Tag Archives: medical information bureau

This Is Not Your Father’s Life Insurance

Soon-to-be published editions of dictionaries will list “InsureTech” as one of the newest words. We all own a piece of that new word and all that comes along with it. More than a new word, it is becoming a new world in the insurance industry. We’re on an InsureTech expedition.

Having spent decades of my life developing products, marketing programs and delivery systems in the life insurance vertical, I feel compelled to share some insights into the unique characteristics of the life insurance segment within the InsureTech movement. I will offer a recipe for an end-to-end digital system that bypasses legacy system quagmires and shifts digital life insurance sales into warp speed in both the consumer-direct and agent-broker categories.

But first a few words about what makes life insurance different from other types of insurance, along with some commentary on the state of affairs in today’s market.

Life Insurance Is Optional

Let’s think about the major types of insurance that consumers buy. Auto, home, health and life. We are required by law in all but two states to have auto insurance. If you have a mortgage on your home, you are required by the lender to have homeowners insurance. Federal law now requires that most of us must have a health insurance policy. These types of coverage are not optional. You don’t see articles about a trillion-dollar middle market coverage gap in the auto and homeowners insurance segments.

See also: What’s Next for Life Insurance Industry?  

But there is a trillion-dollar life insurance coverage gap in the middle-market today in the U.S. Why is that?

First, the process of obtaining a life insurance policy for typical middle-market needs is overwhelming, tedious, intimidating and mysterious for consumers. We’re talking about a basic term life policy with coverage of $250,000 or $500,000 or, OK, perhaps a million dollars of coverage in some cases in the middle market. Seems like it should be easy. But, even though we have seen price reductions across the board during the past 20 years for term life, individual life insurance ownership has actually decreased. The buying process is broken.

Second, combine the antiquated buying process with the fact that the purchase of life insurance is optional, and consumers repeatedly push the chore of buying life insurance to the bottom of their to-do lists. To make matters worse, because the fulfillment process for these smallish policies is so expensive for brokers and agents, they cannot make a profit focusing on the middle market. You end up with an unmotivated distribution system and a trillion-dollar coverage gap.

You Also End Up With a Trillion-Dollar Opportunity

I’ve taken it upon myself to write down the recipe for a digital process for capturing a sizable share of that opportunity.

This is what we need to mix together to end up with a complete system that is capable of starting with “Hello” and ending minutes later with a completed transaction: an “in-force” policy for the consumer.

  • User-friendly graphical user interface for both consumers and agents. (You would be surprised.)
  • Easy quote engine — provides all relevant price quotes so you don’t jump back and forth looking at one quote at a time. First thing I notice about most designs is that you have to keep re-entering inputs to see different quotes instead of being able to scan all of them on one screen.
  • Digital life insurance application process. Simple application language. Find just the right balance between just enough questions and not too many questions per screen.
  • Decision time. Consumer-direct or agent-assisted? Both models will become more numerous in the marketplace. Carriers need to understand that many consumers need and want some level of assistance. So, carriers need to be prepared to offer chat and over-the-phone assistance to complete the online process. Perhaps even full-blown call center agent “take over” of the application process when the applicant calls for help. Or some combination of these.
  • Collection of contact information from website visitors who are “just looking” so that carriers can conduct email and phone nurturing campaigns. Carriers need to understand and appreciate the tremendous dollar value of these campaigns and not leave a huge percentage of potential revenue on the table.
  • Compliance with Do Not Call and telecommunications statutes and CAN-SPAM. By the way, CAN-SPAM is widely misunderstood, and many marketers do not understand the generous powers it provides to contact potential customers via email. Email is still the “killer app” it was labeled as many years ago. Text messaging is a first cousin for certain market segments. Special language is needed on website(s) dealing with consumer permissions to use their mobile number.
  • Secure payment gateway to provide PCI-compliant credit card processing and deliver premium payments to the carrier. The ability to accept consumers’ checking or savings account numbers for payment is also necessary. Payment screens need to be seamless, transparent and simple.
  • Secure digital signature interface for consumer-direct and face-to-face sales as well as agent-assisted phone sales. All are slightly different. All are important. Again, seamless, transparent and simple.
  • Behind-the-scenes secure interfaces to the Medical Information Bureau (MIB), motor vehicle records (MVR) provider and pharmacy records (Rx) provider must be built to provide capability for real-time queries and retrieval of third-party data.
  • If the life insurance product being purchased does not require a medical exam (“non-medically underwritten,” which requires no blood or urine tests), then the process can proceed to the next step, which is the underwriting decision engine. If the design and pricing of the life insurance product do require blood and urine testing (“fully underwritten”), then the system will present a screen in the process for an appointment to be scheduled. Many designs are getting away from blood and urine testing, but, to be realistic, these tests will still be needed in many cases for years. This topic deserves to be considered in the system design sessions.
  • Underwriting decision engine that compiles all answers provided by the consumer on the digital application form with the MIB, MVR and Rx data. In real time, the underwriting engine then renders a decision on the application. Some straight-through systems are considering using third party software for this. Others have their own, proprietary engines that afford much faster adjustments to the underwriting engine rules and settings. Controlling the underwriting engine technology also can be the difference between a “go” or a “no go” answer when seeking to add features, change processes, edit code and take other similar actions, which are needed on a continuing basis, and sometimes quickly.
  • As applications are approved, the system must package the approved policy for the state of issue with all the necessary additional pages, such as HIPAA forms, Consent to Do Business Electronically forms and other pages, which can vary from state to state. This policy package must be provided to the new customer, the policyholder, in real time using a secure link for downloading.
  • All data pertaining to the new customer’s file must be transferred to the carrier’s administrative system in real time. A new customer is born.
  • Finally, a deep and broad suite of analytics must be baked into the system’s DNA and designed to manage the business being put on the books on a daily basis. Take this data in real time and reinforce what is working. Correct that which is not. Just this one necessary component alone could be the topic of an article several times the length of this one. We’ll get right on that.

See also: InsurTech Can Help Fix Drop in Life Insurance  

These are the many pieces that I truly believe are necessary to work together perfectly to achieve the kind of disruption that is so necessary. We’re already all over this one.

Private Exchanges May Be the Free Market Solution to Cost Control and Healthcare Consumerism

While the Patient Protection and Affordable Care Act (PPACA) is sometimes shortened to the “Affordable Care Act” or ACA, the act has few features that will make insurance more affordable.  Government studies and industry experts have indicated that strict coverage mandates, limited premium classifications, community rating, added benefits, single risk pools, and price compression will raise premiums more rapidly than if the ACA had never been passed.

The development of exchanges, both government and private exchanges, are part of an evolution that will change the way insurance is sold and bought.  It is a new way of connecting products with customers.   Government exchanges are likely to be used mainly by those qualifying for a federal subsidy.  The standards and restrictions on government exchanges are likely to attract poor risks and high cost claimants.  The government exchanges will use government paid “navigators” rather than independent licensed agents.  The government exchanges and navigators are not expected to offer supplemental products, life insurance or other products and services.

Private exchanges may be the free market solution to real cost control and lowering the number of uninsureds.  With 40-50 million uninsureds, the traditional agent distribution system for insurance is not working.   About 60% of the uninsured are under age 35.  Studies conducted in Georgia by the Center for Health Transformation Uninsured Working Group showed that 35% of the uninsured could afford insurance but did not know it.  Another 40% needed lower cost options that were not available to them either because insurers emphasized high premium products, or because existing state laws or legislative mandates increased premiums and favored insurers over consumers.

Many uninsureds work for a small businesses that do not offer insurance. They may be self-employed, part-time, or doing contract work.  In most cases, the need is for individual insurance, not group plans.  Selling single policies can be time consuming with little financial rewards for an agent.  Many potential individual sales are halted at the kitchen table when in the process of completing an application issues arise that could cause a declination.   Information derived by an insurer during the underwriting process is typically fed into an industry association called the Medical Information Bureau.  That information is shared across companies and a declined health application could have ramifications for future applications of life insurance, disability coverage and other forms of insurance. 

Private exchanges are developing that will offer individual and group products that emphasize wellness and treatment compliance for those under medical care.  PPACA requires insurers to “community rate” their products.  That is, individuals or small groups will not get direct credit for healthy activities.  New entities are forming that will likely attract healthy individuals and the less healthy members interested in getting better.  Developing private health cooperatives, captive mutual companies, and new insurers may be unencumbered by an existing unhealthy membership or a current business model that limits attracting customers willing to be engaged in healthy behaviors. 

Healthcare consumerism is more likely to emerge through private exchanges than government exchanges.  Private exchanges will provide a transition from employer-based insurance to individual-centered or consumer-centered insurance.  In theory, both large and small employers will be able to purchase health insurance through the private exchanges, and their employees can choose an individual health plan from those offered by participating insurers.

Time will tell.  We are in the beginning stages of a major market revolution.  We already know that government exchanges as originally promised for small groups have been delayed one year until 2015.  As private exchanges come on line, I believe each will be a little different and offer varying levels of products and services.  For awhile it will be a “wild west” show.  Ultimately, the success and failure of each exchange’s product and distribution model will lead to consolidation and better products, services, convenience, help, and information for the consumer.  In the end, more product competition and price transparency will lead to more citizens being insured and lower insurance costs will prevail.  This is the way free markets create successful products and services that consumers want to buy.