Anthony O'Donnell: I'm Anthony O'Donnell, and this is Life Accelerated, A podcast for life insurers striving to achieve digital transformation. In this episode of Life Accelerated, we speak with Fred Tavin, Senior Vice President and Chief Pricing Officer at Legal General America, also known as LGA. A unit of the UK based firm Legal General, LGA is a prominent financial services provider in the US, offering life insurance, pensions, retirement, and investment services to more than 1. 4 million people. As prestigious as Fred's title is, his contributions to LGA's life insurance operation go well beyond it. Fred is a lifelong self innovator, and he brings to his position a background that includes electrical and computer engineering. and actuarial credentials. He leads actuarial, underwriting, and data science innovations, and he works closely with distribution partners, both internally and externally, to disrupt the term life insurance marketplace. In this episode, we get to the meat of those innovation efforts, including LGA's omni channel distribution strategy, the firm's competitive edge in repricing, and Fred's view of the market as a few leading companies beginning to outpace the pack. Here's my conversation with Fred. One of the most common forms of innovation we see on Life Accelerated is the self reinvention of our guests.
Most of our guests are highly experienced people, of course, who have taken interesting turns in their careers, but I don't think I've yet met someone with quite as diverse a background as you, Fred. Your bio says that you lead actuarial, underwriting, and data science innovations. You work closely with distribution partners, both internally and externally, to disrupt the term insurance marketplace, and that is in the pursuit of offering good value life insurance coverage to as many U.S. families as possible. This description harkens to a career of remarkable self reinventions or at least major enhancements to your expertise. So I thought maybe we could start our conversation with where you began in your career and the turns and the experiences that you've accumulated along the way.
Fred Tavan: Great. Thanks, Anthony. Yeah, when I was a kid, I always wanted to be an inventor. So no, I didn't realize at that time that it also meant reinventing myself along the way. But because I wanted to be an inventor. I started out as an engineer, electrical and computer engineering. And during my studies, I was in the co-op program.
So I actually got to work in the industry, you know, I was working on. Designing operating systems, telecommunications systems, circuit boards, and all kinds of things like that. A lot of fun. But at the end of my engineering degree, I decided to actually reinvent myself already and go into a world that's applied the mathematical and analytical skills and the invention skills that I learned more in a financial context and the business world. As opposed to sitting in the lab and developing things, kind of being more closer to the business and the executive level, so on and so forth. So the actuarial field was a good fit for me. And, but even within the actuarial field, over the years, I realized that the world was changing very rapidly and I needed to reinvent myself. So I started out as a. Pricing actuary, then it went on to the valuation side, then went into corporate taxation, but then I left the direct carrier world and I went into consulting world where I worked for one of the largest consulting companies in the world. Then I went back into the carrier world and I started enterprise risk management function at a very large multinational.
So I had to reinvent myself and teach myself risk management. This was in the very early days of ERM where it didn't even exist yet. So I was one of the industry leaders. That set that in motion for the entire profession in the United States. And then I got another opportunity to actually combine risk management with the reinsurance world. So I had to reinvent myself to get into the reinsurance world on the international scene. So learning a lot about international reinsurance and how to optimize capital and pricing and so on for various clients. And then I use all of that experience to kind of re enter the direct carrier world again for one of the largest life carriers in the world and multinational. And I was there for many years, but one of the last things I did when I was there, on top of reinsurance and risk management and being global head of insurance risk and all that, I was assigned to lead and launch the innovation lab. And that took me into the Silicon Valley world and I learned a lot.
About how startups were looking at disrupting the life insurance world in North America and what kind of expertise they were looking for, what kind of products they were trying to tackle for, so on and so forth. So that allowed me to kind of pull my own innovation team within this large carrier where, you know, I started the data science function, I started the innovation function and so on and had a multidisciplinary team of actuaries, doctors, underwriters. MBA, so on and so forth. And we were able to do a lot of like global innovation projects relatively quickly and to show the whole company that innovation is something you don't have to plan for many years. It's just something you get started with the right level of talent and the right attitude to get it done. So hopefully that gives you a very quick overview of my career. And it's been very exciting. And when I first started, I wanted to create. This combination of having the computer skills along with the financial and mathematical skill sets to create a competitive advantage for me. And I'm glad to say that when I look back now, that's pretty much what unfolded over the course of my career.
Anthony O'Donnell: Well, that's a great appetizer to the conversation that's coming, Fred, but before we talk about how you bring this diverse experience to your job, perhaps you could remind our listeners who LGA is. We have had your colleague, Raju podcast, but just tell us a little bit about who the company is, where it came from.
Fred Tavan: Yeah, absolutely. So LGA stands for Legal and General America. So we are a subsidiary of a multinational conglomerate. It's called legal in general out of the UK, they're headquartered in London, England. So L&G as a conglomerate actually has assets under management of more than a trillion dollars. In the United States, there are like three big businesses. I'm part of the life insurance business. We also have a pension risk transfer business and a asset management business as well. So as part of the life insurance piece, we're the. Third largest term insurer in the country, in the United States. There's only two other carriers that sell more term insurance than we do. And they both have captive agencies, which means that agents would only sell their products. Whereas we're focused on the broker channels, whether they're direct or traditional and other types of channels, the BGA market, the BGA market. That's correct. So now over the past few years, we've gone from being number eight in the market to number three, and that kind of shows some of the success we've had with what we've done.
Anthony O'Donnell: Maybe you could briefly state what your job is, the basic description of your job, and then we'll talk about your strategic brief, what you're aiming to achieve in your current role, what LGA is expecting you to achieve.
Fred Tavan: So my current role is I'm a senior vice president and chief pricing officer. Legal in general in the United States. And what that means is I oversee the actual function, which is about product development and pricing. I oversee the underwriting function, which is around setting the underwriting guidelines and designing the underwriting journey, so on and so forth. In charge of the data science function, where we do all of our machine learning. But also where we do all of the experience studies that really support all of the actuarial pricing that eventually leads to pricing and being competitive in the market. I also have some individuals that are involved in product management and just know managing the different product programs that we have out there and working with various vendors in the market that are bringing innovation forward, whether it's in the form of new types of data sources or new types of services that allow us to innovate going forward.
So that's a brief overview of my role. But in terms of strategy going forward, it's very much about understanding and listening to the market and figuring out what is it that the market really needs. And what is it that we need to really try to achieve the mission that we have, which is to cover as many American lives as possible. There is no silver bullet answer to that. There's a lot of different things we have to do, but it starts with figuring out, okay, this is what hasn't worked well for the various distribution channels. Can we do a one size fits all? The answer is no, you can't, really, if you want to cover as many Americans as possible. You need to develop different types of solutions. Different distributors have different needs, so we need to develop different solutions for that. We want to be an omni channel as well. That's a big part of our strategy, is we don't want to sell just through our own captive agency, but we want to be able to sell through as many distributors as possible. Because, ultimately, again, if you really believe in our mission, You have to find all the different ways that consumers want to buy life insurance and they have different needs. Different times of the day, some of them like to have the personal touch. Some of them want to kind of just look at what's going on on the web and make their decisions. So we're trying to sell across as many channels and to as many consumers as possible in the U. S. market. So that's a big part of our strategy.
Anthony O'Donnell: Would you consider your omni channel strategy one of your bigger advantages relative to your major competitors, those two other top three companies?
Fred Tavan: They are focused on just their own captive agencies, whereas we're looking and adapting to various channels, which is not easy to do because we started out ourselves as just. focus primarily on just the traditional broker market. And the brokerage market has expanded quite a bit. We have direct marketers now, we have others that are more focused on just a more DTC approach to selling insurance. There's other organizations that are kind of bringing together various agencies under marketing.
Umbrella and so on and so forth. So we're trying to make sure that our digital processes are usable across all of these various channels and that we're also offering them product options that work for those distribution channels. For example, now you might have a financial institution is another form through which we sell. In the financial institution world, when they already sold a financial product and now they want to also sell an insurance product. They don't have the time to kind of schedule an exam, so on and so forth. So, you know, we developed a no exam journey for them that makes sense for them. So that's what is a big part of our strategy. And that's what I mean when I say we want to listen to the market because there's different needs in terms of reaching different types of consumers.
Anthony O'Donnell: We had a previous conversation in which you brought up the concept of tailoring. One of your goals is to differentiate LGA on price, on customer experience and service. But you know, if price is the initial offering to the customer, that's really not enough in your view.
Fred Tavan: That's correct. Again, that was our history. That's where we came from. In terms of always wanting to be the price leader in the market. So in those days, really, when you try to do that, you're actually moving away from innovation. And it was more about, oh, let's manage expenses so that we can keep our prices going and so forth. Over the last few years, we've done a 180 on that, quite frankly. And we said, no, the world is changing. And we actually want to be the innovators as opposed to just focused on price and expense management. So obviously you have to make millions of dollars of investments. And which we have now made in terms of designing our end to end digital solution platform. And the good thing that it does now is it allows us by having this digital platform to design various tailored solutions, which again, ties it back to the different types of consumers, different types of distribution channels, omni channel approach, all of that. In order to, for example, to get the lowest price possible, you have to go through a different journey, which asks a bit more questions, maybe orders a bit more evidence. However, if you're in another context where you're willing to pay a little bit higher price for a better experience that's faster and so on, we've also tailored to that. And then going up kind of that spectrum, there's different points at which we can kind of look at the risk. Look at the demographics and the profile of that demographics in terms of mortality risk and lapse risk and so on and tailor products because again, some distribution or distributors have very specific cohorts they're going after. So rather than just giving him a generic one size fits all, we're able to give him very specific price and experience altogether combined with.
Anthony O'Donnell: Your bio mentioned that you're working with your distribution partners to drive disruption. So I thought we might talk a little more specifically about how you see disruption, what you see as the opportunities for disruption, and what is the role of innovation in LGA strategy?
Fred Tavan: I really like to think of myself as a disruptor in the life insurance industry. And because life insurance for decades has been one of the most horrible experiences in terms of buying a product. Definitely not something that's immediate gratification is the opposite of that. And that's how it's been sold for many, many decades now since insurance pretty much started. When we think of disruption and the way I think about it is, well, how do we bring it closer to kind of the Amazon experience of buying something right away and kind of seeing the impact right away and so on. So obviously we can't get as good as Amazon, but we certainly can make a lot of movement from where life insurance has been in the past to where Amazon is today by creating experiences where you can actually buy some people a certain segment, like right now, across all of our underwriting classes and risks, about 34 percent of our policies are issued instant.
So that is kind of like the Amazon experience is you answer some questions, we order some evidence that you've authorized us to order, and we can make an instant decision and actually not only do an instant decision, but also issue the policy instantly as well, which some carriers have. The instant decision part, some have the instant issue part. So very few carriers actually have both and we're the leaders in that area right now. So I think this is a big way for us to think of innovation and disruption. The other way we're disrupting is also the speed at which we can reprice, right? So we're able to reprice now within 24 to 48 hours. It used to take us a month or so, then we got it down to two weeks.
And now we're down to a couple of days. And as far as we can observe in the market, whenever there's a price change by us or somebody else, the next best competitor is taking him two weeks right now. So we've made considerable strides in that. And of course. You know, lately, most of the time prices are going down, so that means that more consumers can buy life insurance at cheaper rates, the faster we can do that.
Anthony O'Donnell: So how would you summarize what the competitive environment looks like today for term life and where are you seeking to pull away, in which other areas are you seeking to pull away from your competitors?
Fred Tavan: Right now, across all distribution channels, it's a highly segmented market where there's like dozens of carriers are competing for life insurance, business and so on. And over the last couple of years now, we are seeing a few carriers, let's call it a handful of carriers, who are investing heavily just like we have. In terms of moving towards digital platforms and designing digital processes and moving towards instant decisions, they don't quite yet have instant issue, but we're hearing that they're also kind of building those platforms. So we see the handful of carriers really moving away from the pack and designing these capabilities. And once you have these capabilities, it gives you a big competitive advantage. And more and more distributors want to work with you, so they start knocking at your door and now looking for your products and how to tap into your platform, so on and so forth.
So that's what we're observing happening. It's kind of intensifying, I would say, over the last 12 months and so, and some of the big distributors are now moving towards limited panels in terms of knowing, well, if I want the best price and I want the best experience and the fastest. For my consumer and my clients, then every time I run it, these five names come up as so they might as well just focus on these five and continue to innovate with these five or six carriers that are doing this now. So that's how we're seeing the market evolve right now. We're at the forefront of that and we're very, very happy that distributors are always picking up the phone and talking to us first in terms of moving this forward.
Anthony O'Donnell: Yeah. So you seem to be describing that there's not a consolidation yet of companies necessarily, but a runaway pack of leaders.
Fred Tavan: That's correct. And these are the ones that have basically built the capabilities to be able to innovate the same way we have. So that means that they have no cross disciplinary teams. That means that they're investing. Large sums of money in their tech stack and they're going through the pains of change management.
So there's a lot of things you have to do that are not easy. It raises the barrier to entry. It used to be like, you know, if you just hire some actuaries and underwriters, you can have a product. And price point, and then you'd sell that product. But now, as we're getting more and more automation into the process, the barrier to entry is going higher, and then only certain companies are deciding to go all in. And the ones that are going to be left behind are going to maybe go towards other product lines or other things like that. But it's going to be very difficult for them to compete against this other pack.
Anthony O'Donnell: How important would you say the digital transformation per se is important as we see this runaway pack phenomenon reshaping the term life market?
Fred Tavan: Yeah, I know it's critical. It's the most important thing. Like without digital, there's no way we could do all the automation that we're currently doing. So it's the automation that actually allows us to improve the experience. It's the automation that allows us to reprice so quickly. It's the automation that then allows the distributors to sell like, for example, lower face amount policies and still be profitable within their own organization and so on and so forth. So if none of this was digital and was still all paper. And that the pace of paper was flowing through the whole system, it wouldn't be working. So you have to have a digital strategy for you to be able to compete. Otherwise, you're basically going to eventually have to shut down and move towards other things.
Anthony O'Donnell: We've talked a lot about what LGA is doing. How's it working out? How's LGA been succeeding in the past couple of years since you've been there?
Fred Tavan: The success has been great to see. Obviously, we had some growing pains along the way as well. But I mentioned just a bit earlier, we moved from number eight carrier size wise by annual premium to number three now. Since I've joined where, you know, I've been a critical member of the innovation team and making sure that we're working and prioritizing all the right projects. Making sure that we're doing all the tailoring for different distributors, making sure that we're diversifying our distribution by bringing on new types of distributors.
Like I mentioned, like financial institutions, DTC, all these other types of distributors as well. We've been able to grow our annualized premium equivalent called AAPE. By roughly 70 percent over the last two to three years, which has been a phenomenal number to see. So I can see that the way we're using data and advanced analytics and the data scientists and the cross disciplinary teams is all coming in together, which is the way I had dreamed this up about seven years ago when I first got into the innovation world in Silicon Valley. This is the vision I had and it's really starting to come together and we can see it work in the real world.
Anthony O'Donnell: If we were to speculate about what success looks like for LJ within the next few years, what would that be?
Fred Tavan: I would say there's still more work to be done in terms of identifying new types of data sources that are going to replace the traditional data sources.
So, two of the things that were the most painful in the process in the past were having to have an exam, fluids had to be drawn. And also to go out and gather all of the attending physician's statements, APS as we call them. And that took weeks and that's what kind of turned the whole journey into like weeks and months process before an underwriting decision was made. Well, now we're able to find more and more vendors that have real time data sources. We've already integrated some of them related to labs. We've integrated electronic health records. We've integrated prescription drug lists and so on. But there's more data sources out there that are going to continue to help us make us more efficient in terms of making real time decisions.
And that's what increases our instant decision rate. There's more work to be done in terms of machine learning. So that's another part where with our big data warehouse and the amount of business that we sell every year. We're able to kind of build the type of data warehouse that's not easily available to a lot of other carriers that don't have as much business in terms of number of new applicants every year, where they're collecting all this granular underwriting data, and that's giving our machine learning capabilities a big boost in terms of our data scientists having enough data. To work with, to uncover insights in terms of how we can get better and better at what we're currently do today. How do we continue to increase the instant decision rate? How do we continue to increase the quick decision rate where just the answers to a series of questions without further evidence, we can make decisions within, say, 24-48 hours.
Even if they're not instant, they're relatively quick. So all of that is happening together right now, and there's just a flurry of innovation in terms of data sources, machine learning capabilities, optimizing how we order these things, what sequences, so on and so forth, and then how does all that impact our pricing. There's more work to be done there. And of course, with all of this generative AI as well, the whole side, which is kind of the human side of selling life insurance between the agent and the consumer and how they go through the application process. I think there's a lot of potential there going forward.
The agent is really there more as a life coach, I think, in the future going forward, as opposed to right now where they spend a lot of time just gathering information so they can pass it on to the life insurer, I can see that generative AI is going to help them spend a lot more time kind of Doing the life coaching with their clients rather than gathering data. So that's where I expect more automation to come out in the future as well.
Anthony O'Donnell: And do you see term life as having more of an emphasis on the health and longevity of the policy holder rather than just their mortality? Yeah,
Fred Tavan: absolutely. So we're just at the beginning of starting to develop a portfolio of different types of riders. That we want to sell to our consumers as well, and it's going to be a whole suite of different types of riders depending on what the consumer wants. Some of them will be living benefits, so that it's not just that point of death that you get some benefits to help you through whatever you're going through. Critical illness is a common example of that. And some of them are services around mental illness or just helping people through the grievance process. Organizing, you know, all of the things that happen that have to happen in terms of what families go through after a family death, so on and so forth. So there's new types of services that are coming up and there's a new and creative thinking around how can we design a variety of services that complement this basic term product as well. So more to come on that front. And it's something that we're embarking on and we're going to make moves starting next year and continue to build on that.
Anthony O'Donnell: Five years from now, where should we expect LGA to rank in the term
Fred Tavan: life market? Five years from now, we'd like us to be number one. I think that now, given all of the ambitions we have that are not just wishful thinking, I think, you know, our ambitions are all kind of, we have a roadmap. We know what we need to do. We have the talent in house to make it happen. We're going to need more investment, obviously, to get there in our technology and so on. But we know how to stay ahead of the market. We started out ahead. I think that we have a lead against our key competitors. So it's all about not being complacent and continuing to innovate. And as we do that, I believe that we're going to stay ahead of the market and continue to gain market share.
Anthony O'Donnell: Well, thanks for being on Life Accelerated,
Fred Tavan: Fred. Yeah, my pleasure. Great to spend some time with you.
Anthony O'Donnell: Fred tells us that he thinks of himself as a disruptor, modernizing the historically poor experience of purchasing life insurance. He reminds us that digital is critical, because it provides the automation that speeds processes and thus improves the experience. In my conversations with Fred, I couldn't help thinking of him as a kind of secret weapon for LGA. bringing his diverse skills together on all the major competitive fronts. And it seems to be working. As Fred tells us, LGA has been able to grow its life insurance premium by 70 percent in just a couple of years and to go from being the number eight provider of term life to number three. This is disruption for real. Thank you for joining us for the Life Accelerated podcast. For more relevant content to help you achieve digital transformation, visit Equisoft. com slash life accelerated.
