The rise of insurtech digital is presenting significant challenges for small and midsize life insurance companies, particularly in terms of customer experience and technological adoption, according to research conducted by Equisoft in collaboration with the Life Insurers Council (LIC). The study, which gathered responses from a third of LIC members – a forum comprising small to midsize life insurance companies that are part of LIMRA and LOMA – highlights the difficulties these organizations face in updating their systems and embracing new technologies.
The primary driver behind the digital transformation in the life insurance sector is the enhancement of customer experience. However, the survey revealed that 54% of respondents indicated their organizations currently support only one to two communication channels for customer support, hindering their ability to provide a seamless customer experience. Furthermore, more than a third (38%) of respondents cited legacy IT systems that lack automation capabilities as a major obstacle to streamlining underwriting decisions.
Mark DePhillips, Senior Vice President for USA operations at Equisoft, noted in a statement that life insurance carriers aim to fulfill their original mission of protecting and enriching customers’ lives in the 21st century. He acknowledged that while there are numerous opportunities to enhance customer experience and engagement, limited resources can make it challenging to implement large-scale programs.
The report suggests that insurers should prioritize investments in self-service tools and data management to improve their digital capabilities. Many respondents indicated plans to focus on digital sales and service solutions over the next 12 to 24 months, recognizing the need to modernize their operations.
However, the adoption of digital tools among agents remains limited. While half of the companies provide digital tools to their agents to a moderate extent, only 25% do so to a great extent. This gap in digital enablement for agents can potentially impede the overall customer experience and operational efficiency.
The importance of a streamlined digital experience is further underscored by consumer expectations. According to the 2025 Digital Experience Index from Insurity, one in five consumers avoid filing claims due to frustrating digital processes, and 64% would consider switching insurers for a better digital experience. The survey, which included over 1,000 adult participants randomly selected across the U.S. in April 2025, highlights the need for insurers to enhance their digital claims processes to meet evolving consumer demands.
Key Challenges and Opportunities
Small and midsize life insurers face multiple challenges in their digital transformation journey, including limited real-time analytics capabilities and outdated legacy systems. Only a quarter of respondents reported having real-time data capabilities, which are crucial for providing an end-to-end customer experience and integrating multiple communication channels effectively.
Despite these challenges, there are opportunities for growth and improvement. Twenty-eight percent of respondents indicated plans to implement artificial intelligence for chatbots or automation, signaling a move towards more sophisticated digital solutions. By prioritizing investments in digital tools, data management, and self-service capabilities, small and midsize life insurers can enhance their customer experience, improve operational efficiency, and remain competitive in a rapidly evolving market.
