Insurers Battle Against Companies ‘Born Digital’

Insurers need to work harder to meet younger consumers online in a faster, more nimble process, analysts say, or risk losing to the Amazons of the world.

Chat windows, faster policy statements, intuitive agent portals and robotic technologies are among the new generation of weapons insurers intend to use to compete with “born-digital” companies.

These updates are necessary as young consumers expect near-instant responses from the brands – Amazon, Uber and Airbnb – with which they do business.

In short, millennials have ratcheted up the customer service expectations quotient in every industry. Companies that do not rise to the challenge are going to be left behind, insurance executives and industry consultants have warned.

“Those (born-digital) companies are setting the expectations and those are the kind of customer service interactions that people are going to expect from Lincoln and other insurance companies,” Lincoln Financial president and CEO Dennis R. Glass told investors and analysts earlier this month.

Life insurance, with its slow sales cycles, long tail risks and decades-long time horizons, is going to have to change to remain relevant, a top insurance executive said.

Like it or not, “born legacy” insurer brands like Lincoln Financial, Prudential Financial and MetLife are no longer competing against one another, but against brands built straight out of a digital pond, Glass said.

Born-digital brands, who know nothing of bricks-and-mortar infrastructures or layers of distributors, have perfected the art of connecting with consumers through digital channels and companies everywhere feel obliged to follow suit.

New York City-based Financial advisor David Edwards calls it “an Amazon world.”

“The clients have very high expectations about how we’re going to serve them,” he told InsuranceNewsNet recently.

Accelerating Time Scales

One need look no further than the Thanksgiving weekend for how fast new digital companies fulfill orders and close transactions.

Black Friday online sales reportedly totaled about $5.2 billion and billions more in sales are expected today during 2017’s Cyber Monday when people traditionally buy online.

With born-digital companies, time scales are measured in seconds, often in milliseconds. For life insurers that point to fewer days or weeks as a sign of progress, time scales measured in fractions of a second are in a different league altogether.

But insurers and agents are aware of the importance of reacting to and serving the needs of customers at the speed of light.

Digital marketing and customer engagement was the most commonly demanded capability among life and annuity insurers, according to a survey published last month by Novarica, an insurance IT consultancy.

Prevailing in digital marketing and customer engagement is considered even more important than overcoming speed-to-market or product-change challenges, wrote Novarica CEO Matthew Josefowicz.

Leading-edge life insurers have digitized aspects of distribution and TermAccel helped produce near-record term life sales recently at Lincoln, Glass said.

TermAccel, short for term life acceleration, offers electronic quoting, underwriting and policy issuance, but many permanent life insurance contracts still take too long.

Improvements – But is it Enough?

Insurers have reported improvements in the cycle time it takes companies to issue and bind a long-term contract.

For underwriters of life insurance policies with face amounts of $400,000 or more, the average cycle time has decreased from 52 days to 44 days over the past nine years, according to the consulting firm Celent.

For policies with face amounts of $400,000 or less, average cycles times have gone from 42 days to 33 days over the same period, the report found.

But that is hardly the kind of improvement that will impress millennials.

If the born-digital companies can't deliver insurance and annuity contracts a lot quicker than that, 30-somethings will likely refer friends and family to an insurer named Amazon.

From Books to Banks

Barring a handful of pilot programs, digital-born giants aren’t in the life insurance and annuity business, but they one day could be.

Remember when Amazon sold only books after it was founded in 1994?

Fast forward 15 years and the Seattle-based company sells everything from automotive products to beauty and health care items, and several years ago branched out into lending to small and midsize businesses.

Now the company is in the midst of an expansion that would reportedly create 50,000 jobs for its new host city.

Absent the admittedly steep regulatory hurdles faced by full-fledged lending institutions, there’s little standing in the way of Amazon becoming a bank or even an insurer, said Naveen Agarwal, senior vice president and chief customer officer for Prudential at an industry conference in September.

“Could Amazon get there? Absolutely,” he said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]