Tag Archives: life insurance

False Dilemma Facing Life Insurers

A false dilemma assumes an either/or choice: You are either with me, or you are against me. This kind of thinking typifies life insurance sales, with many insurers looking to digitally transform either their adviser or their direct-to-consumer channel. But does that thinking match the reality of how policies are sold today?

Consider the purchasing journey: research, quote comparison, application, purchase, processing, underwriting, issuance and continuing service. Some parts of the modern journey are almost entirely done online, e.g. research and quoting, while others are primarily handled by advisers, e.g. purchase and processing. Both the direct and adviser channels are engaged.

If that’s the case, can your digital transformation strategy afford to promote one sales channel at the expense of the other? 

Empowering Advisers Requires Empowering Consumers (and Vice Versa)

Advisers typically sell products that are easy. So, insurers must provide the adviser a great experience via intuitive, easy-to-use digital tools for turning prospects into clients. This includes automated lead capture, data analytics for lead routing and management and a dynamic e-application. It also encompasses streamlined application processing, underwriting, approvals and payment to ensure policies are issued and claims are processed in a timely manner. 

Now compare that to the traditional life insurance sales process. First, find a hot prospect and send a generic PDF quoter or application that the person needs to fill out and send back to you. Then manually confirm that all the information needed is provided and send it off to the insurance carrier. Finally, days or weeks later, the carrier approves the application or requests more information. Either way, the process is so manually cumbersome and time-consuming that it’s probably only worth the effort for really big, complex policies – i.e., expensive. 

But what about everybody else? We already know that millennials, the generation of 20- to 45-year-olds our industry desperately needs to attract, has much less buying power than their Baby Boomer peers did at the same age. Can you afford to help millennials? Can you afford not to?

We know that consumers gravitate toward great experiences. It’s your job to offer them one, including dynamic, engaging and easy-to-use content on your website as prospective clients self-educate. You also must make it easy for prospective clients to ask questions and get more information from an adviser in real time, or to convert them directly when no additional help is needed. From there, consumers expect to have policies issued and claims processed in a timely manner.

See also: COVID-19 and Need for Analytical Insurers

Imagine going to the Walmart website, finding exactly the product you are looking for, then not being able to purchase it directly. Maybe you are researching products on the Walmart website and have questions, but no one is available to answer them. How long will you continue to rely on Walmart for your purchases, especially when you can buy from Amazon and receive your product the next day? 

Today, you can have your cake and eat it, too, with an omnichannel approach – enabled by both people and technology — that provides a great experience to each “user” at every point in the buying process.

Getting to Omnichannel 

The key to going omnichannel is NOT blowing up your existing business model. Quite simply, it just means focusing on both processes AND experiences when you are applying technology to distribution challenges. Omnichannel must be part of your plan – really, your endgame — even if you choose to focus on a single channel to start. Here are some ideas for how to get there:

  1. Start small — you don’t need to commit millions of dollars to get started. Pick a couple of products rather than digitizing the distribution of your entire portfolio. Or, start with a single process with a relatively quick time to value.
  2. Establish a few, reasonable key performance indicators (KPIs) — focus on quantifiables besides revenue to start, e.g. an increase in traffic, number of leads generated, number of policies sold, etc.
  3. Test and adjust as needed — this worked; let’s do more of it. This didn’t work; let’s not make the same mistake. 
  4. Evaluate the experience — how does your project improve the experience for all stakeholders (present and future) who engage with it? Is there more you can do to improve?
  5. Add on — for example, you’ve successfully enabled D2C sales of T10 and T20 products. What’s next? Identify another product or process to tackle, establish KPIs and go for it. Do more of what works and learn as you go… just keep going. 

In the past, insurance companies had to assume the full cost and risk associated with technology projects, but this is no longer the case. Subscription-based pricing and modular software platforms provide new levels of flexibility and shift the implementation risk to the technology vendors. They implement, integrate and deliver. You pay a reasonable, agreed-upon monthly fee

Don’t fall into the false dilemma trap. Life insurance, like just about everything else involving digital-native consumers, is a “both/and” world. You can do omnichannel, and frankly you have to to stay competitive. There has never been a better time to get started! 

Omnichannel Life Insurance Policy Sales

Life Insurance Is Ripe for Change in 2021

While the repercussions of the pandemic and subsequent economic paralysis touched many industries, changes within the life insurance sector are among the most widespread. Some changes were underway prior to the events of 2020, yet the pandemic and its economic consequences accelerated an industry-wide transformation. Regardless, life insurance is shaping up to look vastly different in 2021.

New Administration and Best Interest Regulation

Under the incoming administration, the focus on consumer protection regulation will rise for financial services, including insurance. Much of this has been done at the state level already, but we’re seeing increased appetite among federal regulators to extend certain requirements.

New York’s 2019 amendment to Regulation 187 is a perfect example. The rule requiring insurers to act in the best interest of the consumer will likely become the standard for the U.S. life and annuity insurance industry over the next few years. The rule demands more simplicity and transparency within the annuity and life insurance sales experience to prevent what some call “consumer financial exploitation.”

The last four years revealed trends toward a “consumer-only mindset” that’s rooted in transparency. For the life and annuity sector, this means digital product comparison will be necessary. Carriers and distributors with a strategic growth agenda should seek to align with this trend rather than ignore it.

Annuity and life insurance sales have traditionally relied on in-person relationships and meetings; with COVID-19 forcing the industry into virtual selling, regulators will want more auditability and transparency over how consumers are treated during the virtual sales process.  

Consumers Demand More Control Over Virtual Experiences

Consumers are also experiencing a transformation of their own. With the majority of lives moving toward virtual experiences and the increased demand for instant answers or services online, consumers have little to no patience for a traditional, paper-based sales process.

This is one of the main reasons that life insurance sales haven’t kept pace with general population growth. Younger generations demand seamless, often-personalized digital experiences with the ability to compare policy options dynamically and interactively in real time. Moreover, most Americans now rely on smartphones and broadband technology to do everything from banking to tracking the status of the COVID vaccine, according to Pew Research. This heightened reliance on digital experiences has affected consumer interest in life insurance and the ability to effectively sell it.

Creating an interactive visual life insurance experience is increasingly popular among carriers and distributors. Virtual sales meetings are also increasing. More and more, consumers don’t want to feel pressured to attend a one-on-one, in-person sales meeting and want more flexibility in the sales experience.

Additionally, for better or for worse, we’ve all come to expect immediate gratification and a quick transaction. This same expectation carries into insurance, especially when it comes to term life. We expect the growing shift to “instant issue” capabilities will continue at a compounding rate in 2021. We also believe many innovators will seek to apply the instant issue model to select product classes and target audiences in the permanent life space.

See also: 6 Megatrends Shaping Life Insurance

The Uninsured and Underinsured at Highest Risk

2020 also exposed the risks for remaining uninsured or underinsured in America. Years of shifting cultural priorities along with outdated digital experiences have left many Americans without adequate life insurance. Unfortunately, this past year has given a glimpse of how dangerous that can be.

Americans now realize how vulnerable they and their families are without sufficient savings or insurance. With new insuretech platforms simplifying the purchase of life insurance, we expect an accelerated shift in tech adoption. For example, we saw a 155% rise in virtual life and annuity insurance sales meetings last spring, and that trend only increased throughout the year. Consequently, financial professionals, insurance carriers and distributors are investing in technology platforms to deliver a “hybrid” sales approach where the adviser or agent blends expertise with a consumer-oriented digital experience.

Overall, while 2020 was a transformative and challenging year, it also propelled the insurance industry forward at an accelerated pace. Regulations that reflect our new reality and cultural shifts will continue shaping the industry into 2021 and beyond. Carriers and distributors that aren’t moving toward digital transformation now will fall further behind in 2021. Despite the rollout of COVID-19 vaccines, experts agree that “normal” life is unlikely to return in the first half of the year, making these major trends a new part of the life insurance selling experience at least for the foreseeable future.

How to Understand Shopping Behaviors

As consumers shop more online for insurance, research on their shopping journeys can be used to ensure they’re more engaged and more likely to convert. Jornaya and iptiQ by Swiss Re partnered to research how comparison shopping correlates to life insurance applications and policy issuance and to understand how these shopping behaviors vary by consumer characteristics.

Consumers on a life insurance buying journey do their research. One in three applications in the data set were witnessed on a comparison shopping site in the Jornaya network before submitting an application. And their research can begin many months before an application is submitted. Specifically, 27% of applicants began their journey six to 12 months before applying.

It’s important to engage with consumers while they do their due diligence pre-application because engaging can increase the likelihood to purchase. In fact, consumers who shop on comparison sites before they apply are 68% more likely to become customers than those who don’t.

Consumers are often on multiple buying journeys. Jornaya’s research found that other considered purchases can affect buying life insurance: 

  • 13% comparison-shopped for a mortgage or refinance in the year before applying for life insurance
  • Those applicants issued at a 45% higher rate than those who did not show mortgage-shopping activity before applying

During the Application Phase

Consumers frequently shop after they submit an application and should be nurtured accordingly. The study found:   

  • One in 12 applicants will continue to shop post-application
  • 64% of applicants witnessed post-application returned to market within the first week after submitting an application with iptiQ 
  • Consumers who shop on comparison-shopping sites post-app are 26% less likely to become customers

See also: 2021: The Great Reset in Insurance

Post-Policy Issuance 

Retention risk is low early on, and cross-selling opportunities exist for insurance providers that sell multiple insurance products.

  • 3.5% of buyers shopped for a health insurance product within 90 days of their policy being issued
  • 3% shopped for auto insurance within 90 days post-issue

Implication for Insurance Providers

Insurance marketers will maximize production by using the right data to understand their prospects and create personalized nurture programs to drive timely and relevant interactions. 

No two consumer journeys are alike, and insurance providers are better-positioned than ever to meet consumers in the market exactly when they want to be approached. The key is to tap into and act on the data available from first- and third-party sources to drive stellar customer experiences and differentiate offerings from the competition.

In the analysis, iptiQ provided Jornaya with anonymous identifiers associated with 479,570 life insurance applications, a subset of iptiQ’s 2019 application activity.  Jornaya’s Activate Identity Graph ingested hashed identifiers (email and phone) associated with these records and resolved the anonymous consumer to behaviors witnessed within the Jornaya Network of third-party comparison sites.

While the findings are directly focused on life insurance, the trends hold true qualitatively across all insurance lines of business. Complete research can be found here

6 Megatrends Shaping Life Insurance

Senior executives in few, if any, industries think in longer or broader time horizons than those in life insurance. But, thanks to persistent low interest rates, shifting demographics, technology-driven disruption and regulatory shifts and the current global pandemic, life insurance leaders have adopted a more urgent and near-term perspective. While insurers face considerable risk if they fail to take bold enough action or delay necessary investments, there is also tremendous upside potential for firms that move quickly and creatively. 

As highlighted by the most recent installment of our NextWave Insurance series, the following megatrends are reshaping the life insurance and retirement market now and setting the stage for more profound change in the next decade: 

1. Financial health and wellness: Financial well-being — or having the ability to control day-to-day finances, the capacity to absorb a financial shock and the confidence to meet financial goals — has become increasingly important to more consumers around the world. With state pension and retirement plans looking less viable, such security will be harder to achieve. 

For insurers, value propositions will highlight how they can help people live the lives they want. Offerings will be more flexible, forward-looking and “goals-based,” with an emphasis on preparation rather than downside protection. The value propositions will also reflect that more people work for themselves or participate in the gig economy. 

However, insurers will be more transparent about prompting necessary consumer behaviors to achieve goals, rather than guaranteeing outcomes, as in the past. Retirement savings products will be more holistic and offer more options as consumers’ needs change. That’s how they’ll enable individuals to follow nonlinear career paths and take nontraditional retirements, based on alternating phases of asset accumulation and decumulation. 

2. Long-term value: Investors and analysts will expand their valuation approaches to include more holistic, long-term metrics, rather than only short-term financial measures. Intangible assets, such as intellectual property; talent; brand reputation; innovation; and environmental, social and governance impacts now carry greater weight. The shift toward inclusive, or stakeholder, capitalism will help build trust with younger generations and spark broader public-private collaboration to address societal issues, including the cost of future environmental damage or social injustice. 

3. Collaboration with governments and regulators: Difficult macroeconomic conditions, underfunded government retirement programs and intense regulatory scrutiny (especially around consumers’ best interests and data privacy) will force insurers to collaborate with public authorities on multiple fronts. Other priorities: increasing financial education, facilitating product innovation, influencing public policies, including tax incentives and issuing long-term bonds. More robust consumer protections and data privacy standards, as well as financial reporting frameworks, will be designed to promote financial stability. 

See also: Speeding Innovation in Life Insurance

4. Ecosystems and omnichannel engagement: Ecosystems will continue to grow and mature, becoming a primary method that companies use to engage consumers across channels. Technology advancements – particularly in the realm of application programming interfaces, microservices and data fabrics – hold the key by enabling rapid integration and smooth data sharing. 

Insurers will create their own networks of partners to offer complementary services. They will also engage in those orchestrated by others. Ecosystems will allow insurers to focus on their specific strengths (e.g., offering particular services to niche segments) or innovate more broadly (e.g., with subscription models). Ecosystems also suit insurers looking to modernize their distribution and shift to hybrid advisory models that balance robo-advice with human interaction. Partnerships being formed today will set the stage for future ecosystem success.  

5. Capital optimization and convergence: Beyond the near-existential threat of low interest rates, macroeconomic and competitive factors are driving the quest for higher levels of capital efficiency. Mergers and acquisitions and reinsurance are key variables in the equation. 

With more capital available from a wider range of sources and increasing clarity about the need for well-being, sector convergence will accelerate among life and health insurance, retirement planning and wealth and asset management. Capital efficiency will be a key design principle for future business models, largely because it will be necessary for survival. 

6. Commoditization and customization: The long-term trend in customer preference toward greater simplicity, transparency and comparability has helped commoditize life insurance and retirement products. Increasingly, consumers perceive value through user experiences, ancillary services and trust-based relationships. That’s why flexibility and customization are imperative. Delivering the right balance of simplicity and personalization requires stronger digital and analytics capabilities.

In light of these megatrends, we see a greater appetite for operational, organizational and technology transformation than ever before. The rapid shift to remote working and all-digital customer touch points revealed how quickly companies could adapt. That ability to change quickly and nimbly will serve life insurers well in what promises to be a dynamic decade.

Speeding Innovation in Life Insurance

This year continues to present challenges that force us all to think differently. The pandemic response promoted independent action, self-help and a heightened sense of social responsibility. This has accelerated the harnessing of technology as solutions for how we work, communicate, access healthcare, buy goods and receive services. Perhaps more than ever, we are aware of the risks we take and how they affect our chances.

For insurers, the focus on health and wellbeing could be a signal to launch new types of technology-led digital services and support for policyholders. Individuals who are embracing remoteness demonstrate a more open-minded attitude to sharing their data when using technology to get things done. Changes in patterns of working may have revealed shortfalls in existing protection product design that present an opportunity to do things differently.

The pandemic has cruelly also exposed the comorbid impact of previously reversible conditions, including diabetes, obesity and poor cardio-respiratory health. The socioeconomic consequences have also highlighted the financial inequalities behind the increased prevalence and unequal distribution of mental ill-health. Insurers will be asking themselves if they can do more to help.

A new era of preventative healthcare and remote monitoring means individuals can take control of their health by leveraging technology. Right at this moment, insurers have an excellent opportunity to engage customers with products that add some real value. Life practitioners have been flirting for some years with the idea of a new digital paradigm in underwriting, health protection and remote claims management. Perhaps now is the time for it.

Insurers aim to provide as many people as possible with financial protection. As recent claims have provided a grim reminder, life insurance protection helps when all is lost, but products linked to health-boosting technology could help to prevent loss. Flexible disability income products that better serve home and gig workers could have eased the burden on government during the current pandemic. Developing products based on parametric design, such as digital health software, may allow consumers to receive much fairer levels of coverage by deploying technology that avoids medical exclusions.

Offering products that offer flexible help rather than pure indemnity is only one aspect of improvements made possible by technology. Simplifying the road to policy issuance is another. Chatbots and automated processes can link customers to insurers and provide faster response times and increased levels of service with less hassle. Emerging technologies are promising to augment and replace current medical underwriting; digital apps and platforms are proven to improve medical outcomes. In view of these developments, insurers should leverage the new awareness about health and financial risk by appealing to consumers who have experienced for themselves the brittle nature of social support.

See also: COVID, and How to Pivot to Innovation

The life insurance industry has very effective with longstanding protocols that work well, and it has a low appetite for swapping proven methods for new ways of working that may not be as robust. But we are not promoting technology for the sake of it. Proxies for medical risk assessment, for example, will emerge as perfect replacements for health record paper chases and tricky questions on application forms. It is also important to offer safe solutions in this context, particularly in health interventions. The importance of safe solutions underscores the importance of selecting carefully from the large numbers of potential solutions, choosing only those with convincing scientific underpinning.

We all like technology that provides what we want while keeping our data safe. People, however, are also willing to engage and share data in return for something tangible. Working with these two factors, customers will soon be willing to offer disclosures of their digital health metrics in exchange for the benefits of health monitoring if they know their data will be protected and kept private.

This is a period of opportunity for the life insurance industry. Over the next 18 months, the smartest and most nimble insurers will take the collaborative action necessary to develop and deploy tech-based solutions for the new normal needs.

You can find this article originally published here.