwriting processes because it works so closely with its corporate parent. “In this world, if I’m going to change a question in an application, that changes my underwriting process, which changes changes the risk profile and profitability of the product that I just sold. All of those things have to work in concert.”
Haven Life, like Ladder and SoFi, offers instant-approval term life insurance for qualified applicants. Instead of reviewing a blood test and in-person evaluation, the company can search prescription databases and driving records, among other data sources, to evaluate health. Even with that innovation in efficiency, the product is not an easy pitch.
“Life insurance is the double whammy of difficult topics in your life,” Ben-Zvi says. “Financials are hard to talk about, mortality is hard to talk about. We put both of those things together.”