In the midst of increased market competition and reduced consumer spending, life insurance companies might need to make changes to their business model in the upcoming year. Those changes may mean individuals shopping for life insurance quotes could see a difference in how term life and whole life products are designed and marketed in the United States.

5 ways life insurance companies may be changing

The Ernst & Young Global Insurance Center US Outlook identifies five ways insurers may have to adapt in 2013 to address expected challenges.

  1. Diversify product portfolios to be more competitive: As competition heats up in the life insurance marketplace, companies may look to offer a broader range of products. Rather than focusing solely on specific term life or whole life products, insurers may expand their offerings in an attempt to increase profits.
  2. More marketing to younger consumers: Ernst & Young notes there has been a 50 percent drop in average household spending for life insurance during the last decade. To compensate for less household spending, insurers may need to ramp up sales to younger consumers. In addition, the financial group sees a need for simpler term life and whole products that will appeal to those in a younger age bracket.
  3. Reevaluate products to reduce risk: With economic uncertainty still in play, some companies could look to reduce their risk by deemphasizing certain product lines that may be more costly. For example, variable universal life sales dropped 12 percent in the third quarter of 2012 according to data from industry group LIMRA. The decline may be due to the volatile nature of these policies.
  4. Use 'big data' for marketing and business models: Life insurance companies have access to enormous amounts of regulatory and consumer data today, and Ernst & Young predicts businesses will look to capitalize on that information by creating more sophisticated business models.
  5. Respond to new regulations: The coming year may bring changes to the tax and regulatory landscape. Life insurers may need to adjust their policies and processes to ensure they meet new government demands.

In 2013, life insurance companies may find themselves under increased pressure to respond to new government rules while competing with more companies for fewer consumer dollars.

However, for consumers, increased competition may mean lower life insurance rates and more product choices. And that may make 2013 a good year to review current policies and shop for new life insurance quotes.