By Vinod Kachroo
The insurance industry is in the midst of a paradigm shift. The rise in digitization is bringing a host of technologies that are disrupting the industry, while bringing new efficiencies and expanding business opportunities to everyone in the insurance value chain. It’s also changing the way we do business.
The availability of highly reliable and diverse data sets around people, their lifestyles and behaviors have an enormous impact on everything from product design and sales approach to how customers like to be served. Data enables a whole new level of personalization and helps the carriers create an Amazon-like experience for their consumers throughout their life insurance product journey. Data also helps individuals obtain better solutions to their life needs and more affordable life insurance. It also gives agents and advisors a hearty boost to their business.
Insurers are forming ecosystems, partnering with businesses on projects that achieve greater value together than each could capture individually. For example, John Hancock partnered with Verily and Onduo to provide consumers with type 1 and type 2 diabetes an experience that includes personalized education, diabetes management prompts, incentives, rewards and premium savings.
The digital economy, rapidly-evolving technologies, the changing data paradigm and the rise of insurance ecosystems are changing everything about the business of buying and selling insurance. And these trends are also providing agents and advisors will tremendous opportunities to grow their businesses, better serve their customers, and increase the level of engagement and grow relationships with both insureds and their beneficiaries. In particular, these trends benefit agents by:
- Opening up a whole new market segment.
Historically, agents have sold primarily to the affluent large policy market because of the nature of their compensation structure. Sales in the midmarket and low end have been very difficult because pricing was relatively high and not affordable for customers. Today, innovation and technology can help insurers and agents sell more policies to a wider market by making products more attractive and affordable to historically underserved markets. Insurers can offer new pricing and servicing models that can bring the price within the means of more people.
Technology also enables insurers to personalize and tailor products and offer a low-touch buying experience. Insurers and agents benefit from this potentially multitrillion-dollar opportunity with increased sales. The community benefits as well, because more people are able to obtain coverage.
- Selling to people previously considered too risky.
In the past, there was a bias built into the paradigm and approach to how we traditionally looked at life insurance. Historically, life insurance has been driven by categorizing risk pools. These pools have been very broad and in some cases, including and excluding people based on their health and lifestyle. However, not everyone in a common risk pool behaves the same way. Our methods didn’t allow for any distinction around individual behavior over a long-term horizon.
For example, someone with a family history of diabetes might be categorized as prediabetic, and therefore would not be able to get a good rate on a life insurance policy despite living a very active and healthy lifestyle. In fact, insurers would consider this individual a greater mortality risk than a younger policyholder who leads a less active and healthy lifestyle. Over a longer time horizon, the prediabetic with the better lifestyle may have been a better mortality risk but underwriting would have rejected them or given them an unfavorable rate. Because of technology advancements, these customers can become a viable customer base for agents and advisors.
- Decreasing application processing cycle time and reducing abandonment.
In the past, filling out life insurance applications was arduous, taking weeks or even a month for insurers to gather all required information for underwriting and issue a basic life policy. Today, the availability of data, digitized health records, advanced algorithms and machine learning, and technology advancements, completely changes the paradigm. The availability of digitized data is transforming underwriting models and driving decision making in a short span of time.
Not only is this new paradigm cutting the cycle time, but it’s helping better convert prospects into customers. In the past, if an agent approached 50 customers and five wanted to buy a policy, there would be one or two who would likely drop off because the policy would take too long to issue. A faster and more streamlined application process enables agents to help a prospect apply for insurance, get a quote and issue a policy, all in a single office visit.
- Growing the relationship within the insured’s circle, broadening sales opportunities.
We’re seeing a shift in the agent-insurer relationship where they’re likely to communicate more frequently, grow closer and work together. The intersection between wellness solutions, health care and life insurance sets up a unique opportunity for insurers and agents to foster a working relationship – and increase business. Data availability and an expanding insurance ecosystem is helping agents keep in better touch and nurture relationships with policyholders. It’s also helping customers live longer and healthier lives.
- Improving insured’s health and wellness.
Insurers can also provide help with health and wellness so their policyholders can live longer and more satisfying lives with their families. Advancements in genomics have the potential to completely disrupt Life insurance. As genomics and other healthcare paradigms start to become more mainstream and evolve, today, customers can invest in a healthier and longer life, including compensating on their disease markers instead of investing in life insurance.
Rewards and customer engagement play an important role in encouraging adults to improve their health and lifestyle and purchase life insurance. New online research from The Harris Poll on behalf of SE2 and Life.io revealed that more than four out of five Americans (85%) would be likely to improve their health and fitness habits if a life insurer offered a lower monthly premium based on their real-time health information. The study also found that about two-thirds of Americans surveyed said they would engage in gamification to reward healthy lifestyle and wellness habits if their policy offered the capability. A full 82% of millennials said they’d be more likely to purchase a life policy if it included a rewards program to help them improve their wellness.
Many life insurance policyholders are willing to share personal health and life data if they receive some benefit in return. Half of Americans surveyed said they would share their wellness information gathered from a wearable device of customer portal if it would lower their policy premium. This is very similar to the telematics model the auto insurance industry is following, providing discounted premiums and increasing driver safety for drivers who agree to allow their carrier to monitor their behavior behind the wheel.
The rise of insurance ecosystems, and the availability of digitized data is transforming the nature of risk and policy sales for the life insurance industry, paving the way for greater innovation and personalization of services. For agents, this will continue to help increase opportunities to grow their customer relationships – and increase sales.
Vinod Kachroo, chief information officer of SE2. He may be contacted at [email protected].
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