Life insurance & the emergence of the digital sale
by P.E. Kelley
Mr. Kelley is managing editor of Advisor Magazine. Connect with him at pkelley@lifehealth.com.There is an age old tenet of marketing that life insurance must necessarily be sold in a top-down setting, with an experienced agent guiding the process from start to finish, to ensure that the client doesn’t deviate from what has always been accepted as a proven way to seal the deal. Moreover, traditionally, it was the agent that had to carry the entire load all along the way: from prospecting to outreach while cold calling through a wall of resistance to finally securing a face to face meeting… and then the hard work began. You needed to create the urgency and pinpoint the values that resonated loudest with your prospect; you needed to keep those values present while answering to their objections; and you needed to be prepared for them to simply say “not at this time.”
Now, in the digital market, Fintech solutions are emerging that can not only streamline the process, but empower and indeed further motivate the buyer to complete the sale. For an industry that was slow to adopt tech-solutions, carriers have begun to realize that so many consumers simply do not want face to face interaction, and will gravitate to more tech-enhanced processes to buy their products. The digital sale has become an integral part of a new protocol.
We spoke with Mark Holweger, CEO and president of Legal & General America’s insurance division, about how his company navigated the transition into more digital-supported systems, how the Covid pandemic may have influenced those changes and how the results are beginning to eclipse time-honored sales strategies that relied upon events such as marriages and births. In the digital world, it appears, the customer is looking for much more control of the process – and the results are bearing fruit.
PEK: If we presume that the life insurance industry has been one of the slowest to adapt to a digital business-model, what were the underlying reasons for its slow transition?
MH: The U.S. life industry has not been slow to adapt because it did not know how, it’s not adapted at the same pace as other industries because the perceived need for change was not there, especially when also looking at costs. It’s hard to effect change when, for many, the sun was shining on their businesses – both carriers and distributors were making solid returns, so why change? Especially when you look at the size and scale of the U.S. – change tends to be costly. In some ways COVID changed the landscape overnight with customers insisting on digital solutions to avoid face-to-face contact where possible. The industry had to wake up fast, with those who were already investing in technology able to pivot and maximize the opportunity to protect families who now mainly want to transact in a digital world.
PEK: The sales conversation, traditionally, has always relied heavily on face to face interaction, with an agent shepherding the sale from start to finish, and more importantly maintaining the urgency of the sale throughout. How are new Fintech advancements altering these otherwise entrenched protocols?
MH: The key is omni-solutions, where the customer has the flexibility to move seamlessly from a digital environment to a human interaction if required. Life insurance still needs an agent to sell the benefits, however once the customer has decided to purchase coverage, the Fintechs look to make things quick and seamless in a digital world, where possible, so the customer is empowered to complete the application process. However, if required, an agent is always there to assist. By completing the sales process digitally within minutes, it removes the issue around urgency and customers losing interest, which was the case when it took months to go on cover. This allows agents more time to talk to more new customers about the value of term life protection. Price is not always the key driver, often speed and a less invasive process (no exams) are the key focus for Fintechs, balanced with a fair and reasonable price for the customer.
PEK: You moved to the U.S. in 2018 from the United Kingdom which, I understand, actually outpaces America in the integration of FinTech into the life insurance domain. Can you compare how the industry there has adopted new tech-solutions into such a ‘storied’ industry?
MH: I am not sure the U.K. outpaces the U.S. There are some fundamental differences between the markets which allowed the U.K. industry to adopt certain technologies, especially around quick customer journeys, more easily. The U.S. market has some very unique features which results in a more complex use of data and digital technologies being required to achieve a similar outcome. Both are complex and expensive, hence why the U.S. purchasing process appears not as advanced as the U.K. We must remember most of the top Exponential Technology companies in the world are American so if any country knows how to make things happen it’s the U.S.
PEK: LIMRA’s recent report, The Covid Effect: High Tech With Human Touch To Optimize Life insurance Customer Experience, presents compelling evidence of the emerging infiltration of Tech-solutions into this industry, altering the state-quo. What did we learn from the pandemic that opened new avenues to consumers appreciation and understanding of the essential value proposition of life insurance?
MH: Customers were no longer willing to put up with the traditional way of working as they did not want to meet people face to face. They wanted digital solutions like when buying other products so the industry finally had to adapt, and quickly. It made the industry push the boundaries maximizing alternative data sources to understand risk rather than relying on intrusive medical exams.
The demand was there as families saw the importance of life insurance however many of these new customers wanted the option to transact digitally.
PEK: Your company has an interesting story to relate about its transition into digital applications. Please tell us how you installed and integrated new protocols into the company’s operational process?
MH: Transitioning to a digital application involved a great deal of change management, particularly with the Underwriting and Operations staff, to ensure everyone was prepared for the journey. In fact, we are still on the journey as we continue to reinforce our new way of doing business. We lean on a disciplined change management structure, Prosci’s ADKAR, that ensure awareness, desire, knowledge, ability and reinforcement. Whether we were installing new underwriting guidelines, new service levels and performance metrics, new tools, data and analytics for our people to use, or requiring new skills of our staff, we approach these changes with a comprehensive change plan that ensures operational readiness. To complement our change management discipline, we also rely on repeatable management mechanisms that enable us to institutionalize the changes we are deploying. This change can’t happen without our own teams being onboard so we strive for transparency and an open dialogue as we continue to innovate and enhance our offerings.
PEK: LGA has begun hiring a new type of talent to support the underwriting process: Data Scientists. How do they add to the traditional reliance upon mortality data?
MH: Data Scientists’ skills complement traditional underwriting by using advanced analytical techniques to learn from our rich underwriting data and optimize our decision-making. Meeting customers’ expectations around a faster and less intrusive underwriting experience requires us to order less traditional evidence like attending physicians statements (APSs) or exams and replace them with newer digital data sources, like Electronic Health Records. Data Scientists help us accomplish this by building and deploying automated solutions that minimize our APS and exam orders. They also allow us to learn and adapt quickly, figuring out when, and how, to weave those new digital data sources into our traditional underwriting process most effectively and relieve some of the more administrative work from our underwriters.
PEK: There are traditional benchmarks of life that raise the awareness of the need for life insurance: graduations, marriages the birth of a child, along with the influence of family and friends. Yet, the pandemic apparently triggered an anomalous spike in interest. How did this phenomenon influence your understanding of client outreach and interaction – and ultimately how FinTech may be changing the way you conduct business?
MH: The pandemic certainly raised the importance of life insurance; and it also acted as a catalyst for the digital revolution in the industry, attracting new distribution channels that can speak with customers at the various life stages. Historically, because of the costs associated with manual process of selling life insurance, many of these channels didn’t prioritize it, however digital has created the opportunity to talk to these customers on a more regular basis around all life stages. A great example is during the homebuying process. In other markets across the globe, 80% of life insurance is sold when families buy a house as the processes were very digital and quick. In the U.S., the percentage isn’t nearly as high. This is all evolving with the digital revolution in the U.S. life industry.
PEK: How are consumer perceptions of life insurance changing in a digital world?
MH: Consumers used to think it was hard to get life insurance and the process would take months. With new digital journeys allowing customers to buy in minutes instead of days or on their phone instead of in an office, that perception is changing. There has also been a misconception that term life insurance is expensive – these quick digital journeys are allowing customers to see just how affordable term life can be to protect their families.
How can I buy and who will sell me a 5 million life policy for my new born grandchild, single premium?