Life Carriers Lag Behind In Customer Tech Support

By Ron Sussman

These days, people can bank through their smartphone, trade stocks online and instantly view their investments – all thanks to the latest Internet and mobile technology.

Unfortunately, the same can’t be said about life insurance. Unlike other financial institutions, life insurance companies have been slow to implement consumer-oriented technology, or even to provide policy data through more traditional means.

This situation is simply unacceptable in today’s high-tech world. Consumers deserve real transparency from life insurance carriers – especially given the complexity and sheer variety of their products, and the lightly regulated, largely independent workforce selling them. Without full and timely access to life insurance data, policyholders are unable to make decisions in their best interests.

Call for clarity

My team has experienced these problems firsthand. We frequently request data from insurance carriers, but routinely encounter hurdles and roadblocks.

Several factors contribute to this lack of openness. For one, the information is typically stored on antiquated “legacy” systems, which prevent it from being readily available to the policyholder or the carrier’s distribution system. Second, carriers have cut back on customer-support personnel, and the remaining employees often are inadequately trained to handle client requests. And third, many blocks of policies have changed hands and are no longer managed by the originating carrier.

As low interest rates continue to squeeze profits, these companies are unlikely to increase staffing. Therefore, a more realistic solution is for carriers to invest in technology that would allow easy access to important data by policyholders and brokerage general agents (BGAs).

Ironically, many of these same firms have embraced technological improvements to sell their products. For example, consider the skyrocketing sales in recent years of indexed universal life (IUL) – probably the most complex life insurance product ever devised. IUL is being marketed online, using sophisticated software to illustrate its wide variety of uses.

In these cases, however, technology benefits the carrier and not necessarily the consumer. Indeed, the IUL marketplace is rife with false promises and unrealistic illustrations. To make matters worse, IUL and other life insurance products don’t face the same level of regulatory scrutiny as other financial instruments, such as securities.

Costly barriers

Most life insurance carriers do not provide real-time data to policyholders or others, which thwarts or delays customers from evaluating their policies and making any changes.

My team recently faced unnecessary holdups by two major mutual companies. Both caused our clients to wait up to six months to move their coverage to another carrier. Although every life insurance contract has a “six-month clause,” that option was designed by state regulators for use only when a carrier has financial difficulties – which is clearly not the case with many large carriers.

The independent distribution system – including insurance marketing organizations (IMOs), BGAs and personal producing general agents (PPGAs) – is equally culpable. Technology is driving them to automate; they’re embracing everything from sophisticated customer-relationship management (CRM) systems to risk simulators, agency management platforms to LinkedIn. These systems help reduce overhead, increase volume and boost profits. But often there are huge unseen costs – which ultimately are borne by customers. For example, most BGAs have reduced human staff and jettisoned important functions such as policy service.

False excuses

Technology exists to solve most (if not all) of these issues. But most insurance carriers continue to resist providing easy access to information, often hiding behind consumer privacy laws. Yet banks and other financial firms -- subject to the same privacy rules -- provide real-time, helpful websites and online resources.

Surely, the data your bank stores is every bit as sensitive as the value of your client’s life insurance policy -- yet you can access your banking information in seconds from anywhere in the world. Data on your client’s whole life policy? Highly unlikely.

Even policy service representatives often are unable to answer complex questions about customers’ policies. Most are stumped by a question like this: What is the relationship between cap rates and volatility as it pertains to the performance of my IUL policy?

I’ve encountered similar issues with my own policy. In my case, I mistakenly paid our premium early (my bad!) for our survivorship variable universal life contract. As a result, the carrier applied the premium incorrectly, which could cause the policy to become a modified endowment at some unknowable point in the future.

If that were to occur, our whole financial life plan – to receive tax-free income in retirement – would fail, as the income would become taxable. The customer service rep said she was certain the transaction could not be reversed and corrected. Thankfully, we were able to find a solution and reset our plan – but I know not all policyholders have access to the industry information I’m fortunate to have as an insurance professional.

Opportunity to excel

Our team advocates for policyholders. We see top-notch policy service as our responsibility and an opportunity to engage meaningfully with clients. We find that clients appreciate this high level of personal attention, and recommend us to others.

The same can be true for life insurance carriers that adopt this approach. If you sell life insurance, I strongly encourage you to contact the most senior people at the carriers with whom you work, and tell them that excellent policy service must become a top priority. Remind them that transparency breeds trust, and obfuscation breeds anger.

And when it comes to technology, the most successful forms disrupt their industries. The life insurance companies that implement best-of-class policy service and dynamic policy management will own the market for decades to come.

Ron Sussman is founder and chief executive officer of PolicyAudits.com and CPI Companies. He counsels high-net-worth individuals through risk management analysis and life insurance planning strategies. Ron may be contacted at [email protected].