A Tough Sell: Why Life Insurers Need A Better Customer Experience

By Colm Kennedy

What are Americans talking about around the dinner table these days?

According to a recent Life Happens study, 30% of Americans say that life insurance has been one of the top subjects for dinner table discussions. The political and social challenges we are experiencing in recent months present new challenges for life insurers to meet the needs of the public, but only those that match the expectations of today’s consumers will come out on top.

This is because, even with a clear need for life insurance solutions in an increasingly underinsured population, life insurance is far from the top of the average consumer’s wish list. In fact, life insurance remains by its very nature something that must be sold, not bought, largely due to the fact that it is easy to put off buying, potentially expensive to obtain, and has some uncomfortable associations with one’s own mortality.

Two objectives therefore become clear for life insurers: to convince customers of the need for life insurance in the first place, and to convince consumers that their company’s offering is worth the cost and effort involved in securing coverage. The solution? A reduction of friction at all costs.

Put yourself in the consumer’s shoes. Let’s say they are scrolling through Facebook and they see an advertisement for a watch. They don’t need a new watch. Their existing watch is perfectly fine. But they click on the ad out of curiosity. Within two more clicks, they’re at the point of checkout and their details, which are saved to their phone, fill in automatically. They hit enter. Within two minutes of seeing the watch, it’s on its way to their house. If it had taken longer - if they had had to select a style, fill out lengthy forms, search for their credit card - they would have dropped off that site and gone back to scrolling through Facebook.

This is because the amount of friction that a consumer tolerates is directly linked to how valuable they perceive a product or service to be. While life insurance is arguably much more important than a new watch, many people do not immediately see the value in life insurance, or at least they don’t see the urgency in buying it compared to other more pressing needs. As a result, getting them through the door quickly at any sign of interest is paramount.

This starts with making sure the “door” they are going through is the right one for them. Everyone knows insurance claims are not one-size-fits-all, so why should the underwriting process be? By creating a predictive data model to do an initial assessment of applicants, insurers can fast-track certain segments of their prospects. This means that a 30-something, nonsmoker with no prior health conditions can be approved within seconds, while a 60-something with high cholesterol can be redirected for further questioning. From there, automated underwriting capabilities can reduce the number of questions required and sidestep the need for intrusive medical testing.

In the U.S., where bureaucratic, confusing and expensive insurance systems are still largely the norm, this simplification of the claims process could easily give an insurer the edge against its competitors.

The second step to reduce friction is by “speaking the language” of the digital native and fully embracing the digital revolution. At the moment, most insurers in the U.S. have undertaken some level of digitization, moving from paper to digital applications and automating various back office processes. However, this has largely been a like-for-like approach; what we call the “online-ification” of centuries-old processes. This approach fails to acknowledge the tech savvy of their new customers, most of whom have more or less leapfrogged computer hardware to become digital mobile natives.

Additionally, the new reality with COVID-19 is forcing carriers to make decisions with less biological data, such as blood, urine or other lab samples they normally rely on. This opens up decision making for automated underwriting based on “alternative data” as the battleground between carriers. The data built up over years of filled applications is an asset for carriers in this new age.

Insurers must join their customers at the digital front in order to ensure their customer experience integrates with the way consumers live their everyday lives. As the vast majority of buyers of insurance across America already use their mobile phones to interact with agents and insurance companies, insurers can make purchasing insurance easier by engaging directly with customers via mobile devices and social media.

For example, an insurer could integrate their questionnaire with a messaging platform of the applicant’s choice – say Facebook or WhatsApp. The applicant can then answer the questions in their own, all using an application they already interact with on a regular basis. These answers can then be sent to a digital automated underwriting service in the cloud for a real-time underwriting decision. Because the input and output remain the same, insurers can rapidly deploy this service with no big IT project or retraining required.

On top of the immediate improvements new digital capabilities such as automated underwriting and advanced analytics can bring to the customer experience by reducing friction, such tools also free up the advisor’s time to focus on where they can uniquely add value.

Through the digitization and automation of administrative tasks, insurtech allows agents to focus on the human element of the customer experience. Automated underwriting software already has led to a reduction in NPW (not-proceeded-with) applications by cutting down the speed-to-decision.

The pandemic has put pressure on American insurers to match their customers’ digital desires. Rediscovering their data asset or refining it into models brings them one step closer to a world where life insurance will finally be bought and not sold.

Colm Kennedy is executive vice president, Munich Re Automation Solutions. He may be contacted at [email protected].