Where do we go from here?

Digital Insurance - - STRATEGIES - Jerry Whet­nall Vice Pres­i­dent Prod­uct Strat­egy StoneRiver, Inc.

I WAS TOLD many years ago that life in­sur­ance is a piece of pa­per and a prom­ise. In times of ad­ver­sity life in­sur­ance can care for your fam­ily, pay the mort­gage and send your chil­dren to col­lege. That prin­ci­ple hasn’t changed, but over the re­cent past the in­dus­try that guar­an­tees that prom­ise has evolved dra­mat­i­cally.

For good or bad, reg­u­la­tory and com­pli­ance shifts have im­pacted the in­dus­try to the ex­tent that how we are al­lowed to as­sess risk has al­tered. The prod­ucts we can of­fer have been restricted. Reg­u­la­tions con­tinue to go ever fur­ther in im­pos­ing chal­lenges and con­straints on how we can sell our prod­ucts. Con­sider the im­pact of ‘Too Big to Fail’, fidu­ciary obli­ga­tions, and sub­sidiary lim­i­ta­tions on what types of ev­i­dence we can and can­not ac­quire and how we may or may not use that ev­i­dence in as­sess­ing risk. Mor­tal­ity does not dis­crim­i­nate, and pre­dict­ing mor­tal­ity is fact-based sci­ence, not the man­i­fes­ta­tion of a pre­con­ceived out­come.

All that is oc­cur­ring while we try to ad­just to an ever changing marketplace. All car­ri­ers are try­ing to reach the mil­len­nial mar­ket. This co­hort con­sists of the most highly ed­u­cated cit­i­zenry in his­tory. But when it comes to in­sur­ance, they are one of the least in­formed cadres ever. Con­sider that a re­cent sur­vey found mil­len­ni­als es­ti­mated life in­sur­ance pre­mi­ums to be over six times higher than in ac­tu­al­ity.

That mar­ket is also fraught with chal­lenges in­clud­ing life events time­frame changes such as later mar­riages, later home own­er­ship, later chil­dren, and post­poned re­tire­ment plan­ning. Plus, the cost of their ed­u­ca­tion has left them bur­dened with debt that lim­its dis­cre­tionary in­come.

Reach­ing that mar­ket re­quires a concentrated ef­fort on ed­u­cat­ing them about the essen­tial need for in­sur­ance and re­tire­ment plan­ning and that those are not dis­cre­tionary ex­pen­di­tures.

The tech­niques of sell­ing to that mar­ket are vastly dif­fer­ent than prior gen­er­a­tions. This gen­er­a­tion is use to in­stant grat­i­fi­ca­tion when mak­ing a pur­chase. They have dif­fer­ent buy­ing habits; they are tech savvy and de­mand per­son­al­iza­tion and mo­bil­ity. They want to buy any­time, any­where, any­way.

Fra­ter­nal car­ri­ers in par­tic­u­lar must con­front the chal­lenge that cul­tural, eth­nic and so­ci­etal al­le­giances have di­min­ished, thus im­pact­ing their abil­ity to reach this mar­ket group. Mil­len­ni­als do not join the lodge; they don’t join the same or­ga­ni­za­tions as their par­ents. Mil­len­ni­als tend to af­fil­i­ate around shared ex­pe­ri­ences. Con­sider tar­get­ing ’ex­pe­ri­ence affin­ity’ groups with prod­ucts that meet the spe­cific needs of that group. Suc­cess will also be found in this ap­proach when peer-to-peer mar­ket­ing forces be­gin to drive pur­chases. When mem­bers of an ex­pe­ri­ence group have a good pur­chase en­gage­ment with your prod­uct, they will be­come a stealth mar­ket­ing or­ga­ni­za­tion. Peers re­spect the rec­om­men­da­tion of other peers.

The sim­ple facts are;

• Ex­pe­ri­ence groups may be small in size but the spec­trum of th­ese groups is enor­mous

• Car­ri­ers need to un­der­stand that brand name aware­ness is no longer the key dif­fer­en­tia­tor that it was be­fore. Ex­pe­ri­ence groups will con­gre­gate to the best prod­uct and the best ser­vice re­gard­less of brand or im­age.

To meet mil­len­nial de­mands, car­rier tech­nol­ogy and un­der­writ­ing must adapt. As the In­ter­net has changed buy­ing pat­terns, au­to­mated un­der­writ­ing has be­come a crit­i­cal tool to match the new buy­ing habits. ‘Fast Data’ such as Med­i­cal In­for­ma­tion Bureau, mo­tor ve­hi­cle re­ports and pre­scrip­tion his­to­ries have dra­mat­i­cally changed ap­pli­ca­tion-to-pol­icy time­lines. Elec­tronic health records are just be­gin­ning to show ad­di­tional risk as­sess­ment progress. Credit scor­ing as a mor­tal­ity pre­dic­tor is be­com­ing more read­ily ac­cepted by the in­dus­try.

With th­ese new ve­hi­cles for ev­i­dence col­lec­tion we have the abil­ity to re­visit the num­ber and types of ques­tions on ap­pli­ca­tions. Fewer ques­tions are viewed as less in­tru­sive by a marketplace that is in­creas­ingly con­cerned about the pri­vacy of their per­sonal in­for­ma­tion.

Con­sider re­view­ing and elim­i­nat­ing ques­tions on an ap­pli­ca­tion where an­swers can be dis­cov­ered through ev­i­dence sources. If you still re­gard all the ques­tions on an ap­pli­ca­tion as re­quired, then at least con­sider the value of the an­swers you re­ceive. Stud­ies have shown that 20% of smok­ers deny smok­ing and over 25% of peo­ple un­der­state their weight by up to 25 pounds—even when they know a paramed­i­cal exam is re­quired.

This over­all state of af­fairs may be viewed as a bleak out­look on the in­dus­try or as a call to ac­tion. Ob­serve the mar­ket, and ori­ent your plan to your goals; de­cide to move for­ward with the plan or not; and if the de­ci­sion is to move for­ward, then act. No more ‘where do we go from here?’

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