Driving Digital: Why Life Insurers Must Accelerate Efforts to Modernize Now
By Andrea Hatch, Vice President, Customer Advisory Services
McKinsey & Company recently shone a light on changes needed in the life insurance industry for a post-COVID world with a report entitled, “Implications of coronavirus for North American life and annuity writers.” The report noted, importantly, that insurance companies need to comprehensively and fundamentally change operations to a digital-first mindset. Sureify, an established leader in helping insurers transition into the digital world, offers thoughts on the report, and what changes life insurers must make in order to survive in the “new normal.”
Where were you when the world stopped?
That’s not a metaphysical question. In mid-February, nearly all life insurers (along with others from industries across the spectrum) were blissfully ignorant about the potential for a radical shift in the way business is conducted. Organizational factors coupled with the luxury of a large and profitable base of in-force business, dulled the urgency of even forward-thinking insurers to digitize.
That all changed in mid-March with COVID-19.
The sudden, steep downturn of the global economy caught all but the most technologically advanced companies largely off guard. And while a handful of life insurers had taken the first measured steps into full digitization of their end-to-end organizational processes, many found themselves unable to fully function in the remote world dictated by the pandemic.
The recent McKinsey analysis notes that, in the life insurance industry, “analog sales mindsets remain prevalent,” with “new business and underwriting processes… tied to paper applications.” The report’s research also confirms that physical distancing requirements have led to “fewer sales meetings, disruptions to new business processing, cancellation of medical exams and reduced underwriting capacity.”
The report also points out that “key priorities are emerging to mitigate disruption of new business and in-force block management.” While much of the McKinsey research focuses on issues largely outside the control of the industry (e.g., the impact of a sustained low-interest rate environment that has caused insurers to suspend sales of long-duration products and to re-analyze the use of capital), there are other suggested strategies centered around the critical need for insurers to move from analog to digital processes.
From Sureify’s perspective, the COVID-19 crisis has simply accelerated even the most conservative insurer’s interest in quickly and assuredly digitizing all aspects of the agent and customer experiences, not simply to mitigate the effects of the virus on the insurance organization, but to create a new blueprint that will allow business to continue uninterrupted across the board.
Our review of “Implications of coronavirus on North American life and annuity writers” focuses on three core areas of the life insurance ecosystem that demand attention now. Not only will these measures allow life insurers to continue to grow new business and retain and cultivate in-force customers during times of “social separation,” but they will ensure that these insurers remain viable options for consumers who have come to expect a digital-first relationship throughout the sales process and beyond.
New Business Acquisition
McKinsey warns that “now is the time for carriers to lean forward on supporting intermediaries” and identifies two key areas to make this a reality. The first is “ensuring advisers can transact digitally through all steps of the sales funnel, from prospecting to policy issuance.” The second notes that carriers should “work to expand the availability of fluid-free underwriting.”
In the business environment created by the pandemic, a digital initial transaction has become a necessity. This is especially true for insurers ready to engage during what could be a longer-than-expected period of isolation and/or remote business dealings. The prospect of losing face-to-face interactions is of great concern to many traditional life insurers, yet some remain hesitant to fully embrace digitization of their business onboarding process. Still others have dipped a toe into the pool of change by attempting to update their legacy systems, but they aren’t yet convinced of the fact that they will ultimately have to reinvent their entire business model to meet changing customer requirements.
The tide is turning quickly. In addition to the COVID-19 crisis, historically low interest rates and other financial factors are driving change in the way insurers offer products and upsell/cross-sell to their in-force customers. By integrating various APIs to access important information like accelerated underwriting and “know your customer” (KYC) data, today’s onboarding modules (including Sureify’s LifetimeAcquire) are designed to mitigate some of the obstacles that are now facing all life insurers.
In recent years, the ability to pair data access and automation with customizable communication and relationship development has made the buyer an integral and active part of the new business process, rather than an outside entity waiting to be informed of status and next steps. Sureify also saw the rising trend of keeping app users on track and apprised of progress and potential problems. (Think of the experience of booking a ride using Uber – customers are constantly updated with the location and status of their driver, and with communication vehicles to allow changes on the fly.) With its OnTrack feature for pending applications, Sureify has addressed this demand so that the insurer’s process feels proactive to the consumer. Companies poised to similarly incorporate digital communication into the initial transaction will not only build loyalty among their own customers, but will make inroads in attracting new, younger buyers into the future.
Another benefit of digitizing the front end of the sales process: it transitions what had been an expensive proposition – the acquisition of new business – into an area for dramatic cost-savings. By using data, AI and other methods of replicating and enhancing the human experience (including outreach, marketing, medical evaluations and underwriting) in order to maximize customer relationships and satisfaction, insurers will be able to bring more customers into the funnel with fewer resources.
Those companies that have committed to improving their starting point in the sales funnel will be wise to move forward quickly. Author and futurist Blake Morgan observed in a recent issue of Forbes magazine, “Now the challenge is not just to stand-out, but to pivot, innovate and transform … We are now serving a customer that’s been financially impacted by COVID-19, who wants to be a touchless and digital customer, and who will be living differently for some time.”
Service
McKinsey doubles down on the perspective that the entire agent and customer experience, before, during and after the sale, be digitized. “Now is the time for carriers to digitize every step of the customer journey – from initial planning to digital payment, to remote claims.” They further note that “in-force operations, from call centers to claims processing to policy administration operations have transitioned to work-from-home environments and…. delays and amended processes are all but inevitable.”
Insurers cannot afford to have “delays and amended processes,” especially when they are competing with the service excellence of Amazon and Zappos. Customers are unwilling to accept anything less than the smooth, seamless processes that these companies are providing, and the quarantine has certainly increased that demand. To that point, the New York Times reported in April 2020 that Amazon first quarter sales increased 26 percent over the same quarter in 2019, as shoppers were essentially forced to buy online (rather than through traditional brick-and-mortar retail) for the first time in history. Amazon’s agility and ability to facilitate the process of both buying and selling goods through the shut-down will be the roadmap into the post-COVID world.
Sureify has long been a champion of self-service enablement in the life insurance industry. Allowing policyholders to undertake and manage elements of input and change (e.g. beneficiary changes, online and recurring payments, access to policy information, etc.) with assistance from virtual agents, chatbots, and more conversational and understandable UI, has proven itself a valuable asset during the pandemic. According to Business Insider, “Online life insurance agencies saw surges of new term life insurance policy application in March.” And a recent LIMRA study published in insurancebusinessmag.com shows that “24% of US companies that accept online/mobile applications for life insurance saw an increase in applications in March.” There is no reason to expect that this trend won’t continue into the “new normal.” Customers brought into the fold digitally will expect the same online self-service functionality when they need to make administrative changes to their policies.
In-Force Management
McKinsey states that “in-force management has been a second-order consideration relative to new business.” They note that “optimizing the in-force book is the most significant lever for any carrier looking to rapidly improve performance.”
While part of McKinsey’s analysis of in-force business was financial in nature, and looked at evaluating “reinsurance, buyouts and closed block transfers,” a separate McKinsey study suggests leveraging in-force policyholders from a marketing and sales perspective. McKinsey’s study, entitled “Maximizing the value of in-force insurance amid enduring low returns” suggests that “recognizing a customer’s lifetime insurance needs … can inform customer segmentation and targeting.” The study notes that cross-selling and upselling to existing customers can increase product penetration and new sales. McKinsey also found that utilizing technology to communicate with “orphan” policyholders can be an additional way to maximize lifetime customer value.
In plain language, what this research indicates is that leveraging the value of existing customers has never been more critical. These customers have already established a level of trust, and they will likely be receptive to offers of new product solutions to meet their changing needs.
Sureify was ahead of this curve toward more, and better, engagement. The importance of remaining a visible part of a policyholder’s life drove the development of LifetimeEngage. LifetimeEngage has enabled life insurers to unlock the potential of selling more business to existing customers through strategies such as consistent, cost-effective communication; a personalized experience for each individual customer through population segmentation; health and wellness incentives; and the use of completely customizable white-labeled web and mobile consumer apps. LifetimeEngage has also improved insurers’ ability to maintain the “personal relationship” model that the industry was built on, but at a fraction of the cost.
Perhaps most important in today’s environment, digital engagement generally requires no face-to-face interaction – and this will continue to be a critical element of doing business in the post-COVID-19 world. Our own data bears out the importance of facilitating engagement – 55% of users linked to the Sureify apps are active on a monthly basis. Response to lapse notices has increased 300% over traditional mailer results. In addition, Sureify clients using LifetimeEngage have seen as much as a 20-point increase in Net Promoter Score.
What’s Next?
The McKinsey study illustrates that we are seeing a paradigm shift. The need for life insurers to comprehensively analyze business flow throughout their organizations has never been more important. And while traditional insurers were initially pushed to “look inward” by disruptions from digital D2C upstarts like Ladder, Haven, Ethos and Fabric, smart players are now seeing that it will be incumbent upon management to “take the wheel” and drive sales, distribution, operations and post-issue environments from analog to digital platforms. These platforms are not only friendly to the consumer, but provide flexibility and, in many cases, dramatic cost savings to insurers, allowing them to discover new markets, experiment with new products and distribution, and enhance existing sales channels. Only then will they be prepared for unexpected bumps that could appear on the road to future success.