Tag Archives: New York Life

The Start-Ups That Are Innovating in Life

In my last post, I provided categories within which to organize the innovation players within life insurance. Both start-ups and legacy businesses are pursuing solutions to industry pain points. Attention is being paid to distribution, product, client experience, speed, productivity, big data, compliance and other areas within the life category where inefficiency exists or where client needs are not met today.

The very complexity of life insurance will be a deterrent, at least in the near term, to the volume of innovations versus what we have seen in other areas of InsurTech. Much of the innovation, including the examples presented here in my April post, aim at specific issues with the current model for life insurance, versus taking a clean-sheet approach.

Entrants into the space aim to solve adviser problems, become the new intermediaries between the carriers and the client or assist the carriers themselves. For their part, carriers are funding and leading transformation efforts. They know they must adapt, but because it’s almost impossible to drive massive change from within an established business model and culture, it is likely that start-ups creating differentiated value that avoid becoming mired in complexity can do well.

Here are examples of opportunities:

Adviser conversations will move from the kitchen table to digital channels.

The Global Insurance Accelerator aims to drive innovation in the insurance industry. Of note in GIA’s 2016 cohort is InsuranceSocial.Media, a tiered offering that automates adviser participation in social media. Based on a user-defined profile, advisers are provided with algorithm-driven content that they can distribute via their social media identities.

Hearsay Social is a more evolved startup also enabling adviser social media. The company boasts relationships with seven out of 10 of the largest global financial services companies, among these New York Life, Pacific Life, Farmers and AXA. Hearsay addresses the compliance requirements that carriers have so their advisers can participate in social media: (1) archiving every instance of social media communication and (2) monitoring all adviser social conversations, intercepting compliance breaches. While not sexy, this capability is critical and commands C-suite attention.

An early-days market entrant also targeting adviser digital presence, LifeDrip claims to offer an automated marketing platform, including a personalized agent site, targeted content, signals on client readiness to buy and product recommendations.

Advisers as intermediaries are unlikely to disappear any time soon, but their role, engagement approach and capabilities must be more tech-savvy to appeal to virtually any consumer segment in this market with buying power. Expect additional new entrants that continue not to write off live intermediaries, and bring to market solutions to reshape the adviser relationship.

See also: How to Turn ‘Inno-va-SHUN’ Into Innovation

The new intermediaries are digital.

Smart Asset promises to simplify big financial decisions, including the purchase of life insurance, with an orientation toward how people make these decisions vs. pushing product. Shoppers can input data to a calculator and determine a coverage target; they are then encouraged to request a quote from New York Life. Smart Asset’s experience will be more credible when it includes multiple providers. It will require marketing investment to scale participation. Its basic approach could appeal to a large segment that will demand simple, low-cost product.

PolicyGenius has developed a consumer-friendly interface including instant quotes for life, as well as pet, renters and long-term disability insurance, following completion of an “insurance checkup.” As with other start-ups, this is a data-gathering exercise undoubtedly important to the company’s business model. AXA is an investor in PolicyGenius; the site promotes several major carriers as product providers.

Slice Labs is worth calling out because it is a direct-to-consumer play defining itself against a specific, important market segment – the 1099 workforce whose growth is being stimulated by the “on-demand economy.” Think not only about the Uber and Airbnb phenomena, but also the reality of more Americans moving away from traditional employer relationships where automatic access to benefits was a given.

Carriers will be viewed as start-up clients.

All of the companies mentioned already focus in and around the acquisition of new clients. InforcePro offers an automated solution for agents and carriers providing insights into sales opportunities and potential risks that exist within their current books.

Why does this matter? Insurance contracts are inordinately complex – even for the experts. Carriers and agents, particularly in recent years, have been forced to focus more heavily on maximizing the performance of the policies they have issued, versus just trying to sell more. The focus on the relationship with the policyholder has been skimpy. Life insurance policyholders can cancel a policy but cannot be “fired,” and represent continuing exposure, as their future claims can be on the carrier’s balance sheet for decades. With the risks and potential value now more obvious, in-force management has become a priority for focus and investment.

See also: Start-Ups Set Sights on Small Businesses

Carriers will drive efforts to innovate beyond incremental moves.

Haven Life owned by Mass Mutual but operated separately is a digital business whose product line is term life up to a $1 million benefit. The company operates in more than 40 states and represents a bold move for a 165-year old carrier. Nerdwallet rates Haven’s pricing as “competitive” – not the cheapest but well within range.

What is interesting about Haven is that it is not just implementing a shift of the same old approach to digital channels: Quotes are available in minutes, and coverage can become effective immediately, with the proviso that medical testing be completed within 90 days of policy issuance. In this space, this approach represents meaningful experience innovation.

Last year, John Hancock initiated an exclusive relationship in the U.S. with Vitality, marketing a program that gives rewards to clients who demonstrate healthy habits such as having health screenings, demonstrating nutritious eating habits, getting flu shots and engaging in regular exercise. Rewards range from cash back on groceries to premium reductions. This program is strategically significant because it aims at prevention, not just protection, linking preventative behaviors that clients control to cost savings.

Numerous carriers are participating in innovation accelerators, establishing their own incubators or forming dedicated venturing and innovation units. It remains to be seen which of these are what a colleague refers to as “innovation theater” and which are for real — drivers of new business opportunity. As with any early-stage plays, their stories will emerge over years, not quarters.

It’s Time for a Consumer Bill of Rights

On April 6, 2016,  the Department of Labor (DOL) released its long-awaited fiduciary rule. It is clear that things will never be the same. While the fiduciary rule is limited in the products that it applies to, it is a clear sign that the time has arrived for the Insurance Consumer Bill of Rights.

Some complain bitterly about the rule — William Shakespeare has Queen Gertrude say in Hamlet, “The lady doth protest too much, methinks” — but there is clearly a trend, with the DOL’s fiduciary rule, the proposed rule by the SEC, new consumer protection rules for seniors and the amount of complaints to the Consumer Financial Protection Bureau. To go from Shakespeare to a more modern poet: Bob Dylan sang, “The times they are a-changing.”

It is time for the insurance industry to wake up. If the way business is conducted remains as is on products not covered by the fiduciary rule, there will be further regulations and scrutiny thrust upon the insurance world, and there will less opportunity to have a voice at the table.

Insurance Agents, Distribution Systems and Reasonable Compensation:

The traditional agent system has been fading away over the last couple of decades. There are very few companies that still have their own “captive” agents. “Captive” agents are those who primarily represent one specific insurance company such as Northwestern Mutual Life, New York Life, Mass Mutual, State Farm, Farmers, Allstate, etc. and who receive office space and other support from that company.

Most insurance is now sold by agents who represent multiple insurance companies and who try to find the optimal coverage for their clients at the most affordable premiums. Of course, there are agents who are driven by commissions, and those are the ones who are most affected by the fiduciary rule and whatever comes next.  Acting in the best interests of a client is something the majority of agents strive to do, but enough agents don’t that this type of regulatory change is warranted.

Insurance companies are rethinking their distribution strategies, as shown by MetLife and AIG. MetLife recently sold off its Premier Client Group (retail distribution entity with approximately 4,000 advisers). American International Group (AIG) sold off its broker-dealer operation. And a number of insurance companies have withdrawn from the U.S. variable annuity marketplace over the last few years: Voya (formerly ING), Genworth, SunLife and Fidelity stopped selling MetLife Annuities.

The real concern for insurance companies and agents is that they will no longer be able to sell a product that can’t be fully justified as suitable to clients. In other words, selling the annuity with the highest commission and the best incentives will no longer cut it. While the DOL rule only applies to those annuities sold in qualified plans, is it really a stretch of the imagination to consider class action lawsuits against agents who are not following the same practices outside of qualified plans?

And of course there is the issue of reasonable compensation. Reasonable compensation under the BICE is not specifically defined and is certainly open to interpretation. The DOL notes several factors in determining reasonable compensation: market pricing of services and assets, the cost and scope of monitoring and the complexity of the products. There is the interpretation that advisers who have more education (certifications, degrees, licenses, etc.) may be able to justify higher fees or commissions. This is also a good thing as this will encourage advisers to improve their skill set and be of better service to their clients. The Insurance Quality Mark is a great way for agents to show their level of expertise and professionalism.

That Ticking Sound You Hear?

The current distribution system is ineffective with the types of products sold and the accompanying incentives. Agents receive higher compensation for less competitive products, and they receive incentives for making sales targets. This is traditional for sales in any industry. However, as we’ve seen in the investment community, there are few traditional commissioned stock brokers and investment advisers, while the majority are now fee-based planners. Consumers expect more and are more financially literate. The Internet especially has changed the way financial products are sold. And insurance is part of the financial world.

The Securities Exchange Commission may finally be spurred to move forward with its own fiduciary regulation. SEC Commissioner Mary Jo White has stated that fiduciary reform is in order at the commission, and that the SEC should harmonize the rules for investment advisers and broker-dealers serving retail clients.

And will FINRA (Financial Industry Regulatory Authority),  NAIC (National Association of Insurance Commissioners), the CFPB (Consumer Financial Protection Bureau), the U.S. House of Representatives, the U.S. Senate or some other body move forward with their own set of rules and regulations?

The marketing material that I see from many firms is, “We put our customers first.” Thomas E. Perez, the secretary of labor, said in an interview: “This is no longer a marketing slogan. It’s the law.”

The pressure is on annuity companies and insurance companies to design simpler products with lower fees and increased transparency.

Everyone needs to rethink the entire sales and policy management process and follow the best practices outlined in the Insurance Consumer Bill of Rights. It requires insurance agents to place their clients’ (insurance consumers) best interests first to the best of their ability. The Insurance Consumer Bill of Rights focuses on common-sense, thorough communication and providing quality service in a way that benefits everyone. Following the Insurance Consumer Bill of Rights is a win for everyone.

The Bottom Line: 

Insurance agents, insurance brokers and insurance companies can be the leaders in providing insurance consumers with rights or can be led by follow-ups to the DOL’s fiduciary rule. The DOL’s fiduciary rule is not the end, it is only the beginning.

Again, it is good business for everyone when firms must fairly disclose fees, compensation and material conflicts of interest associated with their recommendations and not give their advisers incentives to act contrary to their clients’ interests. (It’s a sad state that such a requirement is necessary.)

The future is up to us. If we start to treat annuities and cash value life insurance as the complex financial vehicles that they are and start to better educate our clients and ourselves and carefully service them, then there will be positive outcomes. If we continue with the current approach, lack of education and disclosure, more contracts will terminate and there will be significant negative consequences for policy/contract owners and their beneficiaries, and agents may very well find themselves as defendants in litigation.

The Insurance Consumer Bill of Rights:

  1. The Right to Have Your Agent Act in Your Best Interest: to the best of her ability. Keep in mind that agents are not fiduciaries and are agents of the insurance company(ies). An agent recommendation should not be influenced by commissions, bonuses or other incentives (cash or non-cash). An agent should not collect a fee and a commission from the same client for the same work.
  2. The Right to Receive Customized Coverage Appropriate to Your Needs: An insurance agent should review your potential coverage needs per each line of coverage under consideration and take into account any existing coverage. Any new recommended coverage must fill a need (gap in coverage). Any replacement must be carefully reviewed with all pros and cons considered and presented in writing to the consumer.
  3. The Right to Free Choice: You have the right to receive multiple competitive options and to choose your company, agent and policy. Agents, brokers and companies must inform you in simple language of your coverage options when you apply for an insurance policy. Different levels of coverage are available, and you have the right to know how each option affects your premium and what your coverage would be in the event of a claim.
  4. The Right to Receive an Answer to Any Question: You’re the buyer, so you have the right to ask any question and to receive an answer. The answer should fully and completely address your question or concern in full and be understandable. If you don’t understand something, you as as the buyer have a duty to ask questions, and, if you still don’t understand, you shouldn’t buy that policy.
  5. The Right to Pay a Fair Premium: There must be full disclosure on how policy premiums are calculated and the impact of different risk factors specific to the type of coverage proposed. Also, information should be provided on factors that may reduce the premium in the future.
  6. The Right to Be Informed: You need to receive complete and accurate information in writing – anything said or promised orally must be put in writing. This includes full Information on any recommended insurance company, including name, address, phone number, website and financial strength rating(s).
  7. The Right to be Treated Fairly and Respectfully: This includes the right to not be pressured. If there is a deadline, the reason must be presented. If an offer is too good to be true, then it most likely is too good to be true. Insurance agents and companies should keep information private and confidential.
  8. The Right to Full Disclosure and Updates: You must receive notice of any changes in the coverage in easy-to-understand language and any relevant changes in the marketplace. All relevant information and disclosure requirements (required or not) on an insurance product must be presented to the client. You must receive in writing a summary of all surrender charges, length of surrender period and any additional costs for early termination. In any replacement situation, all pros and cons must be submitted in writing.
  9. The Right to Quality Service – You must be able to have your coverage needs reviewed at any time upon request, whenever a major event would affect coverage and at least annually. The agent must determine if changes have occurred with the client or in the marketplace that would dictate changes to the insurance coverage. This includes prompt assistance on any claims.
  10. The Right to Change or Cancel Your Coverage: This right must come without any restrictions or hassles.

View the Department of Labor conflict of interest final rule by clicking ere.

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4 Ways Insurance Is Disrupting Itself

Coming from the Insurance Executive Conference earlier this month in New York, I am extremely excited by what I heard regarding where the industry is heading.

I attended both the life insurance and P&C tracks, picking up the following insights about how the industry is disrupting itself before others can:

  1. Insurance carriers are embracing change.
    Anwar Haneef, partner at IBM Watson, said, “We have not seen much disruption in the insurance industry in the last 100 to 200 years” and acknowledged that new technologies have the potential of changing that. Jeffrey Killian, vice president of in-force service and operations at New York Life, stated, “We could become Blockbuster (Video) if we don’t go through the change.”
  1. Insurance carriers are focusing on their customers in a new way. For example, Gerald Patterson, senior vice president of retirement and investor services at Principal Financial group, spoke of Principal’s move away from thinking about customer service to focus instead on the customer experience. Principal tries to provide value to the customer and understand that young consumers expect the same technology from insurance carriers that they experience with other service providers. He also stressed the importance of embedding experimentation in your customer experience on a regular basis.
  1. Insurance carriers are embracing technology and planning for a different future.
    At the highest level, for example, Jane Chwick, former partner in charge of global technology at Goldman Sachs, provides technology expertise as a board member of the relatively young company Voya Financial. Patterson mentioned that he has recently spent time visiting Silicon Valley and attending Fintech conferences.

Killian acknowledged that realizing a company’s vision of customer experience requires investment and pointed out that Principal is committed to making the right investments to accomplish this. He remarked “We have invested a lot in Lean Six Sigma. It’s amazing how much energy you can unlock through these processes.”

Joe Beneducci, chairman, president and CEO of Prosight Specialty Insurance, said, “Technology is a catalyst that affords us options.” Life insurance executives discussed their expectation that the analytics movement will affect carriers’ entire value chain. They also saw predictive analytics enable insurance carriers to be learning organizations.

West Hunt, vice president and chief data officer at Nationwide, discussed the capability of scaling human expertise through cognitive computing. At the same time, the rise of robo-advisers and their potential threat to the business was mentioned. Finally, the recent trend toward digital and what it means to the industry was raised. Technology was discussed all over the conference.

  1. Further opportunities to leverage technology were identified. Colleen Risk, senior analyst at Celent, mentioned the opportunity insurance carriers have of enhancing their websites to provide transaction capabilities for consumers, such as changing beneficiaries. Recent research by Celent showed that less than 25% of life insurance carriers are doing e-delivery of contracts. Other opportunities include: making data available throughout the company, producing strategies to sustain customer loyalty, developing a compelling message for life insurance and educating Millennial consumers.

I was happy to participate in the conference and felt energized by the discussion of new topics that position the industry to continue to thrive into the future.

What do you think? Post your comments below!