Most traditional insurance companies struggle with how to incorporate digital into their traditional face-to-face channels: how to use digital to interact with consumers, particularly younger ones, how to think about new products that fit today’s lifestyle, how to drive down very high marketing costs. But there are some important quick wins.
For example, in life insurance, the processes for new business and applications are still very inefficient, often organized around paper and needing signatures. And it’s still bricks-and-mortar: the agent completes the application in the presence of the consumer and it gets faxed to the carrier’s new-business operation center. It can all take several weeks to process. Meanwhile, consumers cannot understand why, if they can do something as seemingly complicated as their tax returns on their own, they cannot figure out how to buy a life insurance policy unaided. So at PolicyGenius we’ve used digital to cut turnaround time and customer frustration. Weeks melt into a few days. As with TurboTax, the user experience is do-it-yourself, digitally enabled, and you feel good when you’ve done it.
Moreover, what digital opens up is a channel that people are on for most of the day, their mobile phone. Add to that the fact that incentives are aligned—carriers want their customers to live long, healthy lives just as much as they do themselves—and more ways to engage with customers emerge. US insurer John Hancock, with the Vitality Program [a life insurance package that promotes healthy living by offering customers a free Fitbit, and rewards them with the opportunity to lower premiums], is going down the right path. I think that is a great way to increase engagement after the point of sale.
Longer term, underwriting will be transformed through the use of data. There will be much more product innovation than we’ve ever seen in life insurance, and automated underwriting that doesn’t require a human being to delve into medical records. Already we are seeing new products—in an area that hasn’t changed for 20 to 30 years—such as underwriting people who are HIV-positive or diabetic at much more competitive rates than any life insurance company in the United States is doing. In South Africa, for example, an episodic life insurance product is being launched that you can turn on for 24 hours using your mobile phone. That impacts risk modeling of course, but also consumer engagement. Typically you buy a life insurance policy and that’s it. You hold on to the contract for 20 years. But episodic life insurance gives carriers an opportunity to engage more frequently. That in itself is an exciting opportunity for insurers. But it also reinforces the message that life insurance fits into your life when you need it—when taking a flight, for example—and only when you need it, which allows flexibility for consumers who might otherwise go uncovered.
I also see a more important role for advisors and agents, particularly those that can leverage digital in a way that insurance companies cannot. PolicyGenius is not an insurer. It does not underwrite risk or take any insurance risk on its balance sheet. So in that sense we are not competitors. We are there to make the market for insurance companies, and we cannot do that unless we have the participation and cooperation of insurance companies and, importantly, their brand behind us. When you are providing a shopping experience for consumers, you have to have brands that they respect, that signal a high-quality experience. So they are very much partners to us. However, the fact that we are independent and not an insurance company means we can play the role of unbiased advisor in a transparent marketplace in a way that an insurance company cannot. It will always face skepticism from consumers: “Am I seeing the whole marketplace?” or, “You’ve got an incentive to push one product over another.”
Solve for the right things
The successful tech competitors will be those that really understand the customer and customer pain-points. A lot of tech start-ups are solutions in search of problems. They have failed to make sure they are solving for the right things. For example, companies make assumptions about what consumers are and are not willing to do. One insight we offer our life insurance partners, which surprises them, relates to the medical exam that you have to take for fully underwritten life insurance. We have found that it is not as big a pain-point as you might think, particularly if you frame it as a free examination paid for by the insurance company that will guarantee that you get the best rate possible. There are other things that frustrate customers more—such as a 20-page application form that can in fact be reduced to four—and that, if fixed, can transform the customer experience.
Start-ups also need to know their domain and how to work with incumbents. If you want to challenge them, you’ll need a pretty big balance sheet. So the smarter companies will figure out how to work with them to create a win-win for the companies as well as the consumer. As for the big tech companies, for the time being they need the incumbents for credibility—it is much tougher to sell life insurance than a pair of shoes or a flight.