The $50 Billion Problem Insurance Companies Won't Talk About (And the Emotional Solution They're Missing)

Every year, the life insurance industry loses more than $50 billion to a problem most carriers treat as inevitable: policy lapse.

Seven to nine percent of policyholders cancel their coverage annually. That's millions of customers walking away—customers that cost $400-$800 each to acquire.

The industry's response? Price discounts. Feature upgrades. Loyalty programs. All variations of the same playbook: make the financial switching cost higher.

But what if the problem isn't financial? What if it's emotional?

I spent 60 days testing a different approach with insurance executives and actuaries.

I'm not an insurance executive. I'm not an actuary.

I'm the founder of a company built on a simple premise: people don't cancel life insurance because the product failed. They cancel because life got busy and they forgot why it mattered.

The response has been... interesting.

The Problem Nobody Talks About

Life insurance has a 7-9% annual lapse rate.

Let me translate that:

For every 100 policies a carrier writes, 7-9 disappear within 12 months.

Not because customers died. Not because they couldn't afford it. Not because they found a better deal.

They just... stopped paying.

Why?

Because when you're 35 years old, healthy, and overwhelmed by life, a $200/month life insurance premium feels abstract.

You bought it because you're responsible. You keep it because you're disciplined.

But six months later, when you're juggling mortgage payments, daycare costs, and credit card bills, that $200 starts to feel like $200 you could use somewhere else.

The policy didn't fail. Your memory of why it mattered did.

The Industry's Solution: Financial Friction

Carriers know this.

So they've tried everything:

• Price discounts: "Lock in this rate for 10 years!"
• Loyalty rewards: "Stay with us and earn points!"
• Additional features: "Now with living benefits!"
• Gamification: "Track your health and save money!"

All smart. All logical. All collapsing.

Why?

Because they're all fighting the same battle: making the financial switching cost higher.

And that's a losing game.

Because financial friction has limits. Eventually, someone offers a better deal. Eventually, customers stop caring about points. Eventually, features become table stakes.

You can't out-feature forgetfulness.

What If the Answer Isn't Financial?

Here's what I asked myself:

What if instead of making it expensive to cancel, we made it emotionally unthinkable?

Not through manipulation. Not through guilt. Through value.

What if canceling your life insurance meant losing something you could never get back?

The Insight: Death Isn't a Financial Event

Life insurance pays money when you die.

But death isn't a financial event for your family.

Death is an emotional event.

Your spouse doesn't wake up the day after you die thinking, "Thank God for that $500K payout."

They wake up thinking: "I'll never hear his voice again."

Your kids don't grow up grateful for the college fund.

They grow up wishing you'd told them what to do when life gets hard.

Money solves financial problems. It doesn't solve silence.

What We Built

Presence Insurance™.

It's not a life insurance product. It's a retention layer that sits on top of existing policies.

How it works:

1. Policyholders record final messages for their family
2. AI guides the content creation (what to say, how to structure it)
3. Voice cloning technology delivers messages naturally
4. An "alive check" system ensures delivery only after death
5. Messages are stored securely, tied to the active policy

The emotional switching cost:

If you cancel your life insurance policy, you lose access to the messages you recorded for your family.

Not because we're holding them hostage.

Because the entire value proposition is: "Your voice reaches your family after you die, guaranteed — as long as your policy is active."

Canceling the policy means abandoning your goodbye.

The Behavioral Economics

Traditional retention tools fight financial inertia.

Presence Insurance™ creates emotional inertia.

Financial switching costs: "I'll lose my loyalty discount" → But I'll save $50/month elsewhere

Emotional switching costs: "I'll lose the message I recorded for my daughter's 18th birthday" → There is no price on that

One is negotiable. The other isn't.

The Early Data

We're pre-revenue. This isn't proven at scale.

But we've run pilots with 200 policyholders.

Activation rate: 12% (Industry average for add-on features: 3-5%)

Completion rate: 87% (Once they start recording, they finish)

Self-reported impact on lapse intent: 73% said "I'm significantly less likely to cancel"

Extrapolating that:

• 10% activation × 25% lapse reduction = 2.5% overall lapse improvement
• For a carrier with 10M policies at $2,500 avg premium:
  • 7% lapse = $1.75B lost annually
  • 2.5% improvement = $437M saved

Not a projection. A hypothesis.

But a hypothesis worth testing.

Why Carriers Should Care

Three reasons:

1. Customer Acquisition Costs Are Insane

It costs $400-$800 to acquire a life insurance customer.

When 7-9% lapse annually, you're bleeding CAC faster than you can grow.

Retention is the new growth.

2. This Solves a Real Problem

Families want to leave more than money.

Policyholders want to say goodbye.

But nobody's building this.

Life insurance protects assets. Presence Insurance™ protects voice.

3. Emotional Switching Costs Scale Infinitely

Financial switching costs have ceilings.

You can only discount so much. You can only add so many features. You can only reward so much loyalty.

Emotional switching costs have no ceiling.

The message you record for your daughter's wedding day? The advice you leave for your son when he becomes a father? The story you tell about how you and your spouse met?

Those don't commoditize. AI can't replicate that. Competitors can't offer it cheaper.

The Business Model

We're not trying to replace life insurance.

We're trying to make it unforgettable.

Channel: B2B2C

• We partner with carriers
• They offer Presence Insurance™ to policyholders
• We handle tech, content, delivery

Revenue:

• Carriers pay per policyholder (small fee per active policy)
• Policyholders upgrade to premium tiers (unlimited messages, more storage)
• We share revenue 95/5 (we keep 95%, carrier keeps 5% for distribution)

Incentive alignment:

• Carrier wins: Lower lapse, happier customers, differentiation
• We win: Revenue tied to policy retention
• Policyholder wins: Voice preserved, family protected

What I'm Asking

I'm not asking carriers to bet the farm.

I'm asking for a pilot.

Test structure:

• 50,000 policyholders
• 12-month pilot
• Measure activation, engagement, lapse impact
• Independent actuarial validation

If it works:

• Scale to millions
• Category exclusivity
• Long-term partnership

If it doesn't:

• We iterate or pivot
• Carrier learns something
• Minimal downside

Why This Will Work

Because I'm not guessing.

I buried my father without hearing his voice one last time.

No final message. No advice. No goodbye. Just silence.

I would have paid anything—anything—for one pre-recorded message.

If you've lost someone you love, you know exactly what I mean.

That's the market. That's the pain. That's what we're solving.

The First Mover Advantage

Right now, nobody's doing this.

Not State Farm. Not MetLife. Not Prudential. Not Northwestern Mutual.

Presence Insurance™ is a category of one.

But that window won't last.

Once one carrier proves this works, every competitor will copy it.

The question isn't "Will this exist?"

The question is: "Who owns it first?"

If you're reading this and you work at a life insurance carrier, here's what I'd like to do:

20-minute call to discuss:

1. Your current lapse challenges
2. Whether emotional retention makes sense for your book
3. What a pilot would look like

No pitch deck. No sales pressure. Just a conversation.

Reach out: mk@eternalegacy.life

— MK Founder, Eterna Legacy Presence Insurance™ eternalegacy.life