Tag Archives: Policy Genius

Overcoming Concerns by Millennials

According to a recent article by Policy Genius, “The cost of college has skyrocketed over the last decade, resulting in $1.4 trillion of outstanding student loan debt. The burden of educational debt weighs greatest on millennials — those born between 1981 and 1996.

Not surprisingly, college debt is influencing their behavior and spending habits. Research shows millennials are holding back on buying homes and making other big-ticket purchases because they are afraid of taking on more debt. Millennial families are also postponing other financial outlays, such as life insurance, because of debt concerns, according to a recent survey by SE2.

Marriage and kids continue to be the life-changing events that trigger purchases of life insurance. As millennials buck the trend, insurers have to be versatile to adapt to their consumer tastes and lifestyles to capture this vastly untapped market segment.

Start with technology

Speed and convenience are increasingly critical to a good brand experience. Those raised as digital natives do not want to wait for several weeks for underwriting to size up an applicant’s risk. To be sure, a number of insurers have leveraged technology to accelerate the cycle time, but there is still far more we have to do. According to a recent report from Celent, cycle times for modest face amount carriers has dropped from 33 to 26 days, which is a solid improvement but still almost four weeks.

See also: The Great Millennial Shift  

Insurers rely on a mountain of public information — from motor-vehicle records to credit information to property records — to properly assess risk and price premiums. One late monthly payment on college debt can cause a credit score to drop, which could drive up premiums. What if price-sensitive millennials could offset the negative of a low credit score by sharing data from their Fitbit exercise app?

New York’s top financial regulator is taking a step in this direction by allowing life insurers to use data from social media and other nontraditional sources when setting premium rates. Through leveraging data available through electronic medical records and health claims data, more and more carriers are able to provide a fluidless underwriting experience without an APS (Attending Physician’s Statement). In the digital era, many of these digital natives are tracking everything from the food they eat to the number of steps they take every day. Our research shows that millennials might be more willing to buy insurance if their real-time health data could reduce premiums.

Create an authentic experience

Millennials are increasingly more discriminating about the firms they choose to do business with, showing a preference for companies that are authentic, ethical and committed to social good.

This partiality stems in part from the 2008 financial crisis when a shortage of jobs affected the employment opportunities for older millennials. Younger millennials witnessed the pain of parents losing their jobs or their homes, or both. The scary economic news sowed a pessimism about the future and increased their desire for transparency.

See also: Why Financial Wellness Is Elusive  

Big companies have had to scramble to adjust to shifting attitudes. Mass marketing through TV advertising is proving less effective. Companies that target millennials with creative experiential campaigns are finding greater success. The engagement can be online, too, through gamification, loyalty programs and reporting on daily activities and life events. Some of the more innovative insurance carriers have seem immense success partnering with financial technology startup such as Life.io and Vitality to create customer engagement programs that has led to reduction in lapse rates and opened up new cross-sell and up-sell opportunities.

Despite their financial concerns, we found that millennials value insurance and the peace of mind it provides. It falls upon the insurance industry to meet this generation where they are by creating tailored products, tools and processes that connect with how they live and consume today.

Are Patients Ready to Take Control?

In 1980, the actor Steve McQueen traveled to Mexico to receive unorthodox (and ultimately futile) cancer treatment. The widespread coverage that McQueen’s trip received in the mainstream press can, of course, be attributed to his celebrity. But it was also because the actor had taken the reins of his healthcare from the medical establishment, something that was seen as brazen.

Back in those days, we wouldn’t have used the term “consumerization of healthcare” to describe what McQueen did. However, his approach has become an accelerating trend over the past decade, when Americans have taken more control over their health, and the healthcare experience. Consumers are more informed about choice, more demanding about the services being offered and more focused on how they pay for it.

The list of changes is long and growing, focusing on:

  • Wellness
  • Easily accessible online repositories of medical information and advice
  • Medical tourism
  • Physician ratings
  • Walk-in clinics at stores like Walmart and CVS
  • Health spending accounts
  • A proliferation of insurance options

As technology advanced, consumerization was enabled, and, as healthcare costs increase, it’s grown in importance. But the question remains: Do consumers have what it takes to control their health and healthcare as they both consume it and pay for it?

See also: Healthcare Buyers Need Clearer Choices  

What’s driving the consumerization of healthcare?

Thanks to the wealth of information available on the internet (product and service details, pricing info, ratings and reviews), consumers have more control over what they spend their money on, and where and how they spend it. Consumerization began with product shopping but quickly moved into the service sector (financial services, travel services, healthcare).

Whether consumers are covered by group plans in their workplace or by individual plans, they are paying more for their coverage and experiencing higher out-of-pocket costs. A recent Kaiser Foundation study showed that, from 2015 to 2016, deductibles increased by 12% for those covered by employer-sponsored plans. While deductibles have grown more rapidly than premiums – this is, after all, the tradeoff – premiums have still been rising more rapidly than wages. More now than ever, people are more conscious of what they’re spending.

Consumers have become more active

Today, consumers are increasingly relying on technology to manage their health. This trend cuts across generations. Baby boomers were perhaps the first truly “health conscious” cohort. Running, as a popular activity, took off on their watch, as did an interest in (and willingness to spend on) healthier foods. At the same time, boomers are focusing on the health and the healthcare experience of their elderly parents. Boomers are taking advantage of monitoring technology that enables them to keep a remote eye on their parents while helping them remain independent. Then, of course, there’s tremendous interest coming from millennials — digital natives who are used to ubiquitous technology and to shopping around and finding the best deals in all aspects of their lives. Millennials are more likely than boomers and Generation X-ers to own a fitness tracker, search for a physician online and base physician choice on reviews. Millennials are also more likely than other generations to go online and research a medical problem before consulting a physician. Technology, in fact, is bringing about a merger between health and healthcare. When employers are buying Fitbits and sponsoring wellness programs for their workforce, they’re hoping to achieve the dual benefits of healthier employees and more cost-effective healthcare.

There is a growing body of evidence that consumers want more active involvement in their healthcare, and the adoption of digital health tools and applications is a good proxy. For the past several years, Rock Health has surveyed consumers on their use of digital health. In a 2016 report, Rock Health found that 46% of those surveyed have adopted three or more forms of digital health tools. They’re using a fitness tracker, engaging in some form of telemedicine or contacting their physician via email or text message. The survey also found that the majority of Americans would like an electronic version of their healthcare record, and that, in the six months prior to the survey, 20% had requested or downloaded a copy.

Do consumers have the tools and knowledge to manage cost?

Consumers are showing an increasing willingness to take control on the payment end of things. But they may not yet be in a position to do so. Policy Genius, which offers online tools for buying all types of insurance, surveyed consumers on their understanding of some of the basic concepts underlying health insurance. Only 53% picked the right definition of “co-pay.” The term “coinsurance” was understood by just 22%. Roughly half couldn’t define “deductible.” So, while consumers may express a greater desire to take control of their healthcare, they may lack awareness and understanding of how to best utilize their insurance to pay for it.

See also: Consumer-Friendly Healthcare Model  

There’s an app for that

The good news is that technology applications are making consumer control possible. We’ve already seen plenty of apps that help manage so many aspects of health and the healthcare experience: apps for checking symptoms, chatting with a physician, monitoring medications, tracking vitals and even accessing healthcare records. Applications that focus on the cost and payment side of the equation have been slightly slower in arriving to market, but they are coming.
There is an emerging array of insurance-related (insurtech) apps that are making it possible for consumers to gain control of their insurance buying experience, apps that enable them to figure out whether their physicians are part of their network, whether their prescriptions are covered and just what that coinsurance-copay-deductible means to their pocketbook. These insurtech platforms include businesses like GetInsured, which helps individuals purchase the right health insurance plan; apps like Stroll Health, which brings transparency and efficiency to the imaging referral process by delivering personal recommendations based on what is covered by the patient’s insurance plan; and GlucosePath, an app that looks at the 6 million combinations of drugs available to treat Type 2 diabetes to find the regimen that is affordable (based on the patient’s insurance), effective and has the fewest side effects.

Given that Steve McQueen was famous and wealthy, he probably wasn’t worried about the cost or payment side of his treatment. But taking control of his own healthcare the way he did may have helped spark a major consumer trend. Today, consumers continue to push for active control in their health and in how they consume and pay for their healthcare. And, through technology, the healthcare industry is inexorably delivering solutions to fill any gaps that keep consumers from exercising even more control.

Asia Will Be Focus of Insurtech in 2017

Asia will be the key pillar in the coming revolution of insurance and in all likelihood will become the hottest market for insurance technology (insurtech) globally. It’s no longer just a pipe dream, as this time all the stars are aligning. Take the sheer population size and rapidly emerging tech-savvy middle class, together with low effectiveness of traditional insurance distribution. Combine that with a destabilizing wave of political populism, making its rounds across much of the developed world, and you’ve got most of the ingredients for a region that will take on a leading global role for insurtech.

So what, if anything, is missing to really ignite insurtech in Asia? It turns out that while the region is ripe for insurtech, the actual quantity and quality of startups in Asia is nowhere near that of other regions… at least not yet.

Share of investments in insurance startups can be used as a good proxy to the overall level of insurtech activity around the world. According to the figures, the U.S. takes 63%, with Germany (6%), U.K. (5%) and France (3%). China is at 4% – which doesn’t account for Zhong An’s massive investment in 2015 — and India at 5% (Source: CB Insights).

See also: The Future of Insurance Is Insurtech  

So the logical question is, why aren’t there more startups in Asia, considering the substantial opportunity and funding that exists in the region? Is it due to a shortage of experienced entrepreneurs, difficulty of starting a business, lack of access to investment or something else? The answer is that it’s likely a combination of a few factors, including a weaker early-stage entrepreneurial ecosystem, which doesn’t yet effectively support startups, and a cultural aspect of lesser tolerance for failure. Both of these are changing fast, though, and entrepreneurs across Asia are starting to identify and test innovative insurtech solutions.

The following are just a few recent notable insurtech startup examples across Asia that have already reached beyond Series A funding: Zhong An (an $8 billion Chinese insurtech startup), Connexions Asia (Singaporean flexible employee benefits platform with a U.S.$100 million valuation), and two large insurance aggregators out of India– Policybazaar and Cover Fox.

So why am I convinced that Asia insurtech startups will not end up dominating their regional home turf ?

Probability and “Survival of the Fittest”

The lack of critical mass of startups in the region means that they will not enjoy the same quality filters and network effects of the larger entrepreneurial ecosystems of the U.S., Europe and to a somewhat lesser degree China.

“Surviving” U.S. and European startups have to fight their way across a lot more competition to reach scale in their home markets. Hence, where a weaker startup in Asia could get repeated life support simply because there aren’t that many others to invest in, natural selection weeds out the weaker models in EU/U.S. much quicker in favor of more robust ones. Stronger startups then get to attract the best talent from the entrepreneurial ecosystem, including talented entrepreneurs whose models didn’t work as well, further reinforcing successful EU/U.S. startups.

Home Market Advantage

Success in a large home market like the U.K., Germany or a few U.S. states gives a substantial boost to any startup. It provides both credibility and cash flow to allow a much more aggressive expansion into other regions. This also gives a startup flexibility to develop the necessary adjustments to the business model to adapt it for Asia.

The U.S. and EU have a deep domain level of insurance expertise, which gives EU/U.S. startups from those regions a further edge to tap advisory expertise locally, because most of the largest global insurers are based in these two regions.

Lastly, considering that most startups adopt a collaborative approach with insurance companies, having a relationship that originates close to the top decision maker at headquarters gives an added advantage to EU/U.S. startups when they are looking at expanding to new regions. I’ve personally experienced examples of relationships developed in Europe that later carried over in creating a pre-warmed partnership with the insurer’s operations in Asia.

Regulatory Complexity

Asia is made up of a large number of countries, where each has its own insurance regulator, who possess views on how things should be run. This means an additional potential growth hurdle for Asian startups.

For example, a startup out of Singapore will need to figure out how to navigate the neighboring Asian country regulatory regimes pretty early in its growth cycle. Thailand, Malaysia, Indonesia and Vietnam markets all have diverse regulatory requirements. This lands the Singaporean startup at a disadvantage vs. a more mature startup out of EU/U.S. – which not only has experience dealing with regulators in its home market but also possesses a proven track record and a larger resource pool that it can use to overcome any regulatory issues.

Meet Future Leaders of Asia InsurTech

Here are  35 insurance startups from across the U.S., Europe and China that have a real shot at collaboratively shaping the future of Asia’s insurance . Granted that not all of these startups will successfully adapt their models for Asia, a few would and will go on to successfully dominate Asia’s insurtech landscape in the foreseeable future.

Credit: George Kesselman

Credit: George Kesselman

The future of insurance in Asia is coming fast, and it’s looking pretty exciting!

See also: Insurtech Has Found Right Question to Ask  

Below are links/brief description of each of these 35 ventures.

U.K.

  • Guevara – People-to-people car insurance
  • Bought by Many – Insurance made social
  • Cuvva – Hourly car insurance on-demand
  • SPIXII– AI insurance agent
  • Gaggel – A better alternative to mobile phone insurance.
  • ClientDesk – Digitizing the insurance industry
  • Insly – Insurance broker software

Germany

  • SimpleSurance – World’s leading e-commerce provider for product insurances
  • Friendsurance – The future of insurance (P2P)
  • Getsafe – One-stop digital solution for all your insurance matters
  • Finanz-chef24 – Germany’s largest digital insurance for entrepreneurs and self-employed
  • Money-Meets – Save money and improve finances
  • Clark – Insurance as easy as never before
  • MassUP – White-labeled platform for online insurance sales
  • FinanceFox – Your insurance hero

USA

  • Metromile – Pay-per-mile insurance (usage-based auto insurance)
  • Oscar – Smart, simple health insurance.
  • Zenefits – Online HR Software | Payroll | Benefits – All-In-One (EB distribution)
  • Policy Genius – Insurance advice, quoting and shopping made easy
  • Embroker – Business insurance in the digital age
  • Slice – On-demand insurance for the on-demand economy.
  • Trov – On-Demand insurance for your things
  • Cover Hound – Compare car insurance quotes from top carriers
  • Insureon – Small-business insurance
  • Bunker – The marketplace for contract-related insurance
  • Lemonade – Peer-to-peer renters and homeowners insurance
  • Cyence – Comprehensive platform for the economic modeling of cyber risk

China

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.

Is ‘Direct’ a Dirty Word for Insurers?

The second-worst-kept secret of the year, after the launch of Google Compare in the U.S., is Berkshire Hathaway announcing its plans to sell insurance directly to business owners over the web. Quelle surprise.

I recently spoke with a C-suite exec who told me that “direct” is a dirty word.

Perception is reality.

In reality, though, “direct” is a lousy term that doesn’t do justice to the implementations that today’s technology has to offer that are often in direct alignment with an insurance company’s business model.

The conversation becomes uncomfortable to some once the word “middlemen” is introduced. It doesn’t have to be.

There are two primary outcomes to direct selling: (1) eliminating the middlemen or (2) empowering them. For visualization purposes, consider the following three brands:

Quotemehappy.com occupies the left extreme of selling directly to consumers. A spin-off of Aviva since 2011, the online insurer only provides phone support if a customer has a claim. For all other inquiries, there is browsing. Then there are the Geicos of the world, where insurers offer the convenience of buying on the web with the assurance of speaking to an agent, when needed. To the right extreme, Plymouth Rock provides an example of an insurer that has a patent-pending technology that matches online quotes to agents either pre- or post-purchase. There are several other players occupying the comfortable middle with direct-to-consumer models that offer varying degrees of human interaction.

Typically the outcome is determined by the company’s original distribution channel: whether offline, web or mobile. The table below further illustrates how versatile “going direct” can be:

  • Geico, Policy Genius and Cuvva are examples of insurance companies that implemented a direct-to-consumer strategy from the get-go; here, direct is a no-brainer.
  • Plymouth Rock and Quotemehappy.com via Aviva signal companies that implemented a direct-to-consumer strategy in an attempt to address a change in the market.
  • Allstate acquired Esurance to buy its way into the direct market, and so did AmFam with the acquisition of Homesite.
  • Also, AmFam invested in insurance comparison site CoverHound.

When all is said and done, direct selling is first and foremost a marketing channel that empowers the consumer. Sans proper marketing and messaging, the online insurance journey is transactional at best, and players risk commoditizing their product.

“Commodity.” Now there’s a dirty word for you.