Even before the COVID-19 pandemic the life insurance industry was facing significant demographic and economic challenges. LIMRA President and CEO, David Levenson has pointed out several of the most critical that will impact growth:
- Growth is flat: Premium has grown over the last ten years less than 1% per year, whereas the population has grown significantly faster.
- Consolidation has taken its toll: In 1988 there were 2,343 life insurers in the US, by 2016 that number fell to 780. Compare that with the roughly 1,500 insurtechs currently in the market and you can see where things are heading.
- There are fewer agents: There are 43% fewer career agents now than in 1983. LIMRA and Ernst & Young did an "Experienced Advisor Study" in 2018 that showed the four-year retention rate for advisors is 16% in the US and 21% in Canada, while the average age of an advisor is approximately 59.
The net effect: The industry paid out $77 billion in life insurance death benefits last year. It's a significant contributor to the flow of cash in society, but there's a lot of people who are underinsured or not insured. In fact, a recent Celent study revealed that scope of that shortfall is $19 Trillion. A staggering number.
What this means to me is, when you look at change management, customer experience and distribution you have to view them in the context of who are the customers and where are they? Is the industry building the products and doing the right things to support serving those people going forward?
D2C is not the whole answer
I think the real challenge facing insurers is that it' not enough to just put technology in front of consumers expecting them to buy. The industry needs to look at its messaging and how we are getting our solutions in front of people. Having a digital approach is very important, but you're always going to need advisors.
Forward-thinking organizations embrace the shift towards customer-centric models. It's critical for companies to understand how today's consumers want to engage with the industry. But, how do we get to those consumers
Independent distribution organizations want to grow by expanding the number and type of products they offer. Companies are looking at D2C and affinity-direct models, where you leverage an affinity group to market your products. Some are experimenting with e-brokerages, where customers can get quotes from a direct-online retailer.
The way forward
This is especially difficult if you've got legacy systems. You won't be able to leverage your data or conduct the types of analysis that give you insight into new sales opportunities, new product opportunities or new markets. Many companies are held hostage by ancient core systems because they can't stomach the cost, or are worried about the consequences, of having to migrate their blocks of business to a new system.
What's needed is a clear vision and strategy for what the insurer could achieve through modernization. How could they connect with customers in the ways that they desire, and what would that would mean for growth?
For a long time, our industry evolved quite slowly, with major milestones of change being the evolution from unisex rates to male and female rates in the early 80s and introducing smoker's rates in the late 80s. These fairly static times are over. In the last 2 years the migration to the cloud has hit full stride.
Guaranteed issue and simplified issue are becoming more and more common. Investment in new technologies has significantly increased over the past 2-3 years, the future is coming faster than anybody expected. The time lag between innovation and commoditization is shrinking. And, the changes are all being driven by the consumer, meaning understanding those consumers is more critical than ever before.
An interconnected model provides great service for all
Instead of using the term direct-to-consumer, I use the term direct-WITH-consumer. That shift in mindset requires organizations to set themselves up to be available whenever and however their customers want.
The insurer can provide self-serve tools but, if at any point in the process the consumer needs help, they have resources available--like call centers, chatbots, or actual advisors. The solution is a multi-faceted, interconnected and omni-channel.
The process is accelerated and highly personalized because it can leverage APIs and access client data in real time, enabling quick processing of less complex apps and providing support when needs require human advice.
Using client portals to empower customers to easily make changes to their existing policies makes for a better, less frustrating experience. It also enables advisors to provide great service for all their clients, while freeing them up to proactively focus their attention on the more complex needs of bigger clients.
An interconnected, hybrid model for distribution and service is a win-win-win-win for carriers, distributors, advisors and clients.
At Equisoft our vision is to enable all stakeholders in the industry to help make those types of models a reality.