April 14, 2015 INN Exclusives

To Grow Life Sales, Be Prepared To Change

By Linda Koco InsuranceNewsNet

ARLINGTON, Va. – Where increasing sales are concerned, the life insurance industry faces an uphill battle, but that’s only part of the story. New research from LIMRA shows the industry also has a “huge and growing opportunity” to reach American households, said LIMRA’s Eric T. Sondergeld.

He plans to announce some of those research findings during a presentation on pricing dilemmas here today at the Life Insurance Conference. The conference is co-sponsored annually by LIMRA, LOMA, Society of Actuaries and ACLI. Sondergeld gave InsuranceNewsNet an advance look at a few of the points he expected to make today in a presentation that was later canceled.

To get to the opportunities, the industry will need to make some changes, said the corporate vice president-distribution and technology research for LIMRA.

Price transparency

One of those changes entails putting greater focus on transparency in pricing, he said. A key factor in this is that “trust in others has declined significantly in the past couple of decades.”

This decline creates a problem in life sales because life insurance historically has been a trust-me type of business, he said.

“Today, consumers can get price information on just about anything they want to buy, whether it’s shoes, mortgages or car insurance,” he said. But it’s a lot harder obtaining comparative prices for life insurance, he said. To get information on the cost to buy a policy from most insurance companies, the consumer often must have contact with an agent, he explained.

Even the price comparison websites are making it hard for consumers to get life insurance price information directly. “Go there,” he suggested. “You cannot get quotes for most of the products.”

Time was when the price comparison sites provided lots of quotes, he allowed. But in 2014, they started shifting away from that. Today, most of these websites ask shoppers to provide the bulk of their information online and then make them wait for a follow-up phone call. “I consider these types of websites to be lead generation tools,” Sondergeld said.

Some websites still do provide life insurance quotes, he allowed. “But they only offer a few quotes from a few companies, not the many dozens” that may be, and likely are, available for the indicated need.

At the same time, a growing number of life insurance carriers are allowing consumers to get quotes on their own products from their own websites, he said.

But overall, price transparency is not commonplace, he indicated.

Sondergeld pointed to a common concern in the life insurance industry, about big online firms like Google or Amazon being a threat to the business.

“I don’t think this is a threat,” he said. “They don’t want to get into the business of underwriting. They are in retail sales. That (selling through those channels) could be fantastic for the industry, except for the life insurance companies that only do face-to-face sales.”

His conclusion is that “we have to be more open and upfront in order to grow the industry in a meaningful way.” By this, he said he means providing price components and increased transparency in pricing.

Transparency “is not a silver bullet,” he said. “But it’s one thing the industry can do” to help grow sales.

Underwriting methods

Helping consumers understand the differences in underwriting methods, such as guaranteed issue and simplified issue, would help too, he indicated. The research shows that consumers don’t know what these methods are. “We can do better…in our communications,” he said.

The industry also needs to work on simplifying the underwriting process “so it is not long and onerous,” Sondergeld said.

He noted that some companies are starting to do this by using “predictive underwriting.” This uses a computer model that generates prices for submitted cases as if the cases had been fully underwritten, even though they did not go through full underwriting. A key ingredient here is use of predictive data analytics to identify underwriting factors that point to risk classifications.

Cases can be issued with a preferred rating that way, he noted. “Some people think that this is simplified issue, but it’s not. It’s a simpler process.”

Carriers can open up other opportunities with product design, he said.

In addition, they can work on aligning distribution with opportunities they’ve decided to pursue. For instance, if a carrier wants to build sales in the middle market, it could focus on finding way to be more efficient in selling there, Sondergeld said.

InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at [email protected].

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected].