Tag Archives: digitalization

Reigniting Growth in U.S. Life Insurance

Catastrophes can often be catalysts for how society manages risk. For instance, World War II transformed the U.S. into a highly industrialized economy and put us in a position of global economic leadership. As a result of the COVID-19 pandemic, the U.S. life & annuity insurance industry is at such an inflection point.

Life insurance has endured flat to declining sales for over a decade. Put simply, sales have by and large not kept up with the growth of the population, and younger generations are not seeing insurance as a product that belongs in their financial portfolio.

But as the world shut down seemingly overnight, interest in life insurance has come roaring back, and COVID-19 is now accelerating sector adaptation. Electronic application (eApp) submissions are up by 20% year over year, and e-policy deliveries by 52% YOY, according to recent insight from iPipeline. At Ensight, we have seen a dramatic shift toward the virtual sales experience, with growth of 155% in just the last three months. This agile sector response to COVID-19 bodes well for returning the sector to long-term growth and wider financial protection in society.

However, this resurgence will be short-lived if the life insurance industry doesn’t use this moment of opportunity. Younger generations will not tolerate antiquated illustrations or the absolute need for an in-person sale. When we take a step back, COVID-19 is very likely to drive the following three transformations within the life insurance sector: 

  • Greater focus on the transformation of the sales experience
  • A broader, accelerated shift to more holistic financial planning by advisers
  • Increased consumer understanding of the importance of life insurance

These are potentially simultaneous tectonic shifts. And the potential long-term positive implications for life insurance sales are significant. 2020 may therefore represent the long-awaited inflection point for the U.S. life insurance industry.

So, what are insurance carriers doing well today? More importantly, what additional gaps must be closed to ensure long-term growth?

See also: Will COVID-19 Spur Life Insurance Sales?

The Current Frontier – Tackling the Application Pain Point

Over the past decade, the principal transformation agenda has been on addressing the pain point and cost inefficiency of the life insurance application process. Insurance carriers have largely focused on shifting to electronic applications (eApps), as well as implementing new accelerated/simplified underwriting programs.

This shift is critical. However, insurance carriers need to remember that eApps and accelerated underwriting programs will drive little long-term competitive advantage, because everyone will have them.

The next chasm to cross for the sector is product accessibility. Without it, we will not return to a vibrant life sector in the next decade.

Crossing the Chasm – Addressing Product Accessibility

In 1991, Geoffrey Moore wrote “Crossing the Chasm,” which quickly became the bible for entrepreneurial technology marketing. “Crossing the Chasm” focused on how to drive the introduction of innovative products from early adoption, to finding product market fit and ultimately to wider adoption.

To truly cross the chasm and reignite significant sector growth through broader understanding and belief in the value and application of insurance products, life and annuity carriers should prepare to address digitalization of sales and distribution.

Complete digitalization of the point of sale

Even with eApp growth, the permanent life insurance point of sale experience continues to be rooted in paper. Whether it is PDF brochures heavy on the compliance language or the 40-page illustration, the point of sale has simply not adapted to the 2020 expectation threshold. 

Consumers today – with the fintech movement transforming everything from banking and investing to mortgages – expect a digital, intuitively visual and easy-to-understand experience. These are the prerequisites for selling your products successfully – especially in the world of Amazon.

Life and annuity carriers need to transform the entire sales lifecycle – not just the application pain point. This means addressing everything from digital presentation of the product by financial professionals, to interactive training and to a consumer-oriented in-force web experience. Policy statements sent via snail mail are out of date. 

And financial professionals, for whom 50% of client engagements are now virtual, should be enabled with an interactive, digital experience to explain products to clients. Clients should be able to interactively play with products online to better understand how they might perform, for instance under different market scenarios. This is now par for the course.

Change distribution mindset and prioritize technology “platform plays”

Silicon Valley venture capitalist Marc Andreessen said, “Software is eating the world.” A corollary in financial product distribution could certainly be: “Technology platforms are eating distribution.”

Life and annuity distribution has traditionally been focused on relationships and traditional distribution partner platforms (i.e., people plus services). There is an unprecedented shift happening today – the introduction of distribution technology platforms and the elevated importance of the platform experience.

Insurance carriers will need to open their distribution mindset and strategy to prioritize “platform plays.” This means not only reevaluating whether they are delivering a modern, Intuit-like illustration experience for different types of personas, but also consider how they are enabling new technology platforms to drive premium growth.

See also: Fundamental Shift in Life Insurance?

Increasingly it will be the “platform plays” that will drive premium growth. And without addressing the challenge of “product accessibility,” the life and annuities market will never truly “cross the chasm” and return to long-term, sustainable growth.

Fintech is evolving our world and creating experiences that a growing portion of our potential client base have come to expect. While insurance has gained some renewed interest during the pandemic, we are now at the inflection point that will determine how well we can adapt and grow over the next decade.

New Efficiencies in Life Insurance

A tiger never changes its stripes. But is this true of life insurance companies? They’re good at selling through distribution, but there is a large pool of younger generations that must not be overlooked. This is where digital distribution comes in — digitizing the whole process end-to-end, from improving the sales process through to identifying new target audiences. But how can this actually work in practice? And what are the barriers for life insurance firms?

Digital distribution is often conceived of too narrowly – something akin to “we’ll market via social media,” with little additional thought. In reality, the use of digital has multiple applications right through the whole sales process.

First, there is the question of funneling new customers into the sales process – getting people aware, interested and to the door. The insurance industry has a real opportunity here to supplement its traditional reliance on agents and intermediaries with direct-to-customer marketing through all manner of online engagement. But rather a one-off initiative, long-term success depends on creating a virtuous cycle. Any company that moves into digital sales and marketing will find itself with an influx of new data. This needs to be stored, analyzed and used in a sophisticated way to inform future marketing, in terms of whom to target, how and when. It needs to be a continuing process.

Second, there’s the sales process itself, which is still fairly archaic and often involves reams of paperwork with incomprehensible or irrelevant detail (from the customer’s point of view). Embracing digital distribution means giving new customers the ability to sign up to a policy in around five minutes maximum, via a simple, slick and intuitive mobile app that doesn’t overload the user with information.

Third – and most often overlooked – is the role digital can play in engaging, retaining and upselling to existing customers, those who are already through the door. One example of this is what we call reciprocal intelligence, whereby, instead of the data flow being entirely one way (from customer to company), the insurer gives something back. For instance, if a consumer is using wearable apps to monitor fitness levels for a policy, the insurer should provide information back — if the average resting heart rate has improved, or about the level of subsequent health risk that comes with certain lifestyles.

See also: Digital Innovation in Life Insurance  

The main misconception with digital distribution is that it’s all about replacing traditional marketing. In reality, it’s an opportunity to supplement the more traditional approaches and start to tap into an entirely new set of customers. The more traditional, agency-based model does still works well at engaging and selling to the type of customer it has always favored – asset-rich households. However, this pool of revenue is shrinking, and younger, less financially secure generations are far less inclined to purchase insurance through traditional channels. It is in tapping this relatively untapped pool of customers – and thus growing the overall pool of potential revenue – that digital distribution will come into its own.

Another misconception is that digital distribution brings channel conflict. A few years ago, this was a dominating fear, and the main reason behind a lot of companies’ reluctance to adopt direct, digital models. But the fear was largely based on the misconception that both strategies would be targeting the same audience. This isn’t the case. On the contrary, embracing the digital side can make the traditional component more efficient and effective. The data and insights generated on the digital side can be used to inform and improve marketing and outreach on the traditional side in a way that was too expensive before. There’s more synergy than conflict.

Of course, there are challenges for life insurance carriers looking to digitize. First is the question of technology and infrastructure, of making the investment required to ensure the company has the means to execute these quite unfamiliar, data-heavy digital strategies – whether that be through replacing or upgrading in-house systems, or through partnering with technology firms.

There is also the question of talent and company culture. Fully embracing digital means processing large amounts of data, then knowing how to use it to maximum effect. This will require hiring people who are tech-savvy and know how to navigate, for instance, social media or data analytics. The skills and aptitudes involved are quite alien to many insurance firms and will involve hiring new types of employees at all levels. Any insurance firm that wants to do the work entirely in-house will have to, to some extent, become a tech firm – and that’s a big cultural leap. There’s also the inconvenient fact that insurance is not exactly the first sector that younger tech wizards think of when deciding on a career – firms will need to think about how to make themselves appealing to this kind of talent and bridge the gap.

There is also the matter of digital distribution affecting the carriers’ risk profile. The main hazard from a risk perspective is the loss of human judgment when bringing customers onboard. The digital approach is about automation and volume – what comes through the door is a set of data points. There isn’t an agent talking to customers, getting to know them in a more rounded way.

This is far from an insurmountable problem, but it does introduce the potential for new risks coming on board to not be screened as well as they would be via the traditional approach. It means learning new ways to screen for risks. The main things an insurer needs to understand about new customers are their financial status, their health and whether they truly need the product in question. This evaluation has to be done differently, rather than relying on the expert judgment of agents – any digital onboarding process needs to incorporate a way of both capturing and assessing information in a reliable fashion.

This further underlines the point that digital and traditional should be seen as complementary rather than mutually exclusive – ultimately a human element will always be needed to address this type of risk. The key is finding a way to integrate the two, to ensure there’s an aspect of human intelligence built in.

Life insurers are starting to embrace the shifting sands and are looking to digitize. Some firms want to build their own digital capabilities but recognize they don’t know where to start, and so they bring in a tech firm to advise. Other firms are partnering with tech firms to outsource the function. In these cases, the insurtech firm gets ‘bolted on’ to the insurance company, bringing its own talent and essentially acting as that company’s digital department.

See also: A Game Changer for Digital Innovation

The relationship between traditional insurers and smaller insurtech outfits has changed considerably over the last couple of years. Whereas many insurers initially thought they’d be competing directly against a new generation of disruptive fintech startups, a far more collaborative dynamic has now emerged. This makes a lot of sense – the two sectors bring very different yet complementary capabilities to the table, and have advantages with different markets and consumer audiences.

Life insurers’ traditional revenue pool does have some life in it yet. But firms that are not just looking to survive but to thrive, at the very least, need to understand their customers better, and be more up to speed with modern consumer behavior.

This doesn’t necessarily mean they have to go down the direct-to-customer route, but adaption is needed to unlock the efficiencies that digital can enable and to bring approaches in line with expectations consumers now have. Relying on traditional messages and systems limits the potential market, and will eventually be obsolete. Digital distribution is just one aspect of the modernization of the insurance industry that is, in the long run, inevitable. Those that don’t adapt will be left behind.

Has Digital Insurance Failed?

“Digital insurance” was an exciting concept for the insurers until a few years ago. It was believed that digital transformation would change the insurance industry forever. We can say that digital insurance was the “autonomous vehicle” of the insurance industry.

Today, it seems that the digital insurance concept has lost most of its popularity. Insurers haven’t found what they expected from digitalization; now, they are dreaming of more disruptive technological transformations (like insurtech). So, why has digital insurance failed?

The truth is insurance companies realized that digitalizing the traditional insurance process is not enough. At the beginning, they must have thought that, after transforming all offline processes to online, digitalization will be completed, and everyone will be happy with that.

If you define digitalization as “transforming all offline processes to online,” insurance companies did their job completely, but ungrateful (!) consumers did not appreciate the change enough. Although most insurance companies have digitalized their sale process in the last five years, the share of online sales is still below 1%.

However, if you define digitalization in the broader meaning as “being a part of the online ecosystem, to respond to changing and diversifying customer expectations,” insurance companies are going nowhere fast. This makes clear why digital insurance projects haven’t reached expectations.

See also: Digital Insurance, Anyone?  

There are reasons why the digital world is growing incredibly fast, regardless of industry. These are also motivators for stakeholders to be a part of the digital ecosystem:

  • Low investment cost, easy entrance to the market and easy exit (means high competition)
  • Low agency and services cost (low price)
  • Easy-to-reach information (more comparison)
  • Real user reviews (more trusted purchase)
  • Product diversity (a tailor-made way to satisfy needs)
  • Easy purchase and live support (better customer experience)

These six topics are the essentials of a well-built digital ecosystem. Let’s check how many of these features are available in the digital insurance ecosystem: Zero.

So, we need to think about how we can bring the six fundamentals to insurance.

Low Investment Cost, Easy Entrance and Exit

The insurance business is strictly regulated in many respects, but, if we want to grow the digital insurance market, we have to make providing insurance easier. We need a new approach to insurance agency services, especially in digital platforms. Simple, fixed-price and easy-to-understand products should be sold by digital retailers or even individuals. Uber has transformed the individual transportation industry by providing a simple service.

Low Agency and Services Cost

Rule No. 1 about online shopping: Consumers want to have a significant price advantage while shopping online. Discount coupons, gift cards, limited time offers are necessary in online shopping. If you think that offering an off-season discount on health insurance is absurd, think again.

Easy-to-Reach Information

Insurance products are too complicated; we all know it. We also know they don’t have to be. We should simplify products and make them easier to understand. To sell a product online easily, you have to provide all key information in a few minutes. Why don’t we replace boring policy documents with YouTube videos?

Real User Reviews

Creating a name in the digital world has never been easier–or harder. While a no-name startup can become a well-known brand with thousands of fans in a few months, giant brands can lose all of their prestige with a simple case. If you want to exist in the digital ecosystem, you must have a good reputation and always protect it. Blogs, forums, customer reviews have a huge impact on the consumer’s purchasing decision, even more than TV ads bought with millions of dollars.

Product Diversity

There is a word that doesn’t exist in the digital ecosystem: “standard.” Almost every product sold online has different color, size, function, power and quality options. For the consumers who are familiar with these opportunities, a one-size-fits-all approach will not be appreciated. Do you think that the couple who are going to the Maldives for their honeymoon and to Tanzania for a safari have typical needs and expectations for travel insurance?

Easy Purchase and Live Support

We are all busy. Digital consumers want to handle all their business as soon as possible, including insurance. If a consumer prefers buying insurance online instead of buying from a traditional agency, he would like to save time. Long phone calls, pages of application documents, lengthy procedures… have no chance in the digital world. People don’t even want to talk on the phone any more; do you have a Whatsapp number?

See also: A Game Changer for Digital Innovation  

Unfortunately, insurers emptied the concept of digitalization. There is a myth that everyone is doing something, but no one can make progress.

We don’t have to wait for Amazon to change the rules of the game in digital insurance. The industry can catch the digital era with a well-defined and rational strategy, based on the requirements of a digital ecosystem. Even a collective transformation strategy that includes all stakeholders of the insurance ecosystem would be much more successful than what is happening now.

Without a new strategy, digital insurance will be a cool idea to mention in an insurance company’s annual reports but nothing more.

How to Keep Humanity in Online Sales

It’s no secret that the small business insurance industry is creeping online, representing the start of an insurtech revolution. More insurers are realizing that customers are getting comfortable buying directly from them — and aren’t shy about asking for specific products. There is a huge opportunity for insurers making the jump online, but I would argue that it’s not going to be the first online insurance brokerage that wins…

It’s the one that won’t lose its humanity in the face of the digitalization.

Here’s a deeper look at how online insurers can provide a more comfortable and human experience for their customers:

Follow the Golden Rule

It’s a timeless piece of advice, and for good reason: If you wouldn’t accept a certain level of treatment as a customer, you shouldn’t treat your own customers that way.

Think about every part of your customers’ journey and how your brand interacts with them at key touchpoints. For example, if they call with questions about their policy, are they able to speak with an adviser immediately, or are they on hold for several minutes? Is your site copy easy to understand, or would it take an insurance agent to decipher what you’re trying to say?

See also: 5 Digital Predictions for Agents in 2019  

Analyzing your customer journey with this empathetic lens can help you better understand opportunities for a more human touch.

Don’t make it complicated

It’s a huge understatement to say that the insurance industry can be complicated. That’s why, as insurers move to the online world, it’s important to make it easy for customers to get what they need. Don’t overcomplicate things for them or add information that they really don’t need to know. A large number of small business owners are probably shopping online for insurance before or after putting in a full day’s work; they just want what they need, and that’s it. Your digital experience is the face of the company, so make sure it provides a smooth process.

Leave industry jargon at the door

Be smart about what you’re presenting to the customer because, as I mentioned in my last point, our industry is overwhelming. Creating a more humanizing digital experience involves leaving behind the jargon and framing the conversation in a way that’s easier for the customer to understand.

Deliver on your promises

A lot of insurtech companies are jumping on chatbots as a platform for engaging with customers. But bots can quickly lead to a negative brand experience if you don’t have the logistics to support chats. Recently, I left a query on a brand’s chatbot and was told that I would get an answer about three hours later (already unacceptable). Seven hours later, I got a response — but the answer didn’t even relate back to my question. Needless to say, the frustrating experience hurt my opinion of that brand.

See also: Best of Both Worlds: Humans and Tech  

If you’ve promised your customers something – like support or an easy claims experience – you need to deliver on your promise. It’s as simple as that.

How Agencies Must Embrace Tech in 2019

When is the last time a P&C insurance application or renewal was a simple and comprehensive process? Chances are the applicant spent hours going through extensive and repetitive paperwork, much of which was the same information that was provided last year. The insurance agent likely spent an equally lengthy amount of time reviewing, reminding and processing. While some insurance agencies have made updates to embrace disruptive digitalization to alleviate these problems, most are still woefully out of date — causing incredibly inefficient work, unorganized communications and old-fashioned experiences for customers. The industry has reached a breaking point: Embrace insurtech or be left behind.

The U.S. accounts for $558.2 billion across P&C insurance, and changing trends have created a chance to establish a robust technology plan and take the necessary steps toward better business to compete in a highly competitive market. Established insurance agencies need to invest in insurtech if they want to compete with lean, mean and hungry startups. By leveraging new technology, agencies can address persistent challenges and take advantage of new opportunities.

Establishing Digitalization is Everything

There’s no one playbook or single solution to meet the digital age for all businesses. Without recognizing a move to a digital and on-demand world, companies can’t avoid falling behind their competitors and fading away. We’ve seen time and time again companies that fail to embrace change. The entire video rental industry went obsolete when Netflix and Hulu burst on the scene. An inability to transform like Walmart is what doomed lesser big box retailers. While a major shift like that has yet to occur in the insurance sector, no agency wants to be known as the Blockbuster or the Sears of the industry.

While the industry has been notoriously slow to adapt to the digital age, it is certainly not immune. Many insurance agencies have made a basic digital migration out of sheer necessity, but the challenge of how to stand out from competitors remains. Nine out of 10 insurance companies identified legacy software and infrastructure as barriers for digitalization. But simple changes like embedding digital capabilities directly into business models can produce big gains.

See also: Embrace Tech Before It Replaces You  

For example, establishing a rich, secure database of digitally enhanced “smart” insurance forms and carrier applications that are regularly updated can save an agent significant time. Customer segmentation software can use data to strategically target and retain customers to make acquisition more precise and less of a guessing game. Risk management programs can calculate accurate policies to avoid having to make costly adjustments months or years later.

Pushing to evolve your administrative workflow with basic digital innovations is incredibly valuable to progress and process.

Improving Inefficient Operations

One of the fundamental roles of all technology is to make life easier for people using it. When enforced properly, technology can increase efficiency for internal and external processes. Seamlessly consolidating basic functions, which normally cost staff and customers inordinate amounts of time, can drive productivity and services with ease. Those who move fastest reap the most reward. The big challenge in 2019 is to enforce these processes.

Insurers that implement new internal tools like cloud management drive productivity from start to finish, increasing efficiency and ultimately saving resources by doing so. The tools also improve services like underwriting and claims. The ability to use real-time data to analyze the effectiveness of a workflow can better inform business decisions and can even help determine how to improve the agent-customer business relationship.

With that data as a technological foundation to a rejuvenated workflow, agents are able to get key information from a client or prospective customers through simplifying communications and streamlining tasks. This, in turn, delivers the kind of efficient experience that modern customers have come to expect.

Agencies that are hesitant to adopt any overwhelming innovation can look at it this way: Capitalizing on technology now would only enable stronger relationships in the future. Studies show these digital-minded insurance companies also generate revenue about 10% higher than the industry average, and are 20% to 30% more profitable.

Modernizing the Customer Experience

Ultimately, the consumers choose the winners and losers in any industry. Consumers have come to expect a certain level of customer experience that an agency cannot offer without incorporating technology. Customer experience is the foundation of the insurance industry, and a large part of that experience in this day and age comes from technology.

In today’s constantly connected world, insureds expect to be able to access their insurance information and documents digitally and certainly on their mobile devices. The bad news is that only 15% of insureds are satisfied with their insurer’s digital experience. The majority of customers are already accustomed to completing other non-insurance tasks online and will choose agencies that offer a simplified tech solution over ones that do not.

However, the power of human interaction remains an important part of the customer experience. Technology will empower insurance brokers to do their jobs even better, in a fraction of the time, while offering better service. The aim of technological advancement is never to replace the broker, as people often worry, as 57% of consumers prefer talking to a real person throughout their digital experience.

See also: 3 Technology Trends Worth Watching  

There is a younger class of business owners who are founding companies, almost all of which will need P&C insurance. According to one Gallup poll, millennials are more than twice as likely as all other generations to purchase their personal health insurance policies online rather than through an agent. Conversely, millennials are the least likely to be fully engaged — and the most likely to be actively disengaged — with their primary insurer. This trend will translate to commercial insurance as more millennials become business owners. These younger business owners are inherently going to be more attracted to agencies that offer a tech solution to simplify the application and management process than those that do not. According to a PwC study, 70% of business owners who purchased personal insurance online would like to purchase commercial insurance online. This has serious implications for insurance leaders who will look to capitalize on the fact that millennials are the largest generation in the U.S. and will grow to dominate the market.

With tech-empowered customer experience (CX), digital tools will attract and retain customers by automating tedious tasks. For example, there are technologies that make it a possibility to set automated “smart” reminders, saving agencies the time and hassle of having to follow up and remind clients to complete certain forms. The technologies also significantly reduce risk for errors and omissions, which can result in inaccurate or even a lack of coverage. These can be costly in both time and money to update.

Some technologies allow users to log in to online portals or platforms from anywhere with an internet connection, to find their insurance forms, applications and documents. This omni-channel experience is a drastic improvement over the old way of looking through old filed paper documents, sifting through old emails or searching hard drive files.

Those services and that key information can offer a near-complete customer view, with 75% of consumers noting that such engagement tools will enhance their experiences. As such, modernizing the customer experience has empowered all parties involved with increasingly sophisticated insurance.

Many agencies have rapidly embraced technology, but so many more can still benefit. Their inadequacies and deficiencies will become more visible in 2019 and beyond the longer each waits to embrace technological innovation. Whether it’s to streamline systems or increase internal efficiency, agencies must embrace technology if they want to remain competitive beyond 2019.