April 15, 2015 INN Exclusives

Carriers Must Make Life Insurance Relevant To Consumers

By Linda Koco InsuranceNewsNet

ARLINGTON, Va. – Life insurance carriers must get a better understanding of consumers, according to Mark Hug, the executive vice president for product and marketing in individual life insurance at Prudential Financial.

Obtaining this information will entail carriers actively seeking consumer feedback on life insurance directly from consumers, Hug told InsuranceNewsNet in advance of a general session address he will give here this morning at the 2015 Life Insurance Conference. The conference is co-sponsored by LIMRA, LOMA, Society of Actuaries and ACLI.

Carriers will need to obtain consumer input before — not after — building product solutions and deciding how to go to market, he said. They also need customer input on customer service approaches, claims handling and other life insurance functions that affect customers.

This is one of several points he intends to make regarding innovations that will help transform the life insurance industry.

The consumer experience

“Five years ago, customer experience was not the lead sentence for many life insurance companies,” Hug said.

The primary strategy for learning about customer needs and wants was to consult with distribution, he said. The carriers would listen to comments in producer advisory councils or at meetings, for instance. Some would call distributors directly to hear what consumers were thinking and saying, Hug said, adding that the carriers trusted these opinions.

But now, the focus is turning toward starting with the consumer, and then figuring out how to optimize the customer’s life insurance experience around that data. The carrier brings distribution into the process after that, he said, and distribution functions as a business partner, for purposes of collaboration.

Prudential has been moving in this direction gradually over several years. Then, a year ago, it began running its own consumer studies. What the company learned is that one word will cause the industry to change how it does things, Hug said. “That word is ‘relevance.’”

Prudential found that “life insurance is now irrelevant in the consumer’s eye,” he said.

A major change in American culture has created a “ton of issues” for life insurers that are trying to reach consumers, he indicated. The well-known LIMRA finding, that life insurance ownership is now at a 50-year low, reflects that.

Because of this, the industry needs to change its dynamic, he said. It needs to make life insurance more relevant to today’s consumers by providing what they want and need, and by building business opportunities around that.

Distributors as partners

This understanding is what spurred Prudential to the approach it is using today. It does not ignore distribution, Hug emphasized. In fact, it includes distribution “as a partner in any action we take,” such as efforts to train producers, how to teach different approaches to product and customer, and ways to get feedback on selling the company’s products.

Some carriers view their distribution as another customer, not as a business partner, Hug allowed. That is, they see consumers as one set of customers and distributors as another set. So they may not want to treat distribution as a business partner.

However, he contended the distinction is important to establish if the industry is to gain greater relevance in the consumers’ eyes.

When companies interact with customers, they show the positives of their products and approaches, he explained. Their tone is respectful and shows caring. A company does not talk about its challenges and problems with customers.

By contrast, when interacting with a business partner, he said, “you share everything.” In this case, it includes sharing challenges and problems with distribution as well as the positives. This can result in some “robust discussions” about customer experience, Hug said. And it can continue until everyone gets to the “right solution.”

That solution will be one that the partners believe has relevance, based on the customer research.

This will be critical

Working closely with distributors in this fashion will be critical to the industry’s success in the next five years, Hug predicted.

“Our research of every consumer group shows that 70 percent still want to buy from a person.” Even millennials want that, he said.

What the millennial generation wants and considers relevant will become increasingly important. By year 2017, the millennials will have greater buying power than the baby boomers, Hug said. The oldest will have families, although not necessarily in the same structure as boomer families. Many also will own houses. And many will be “open to life insurance” if they see its relevance. “There are 88 million millennials,” he added. “That’s more than the baby boomers.”

InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at linda.koco@innfeedback.com.

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at linda.koco@innfeedback.com.