Rate Pressure Pushes Reinvention Through Data

Data and low rates might not seem to be intersecting issues, but one definitely affects the other.

Low rates are putting pressure on many aspects of the business, particularly on profit margins and the ability to offer attractive products based on return. The tough environment requires companies to tighten efficiency in serving clients and finding prospects.

Marianne Purushotham, LIMRA corporate vice president, is presenting the second phase of work from LL Global’s Low Interest Rate Executive Task Force with Oliver Wyman and 125 executives across the industry. The session on opening day of LIMRA, LOMA and LL Global’s virtual annual meeting focuses on the customer and distributor phase of the task force’s effort.

The pressure of low rates has carriers turning to the efficiency that can be provided by data, a subject she is scheduled to moderate during a Tuesday session with two panelists from Swiss Re, “Driving Our Industry Forward Together: Using Data to Deliver on Customer Expectations Together.”

“Operational efficiency is becoming more important when your margins are squeezed because interest rates are lower,” Purushotham said, adding that the two pursuits inspire similar questions. “The ideas in terms of innovation seem to fit in very nicely with what we learned when we did some research around what the low interest rate environment is doing to the attitudes of distributors and customers.”

She said some of those questions were: What are customers looking for? What are they concerned about? How do they want to interact? What are the products they're interested in?

Low rates have been a key factor in leading the life insurance industry away from an intense product focus and toward more holistic advising. Data provides tools to help the distribution chain from carrier to advisor. Analytics can help advisors guide clients looking for better options other than pure savings vehicles, but without equity market risks.

“Customers are looking to their advisors for advice more than they ever have before,” she said of consumers seeking long-term return. “Distributors that are hearing that are saying, ‘Well, let's talk about financial wellness first. Let's talk about your concerns, what you want to do, and then let's look at what types of insurance products can help you in your plan.’ So that's where the two connect.”

Data-Driven

The Swiss Re panelists are expected to make a case for a data-driven approach to serving clients.
“They talk about how organizations like Tesla operate their entire strategy around understanding their customers and their preferencing,” Purushotham said of Swiss Re’s presentation.

Carriers don’t have that deep knowledge of customers now because advisors and distributors are doing the larger share of interacting with buyers.

“We know very little about them for our strategic planning purposes,” she said of consumers. “Our distribution channel is set up such that they have the relationship by and large with our customers, and so we don't get very much interaction with them at all.”

Companies interact with clients in rare circumstances, such as a policy or address change. One way carriers can build that knowledge base is using the information they gather when they issue policies for analysis.

That information can help companies gain a clearer composite of customers who buy particular products and understand their needs.

“We need to understand our customers better and then we can figure out what the right model is for selling to them because we've been using the exact same model for 100 years or more,” Purushotham said.

The era of big data is allowing companies to pull in information from different sources and analyze it in a way that would be useful for strategic decisions about consumers who responded to marketing messages for products.

Purushotham said companies can analyze the data to answer key questions such as: What market segment are they in? What are their financial needs? Why did they buy the product? What specifically did they buy?

From that information, companies can glean a better understanding of why products resonated with consumers.

That can also come from “unstructured” sources, such as customer service centers when they interact with consumers. They are now keeping call and chat data to understand what consumers are requesting and analyzing how best to fill those needs.

Partners In Data

Swiss Re’s presentation focuses on the industry’s need to modernize products and sales processes.

“It all has to be reinvented and it needs to be reinvented around data,” Purushotham said. “So we may not ever be able to go to a model of fully direct-to-consumer sales without an advice piece in there, but we can certainly make it easier for these advisors to sell our products by using data more effectively to underwrite.”

That push for a more holistic understanding of current clients and prospects serves advisors in many ways.

New processes informed by data can position salespeople more as financial partners beyond one sale. Distributors can expect to see valuable assistance from carriers, Purushotham said.

“It is communicating things to the distributors about their existing client base,” she said. “So, if they've got a surrender charge period that's coming up on one of their annuity clients, the insurer should be setting up a data feed so that the distributor gets alerted for those kinds of things.

That's an opportunity for them to reach out, and that's an opportunity for them to reexamine what other products they might need.”

A large factor in these changes is digitization of records, a process that has been accelerated by the pandemic.

Digitizing information helps carriers gather data, and distributors to improve their processes, particularly for remote sales. It also helps distributors track applicants’ progress to know when to step in to help them along.

Eventually, that digitized data will help analyze current clients for leads, but perhaps also to generate new leads. Right now, though, distributors tend to be growing business out of their existing client base.

“We had a couple of distributors say they've increased their client base, like 25% in the last six months,” she said, “because so many of their existing clients are looking for advice, they're helping them and then they're referring others of people they know.”

Going Direct?

This might all sound like some carriers are trying to figure out how to go direct to consumer. That assessment would not be wrong.

“There are some companies that think the ultimate goal is for someone to just be able to go online, click on a link, provide their information and get a policy in 15 minutes,” Purushotham said, adding that the pieces are not there yet to build that model. “But a lot of companies that are interested in direct to consumer think of that as the gold standard for the future.”

People still want people, especially for guidance through a market filled with complex products. When confronting such a big decision involving a wide array of options within options, consumers need guidance.

“Although they may be able to navigate to your website or to the place where they can buy directly online from your company, there's huge hesitation in buying something,” Purushotham said. “Even though they would buy a TV online, an insurance policy is very different.”

Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at [email protected].

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