Tag Archives: consumer

InsurIQ’s Brian Harrigan

Brian Harrigan, Founder and CEO of InsurIQ, describes the company’s ability to give consumers a more holistic view of all their insurance coverages in one easy to use platform, simplifying the process of researching, buying and managing a portfolio of insurance products as needs change and evolve.

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Insurance Information Institute’s Laura Favinger

Laura Favinger, chief administrative officer of the Insurance Information Institute, talks about the III’s historic mission and the importance of thought leadership to continue to inform and educate consumers on how technology and innovation can help insurers mitigate new risks.

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Wave of Change About to Hit Life Insurers

A tsunami of change is poised to disrupt the life and annuity market in terms of regulation, products, distribution channels, business strategies and customer expectations. The new regulatory ruling from the Department of Labor (DoL) will initially disrupt annuity product sales related to IRA rollovers but will likely have significant impact in the medium to long term with all the products that U.S. life insurance companies provide.

The new ruling places a fiduciary standard on all types of financial services companies and advisers that provide investment advice or sell insurance or other products that affect qualified retirement accounts. Unlike the previous suitability standard that applied to most annuity and other investment product sales, the new fiduciary standard will require that financial advisers be completely transparent about their conflicts of interest and compensation and will make it very difficult to justify commission payments by product companies. To help guarantee objectivity, the preferred fee structure for retirement account-oriented advice and product sales will become fees directly from the consumer. While the fiduciary standard will apply initially to qualified retirement accounts, the recent experience in other countries like the UK and Australia makes it clear that consumers will come to expect a similar level of transparency and objectivity for other types of financial advice and financial products like life insurance.

See Also: 8 Start-ups Aiming to Revive Life Insurance

Life insurance companies that write a large volume of high-commission, retirement-oriented products like variable and indexed annuities will experience the most significant, immediate and potentially negative impact. Traditional life insurance and other lines of business will experience the impact of the fiduciary ruling more gradually, giving life insurance companies early warning and much-needed time to evolve their products, technologies and distribution strategies.

Insurers should assume that group-led individual product sales sold under something resembling the fiduciary standard will ultimately become the norm for the whole life insurance portfolio.

Adding further momentum to this wave of change are Millennials, now the largest living generation. As also the most educated living generation, they expect objective advice and fees for products that represent fair value. While often very self-directed, Millennials want advice from experts in complex, important areas like employee benefits. Millennials want to receive employee benefits advice from their current employers but then often buy individual products that can follow them to future jobs at new employers. This represents another wave of change because of the dynamic, “gig” economy.

Right behind, Gen Z, is a generation ‘born digital,’ with technology incorporated into all aspects of their lives. They live and breathe innovation, as noted in our Future Trends: A Seismic Shift Underway report. What does this mean to their employers and their desire to build employee loyalty?

This new customer expectation is reinforced in a recent MetLife employee benefits study where nearly two-thirds (62%) of employees say they’re looking to their employer for more help in achieving financial security through employee benefits as compared with 49% in 2011.  Furthermore, the study noted that Millennials were twice as likely compared with baby boomers, 44% versus 20%, to say that their employers “ought to help them solve their financial concerns.”

So what does this mean for life insurance companies? It means a new world of transparency, objectivity, fee-based adviser compensation, lower-fee products and employee job hopping will together create a wave of change to long-held business assumptions, operations and more. With the pace of change gathering strength and with limited resources, life insurance companies should seek partnerships that will help them ride this wave. This could involve partnering with technology companies to provide a single modern platform to support both individual and group needs that match the emerging customer needs. It may mean working within an ecosystem of innovative, new investment and insurance distribution platforms that were built with business and operating models that fit properly into the context of this new world.

Rather than acquiring these platforms and stifling innovation, the distribution partnerships provide valuable insights to understand how the platforms connect with Millennials and Gen Z and how to provide value to them. The new “robo adviser” technology-enabled platforms act as fiduciaries and have shown strong, early success with accumulating investment assets from Millennials and other types of consumers by providing automated, institutional-style asset management. Some of the robo platforms like Betterment express an interest in implementing retirement income-oriented advice and product delivery capabilities but will need help understanding the nuances and complexities of retirement income. Interestingly, life insurance companies are in a stronger position than other types of financial services companies to explain the benefits of having a “retirement income floor” and then providing the deferred or immediate income products that can actually provide that floor.

With insurance protection products, the new employee benefits distribution platforms focus almost exclusively on health insurance benefits, but will inevitably diversify into non-health employee benefits products. While technology will help with making protection products more consumer-friendly, combining technology with expert advice from people will provide the formula that Millennials will want.

To provide the multi-channel employee benefits advice that Millennials prefer, life insurance companies should consider investing in dedicated agents/advisers who can act as fiduciary equivalents for employee benefits products and provide objective advice based on the employee’s particular needs. These dedicated agents will find an attractive opportunity in helping employers with fewer than 100 employees level the playing field with larger employers — providing a compelling service to Millennials and other employees that will help to retain and motivate them.

Furthermore, life insurance companies should also seek to partner, tightly integrate with and learn from a few of the early self-service enrollment platforms for employee benefits like Gravie and Connecture, even though they are currently focused on health insurance products. Only by partnering with these types of companies and by understanding how they generate revenue by providing objective advice to Millennials will life insurance companies be able to succeed. For an industry that has relied for many decades on selling commission-based products through traditional, third party intermediaries, this will require a completely new way of thinking and a new business model that is currently foreign to most U.S. life insurance companies.

Finally, to put this all together as a “platform” solution, insurers must look to new technology software that will provide some key elements, including:

  • a core platform that supports both individual and group, to enable portability of insurance,
  • a digital platform that will enable multi-channel environments and provide a compelling customer experience, and,
  • a platform that will easily integrate innovative solutions and partners to differentiate the organization within its market.

It all comes down to adaptability, innovation and speed in life insurers’ ability to ride the wave. These corporate mandates are explained in greater detail in Majesco’s latest research paper, Riding the Wave of Change in Group and Employee Benefits.  

Why not treat partners and new players like expert surfers that can help to ride the new  wave?

New Attack Vector for Cyber Thieves

It has become commonplace for senior executives to use free Web mail, especially Gmail, interchangeably with corporate email. This has given rise to a type of scam in which a thief manipulates email accounts. The goal: impersonate an authority figure to get a subordinate to do something quickly, without asking questions. The FBI calls this “CEO fraud,” and a surge of these capers has resulted in scammers stealing a stunning $750 million from more than 7,000 U.S. companies from October 2013 through August 2015.

Here is an example where the scammer targets an attorney from a big city in the Northeast.

Attack vector: The scammer gathers intelligence about real estate transactions handled by an attorney and drills down on a specific deal in which the law firm is handling the purchase of a $450,000 home for a client. The scammer learns this attorney is in the habit of using his personal Gmail account interchangeably with his law firm’s email. As the transaction approaches the final step, the attorney’s paralegal receives a spoofed email that appears to come from her boss. She instantly follows a directive to cancel a check for $450,000 that she is about to mail and instead wires the funds into an account designated by the scammer.

More video: Scammers exploit trust in Google’s platform

Distinctive technique: The funds initially get routed to another law firm in the Southwest. A subordinate in this law firm also appears to have been spoofed by the scammer to be prepared to move funds once again, this time into an account set up in a U.S. branch office of Sumitomo Bank, a giant global institution with headquarters in Tokyo. “At this point, it is not likely the $450,000 will ever be recovered,” says IDT911 Chief Privacy Officer Eduard Goodman. “Once a transfer like this is made, you can’t really unring that bell.”

Wider implications: U.S. consumers are well protected by federal law, and banks usually will reimburse individual consumers victimized by cyber criminals. However, banks are under no legal obligation to offer any relief to businesses, large or small, that have been tricked like this. Most of the $750 million lost in documented cases of CEO fraud has most likely been absorbed by the duped business entities.

Infographic: More Americans living with data insecurity

Excerpts from ThirdCertainty’s interview with Goodman. (Answers edited for length and clarity.)

3C: Businesses are losing one heck of a lot of money to CEO fraud.

Eduard Goodman, IDT911 chief privacy officer

Goodman: Yeah, absolutely. This one was for about $450,000. There is another woman with a ballet company who recently lost about $100,000. It’s significant chunks, let’s put it that way. And because this is happening in a business setting, it’s a little bit different in that your bank won’t stand behind you. It’s caveat emptor. There is no consumer protection. When something like this happens to your business, you’re out of luck.

3C: Why aren’t suspicious transactions flagged more often?

Goodman: The government will tend to go after companies for anything that may have to do with consumer violations. But when businesses impact other businesses, the government doesn’t do a damn thing, even if the victim is a really small business and they’re essentially consumers in and of themselves. Banks have that unfair advantage to say, ‘Well, sorry, should have flagged it, but we just process it for you.’

3C: So by using free Web mail this attorney sort of invited spoofing?

Goodman: He kind of comingled accounts, that’s the thing. He had his law firm’s email, and he also had a personal Gmail account. He would send emails from both accounts. That is something that has become a very common practice. He probably had previously emailed himself something from his actual work account into his Gmail account. This scammer probably got into his Gmail account, and then made the connection to his law firm account.

Then it was off to the races. The paralegal gets the wire transfer request from an email that’s very close to an authentic law firm email except there’s an extra letter in the domain name. It looks very credible.

3C: Could this have been avoided?

Goodman. Yes, by taking the extra 45 seconds to make a phone call. Pick up the phone and verify things instead of getting caught up in the workday.