Our Wired World

Insurtech Growing Pains

Instead of bypassing advisors, they should be empowering them!

by Ryan Toner

Mr. Toner is the Executive Vice President of Sales at Afficiency, an insurtech transforming the end-to-end life insurance buying process and accelerating the time it takes to get applicants approved and covered.

I’ve used the same insurance agent since college for my auto insurance. Every couple of years, he calls and announces: ‘We’re switching carriers; I’m sending you paperwork!’ I trust him, and the enrollment process is seamless for me. Consumers expect the same level of service and ease when it comes to all of their insurance needs, including their life insurance policy.

In the race to get out first and claim a share of the direct-to-consumer (DTC) market, many startups tried to bypass the critical link in the buying process: the advisor. For anyone keeping an eye on the market lately it comes as no surprise that some DTC life insurance startups are experiencing a few hiccups.

Advisors: Key In The Insurance Value Chain

We’ve seen the recent headlines announcing insurtech layoffs and stock value erosion – a repercussion of overlooking the agent as such a key part of the insurance value chain. Advisors play a critical role as consumers seek guidance on different life insurance products and reassurance before finalizing a purchase. As a result, DTC life startups are flocking in droves to build processes that support the agent.

At Afficiency, we see more than two times the conversion rate when an agent is involved from approval to purchase versus when they are omitted in a strictly DTC buying journey. Plus, agents can often help consumers get more coverage than they might expect at a price point that fits their budget.

One survey finds that 65% of all consumers plan to use an insurance agent in the future. Most of those who have worked with an insurance agent would use one again. This optimistic view is consistent across different age groups – 79% of Gen Xers, 84% of Millennials and 69% of Gen Z who have worked with an insurance agent plan to use one again.

According to Celent, about 50% of the life insurance market is still sold by independent agents compared to only 7% sold via DTC. DTC represents a small but growing number, considering this figure has only doubled since 2011. This tells us that agent-assisted sales are still more prominent in the market, but digital means of selling life insurance are undeniably gaining traction. When combined: the holy grail.

These strategies are not mutually exclusive. Digital channels should be paired with the helping hand of an agent to achieve the best consumer experience. Instead of thinking how do I circumvent the agent, insurtechs should consider: how do I empower the agent? This could mean the difference between floundering and flourishing.

For insurtech players to ensure they are empowering the agent, they must first ask:

How do we embed advisors in the digital journey?

The preference to purchase life insurance online doubled to 29% in 2020, according to LIMRA. The days of meeting with an agent desk-side are over, but this does not mean agents should not be digitally represented. An online or mobile application is a great channel to draw digitally-savvy consumers in, and there should be prompts each step of the way to speak with an agent as needed and preferred. This will help ensure all questions are answered and the next steps in the insurance buying process are clearly communicated.

We’ve seen the recent headlines announcing insurtech layoffs and stock value erosion - a repercussion of overlooking the agent as such a key part of the insurance value chain...

How do we reduce the bottlenecks?

LIMRA research shows that 56% of Americans would be more likely to buy life insurance if they could avoid medical exams. Digitally-designed, no-exam life insurance products forge the opportunity for agents to serve consumers quickly with a minimal number of steps. Previously, agents would spend countless hours coordinating health screenings and requesting supplemental information from applicants. With available data and predictive analytics, consumers can receive true pre-approvals in seconds, with policies delivered in minutes.

Bottlenecks result in lost sales. In a study that analyzed 3 million life insurance applications across 62 life insurance companies, it was found that if the average carrier could complete underwriting in under 55 days, they could save more applicants from exiting the sales funnel, resulting in millions of additional premium dollars. What’s more intriguing is when you look at the same data at lower face amounts. For consumers 36 to 45 the average buying time was 30 days for face amounts of up to $250,000. If you go to $1,000,000 in face amount you can add 6 days to the process.

How do we equip advisors with their own digital tools?

Agents require solutions that simplify the insurance buying experiences — digital enrollment and underwriting, secure message transfers, instant payment capture, and digital policy issuance.

Agents also require the tools to build personal connections and trust in a digital environment. Consumers want agents to listen to their issues and to see this translated into the right products. We have seen some platform providers recognize the benefits of providing a fast and easy way for agents to build an interactive client experience online. By combining all of the necessary tools into one life insurance platform, the agent can build a scalable business, eliminating the need for multiple tools. Creating these efficiencies improves the engagement and overall relationship between clients and agents every step of the way.

They are onto something. According to McKinsey, client-relationship building has a direct impact on margins. They conducted a benchmark analysis finding that product density was higher among agents who possess deeper relationships. By one anecdote, a multi-line insurer undertook a transformation to focus on deeper consumer relationships with a focus on cross-selling. The pilot saw an uptick in gross written premiums of approximately 50%

In summary, agent involvement is important to consumer engagement, to selling policies, and to boosting bottom lines. There is room for optimism and ample opportunity for all players to capture a piece of the pie with a whopping 106 million U.S. adults having subpar or no life insurance coverage at all. In addition to the above questions, if you are currently bypassing agents, ask yourself why and reconsider if they should have a place in your business model.

As insurtechs, we need to make it easier for brokers, like my agent, to provide the best possible service.