Tag Archives: Ferrante-Schepis

Does DOL Ruling Require a Plan C?

As the Department of Labor’s “ultimate” ruling becomes finalized in the short weeks ahead, insurance carriers across the country are putting a lot of sweat equity into various strategies. These strategies include many variants of two plans going on simultaneously:

Plan A: Fight. After all, there are flaws in the way this ruling was brought to bear, and it places significant burdens on the industry that could harm consumers.

Plan B: Alter. If the fight fails, then companies must be ready with alternative plans that are the least disruptive to their business model.

Both plan A and plan B make a ton of sense, and there is no doubt that they must be done, and done quickly. The sales engines will shut down without them. However, both plan A and plan B are missing something really important: the future.

See Also: Stepping Over Dollars to Pick up Pennies

Why is the future missing? Both of these strategies rely on keeping things the same or as close as possible to the status quo. Yet, things have changed. While we may despise the way this legislation was brought to bear, and the math is very questionable, there is something we can’t deny. There is growing consumer mistrust in commissioned agents and advisers because it is believed they will sell products that make them the most money.

While we all know that many commissioned agents do act in the best interests of their clients, consumer perception is the reality. A 2012 study by Maddock Douglas revealed that more than 70% of the population agrees that “insurance agents always try to sell people stuff they don’t really need.” Ouch.

So, in spirit, this legislation is inevitable, and if it doesn’t take effect now it will keep coming back in new forms, and we will be fighting the same fight over and over. This realization blows up plan A.

Further, if the ruling does take effect, and we merely alter our processes to work within the exceptions and leave the current compensation model largely intact, the consumer won’t be satisfied and will gravitate toward another model. That realization blows up plan B.

So then we must create a new plan. Plan C: Lean in.

No, I don’t necessarily mean robo-advice. While robo-advice is the proposed solution against bias, it is only one solution. It may not actually be the right answer for your organization. The consumer mistrust around agents and advisers does not mean we need to eliminate humans; we just need to eliminate bias.

This is clearly an innovation challenge, and it requires developing many ideas and then choosing the best one(s) to pursue as your plan C. Your plan C ideas need to push thinking beyond the status quo, and if it is to be a successful alternative it should contemplate the following: 1) What would an unbiased advice model look like if it were invented today and the current one never existed? 2) What kinds of adviser incentives would the consumer see as aligned with their own best interests? 3) Who has solved a similar challenge in another industry, and what can you learn from them? 4) How can you prototype one or more of these models and learn if it will work before you invest a large sum in building it?

All of these questions, and others, can be answered if you apply the right process for getting to your plan C. Yes, it is possible. Some may wince when I state the old wisdom that there is opportunity at every point of major change, because this one really hurts. I’ve heard some of the most respected experts call this the biggest change in the industry since the Armstrong investigation in 1905. It is painful; however, the old wisdom is still true.

There is always opportunity in change, as long as we keep our wits about us enough to see it. If not, then the opportunity belongs to the disrupters of our industry.

This article first appeared on National Underwriter Life and Health magazine. 

What’s Next for Life Insurance?

If you are thinking that what’s next for the life insurance industry has something to do with the experience surrounding buying and owning life insurance products, think again.

Yes, the life insurance industry has a big opportunity to improve the customer experience. Companies are improving the complex and inauthentic language used in communications, improving engagement levels with consumers, reducing friction in the underwriting process and creating the ability to transact in an omni-channel way. We are even seeing new peer-to-peer models cropping up for other insurance lines, and it is just a matter of time before life insurance becomes a focus within them.

And, yes, the life insurance industry now at least has a handle on what needs to be done to improve the experience. Companies are putting significant effort into catching up to other categories. Some of the progress is coming from within the established carriers, and even more of it is coming from disruptors that are improving the model rapidly, giving established carriers new capability to buy instead of building.

So the industry is just a short time away from meeting the demands of today’s consumer. Bravo!

But the industry needs to get beyond improving today’s experience and focus on what’s next. And what is that?

Are you ready? Well, here it is: Death just isn’t what it used to be.

Social, scientific and technological advances have dramatically reduced the probability of death for those under the age of 55. This is the group of people whose untimely death would cause the greatest financial burden on families and businesses and is the group we depict as needing life insurance most.

Granted, many life insurance policies sold are issued on older people to implement tax strategies. However, the original intent of the insurance industry was to protect families and businesses from becoming destitute as a result of the loss of a breadwinner or key person.

What happens if that probability is significantly reduced? Do we continue to try and find more “death pool” needs. Or, do we find new needs that our unique skills and competencies can solve?

What’s next, in my opinion, lies in the latter. We can define our business more broadly. Are we in the business of “insuring” lives or “assuring” them? In other words, are we assuring that someone will live longer by avoiding or recovering from the things that are likely to cause death, such as drug use, cancer and suicide?

What does this question mean for what’s next in the insurance industry?

First, let’s examine avoidance. Could life insurers use technology and probability to help individuals and communities further reduce the likelihood of accidents? We need to go beyond driving and household safety tips and into true early warning systems or algorithms that can enable consumers to be proactive.

Could we better predict the likelihood of suicides or accidental drug overdoses? Could we help people understand the role of new, emerging risks such as “hackccidents”? (This is my term for an accident that is a result of human intervention into a computer system that may be controlling a car, a train, a plane or some other technology.)

Secondly, let’s examine recovery. Suppose someone has an incident, and death is now imminent. Could the life insurance industry guarantee access to the latest technology? Could it design investment futures (similar to investments in gold or pork belly futures) in the ability to get an organ transplant or expensive medicine or to be frozen until a cure arrives?

This may all sound far-fetched, but how far-fetched did the innovations of today sound just 10 years ago?


This article first appeared in National Underwriter Life & Health Magazine