Laura Boylan is the Head of Underwriting Solutions at Haven Life, a digital life insurance agency backed by MassMutual.
For decades, life insurance sales in the United States have been declining, with fewer Americans purchasing life insurance and others remaining underinsured. In late February of this year, however, the Covid-19 pandemic and the resulting financial instability that ensued reminded individuals of their own mortality and the need to protect their loved ones financially. As a result, there has been an uptick in consumer interest and purchase of life insurance products.
At the same time that demand for life insurance spiked, buyers were locked down at home and afraid to step out into the physical world, making face-to-face sales and in-person medical exams nearly impossible and requiring the industry to navigate new ways of doing business.
These seismic shifts have led many in the life insurance industry to question traditional business models and accelerate new paths forward. At Haven Life, a digital life insurance agency backed by MassMutual, we’ve realized three key learnings in the six months since we began feeling the effects of Covid-19. When we emerge from this crisis, the life insurance industry will look very different than the one we all remember.
1. Streamline processes and systems.
Covid-19 highlighted the reality that a high-touch, manual model just isn’t possible when meetings are remote, people aren’t in the office to receive faxes and parents are juggling their jobs alongside child care and schoolwork. Processing more insurance applications without the normal means of doing business has been a challenge for everyone in the industry. Life insurers who relied heavily on manual processes and face-to-face interactions have especially struggled to move business forward during the pandemic.
For example, some in the industry aren’t set up to accept e-signatures, and requiring a wet signature can delay the next step of the buying process, especially if an applicant doesn’t have a printer at home. Once the application is signed, some still rely on faxed third-party verification records instead of APIs to receive underwriting data.
Companies that do have automated systems and algorithms still face challenges, but they will have much more flexibility to solve issues and can minimize customer-facing delays down to a couple of days instead of months. Simply put, having end-to-end digital capabilities for processing applications and issuing policies means the difference between doing business and failing to capitalize on the surge in customer demand.
2. Have a backup plan.
While third-party data is imperative to life insurance underwriting, it’s often one of the biggest challenges in the process. Data is fragmented and not often standardized. Hit rates take time to improve. And sometimes, a vendor goes out of business.
During Covid-19, a large industry vendor that provided significant volumes of medical record data went out of business literally overnight: It was business as usual on Thursday, and then we received notification that the vendor had shuttered on Friday. Its shutdown rippled throughout the industry, creating a lot of operational headaches.
This example underscored the need to have contingency planning in place. Because this single vendor provided such a breadth of services, there was little else to do but reach out to other vendors — who were swamped with new connection requests — and hope that we could build a new data pipeline as soon as possible.
We scrambled, but we were fortunate to build out a new vendor partnership quickly due to the flexibility of our technology infrastructure. Without the systems and processes in place to get a new vendor up and running quickly, others have cobbled together manual back-office solutions with high overhead costs just to keep applications moving. The lesson here, and in any crisis, is to invest time and resources in contingency planning.
3. Treat customers the way they want to be treated.
Consumer expectations have shifted dramatically in recent years. Modern customers are used to conveniences like instant transactions, mobile payments and two-day shipping and are not interested in a product that can take four to six weeks to deliver. Algorithms and expert systems help streamline the process, but it’s also important to offer a diverse product lineup to meet the needs of a broader range of customers.
The pandemic has brought the shifts in product strategy further into focus. Term life insurance remains a simple and affordable way to help financially protect loved ones, and when they are required, medical exams typically enable better pricing and higher face values. But some customers still prefer a no-exam buying experience, especially during a global health crisis. So, it’s necessary to offer a menu of options through a variety of channels to better serve customers.
Through a diverse set of product offerings, 42% of all policies sold by my life insurance agency between March and June were placed without a medical exam. I expect we will see more products with a 100% digital buying experience hit the market in the years to come as more in the industry realize the benefit of having options to meet consumers’ varying expectations.
The past six months have been unprecedented. Things are continuing to evolve very quickly, and I’m certain we’ll see more business impacts for the rest of the year and into 2021.
Even though shelter-in-place restrictions have been lifted in most areas, there remains a tremendous amount of anxiety and uncertainty in terms of Covid-19 and ongoing economic instability. This naturally leads people to try to safeguard themselves and their families. Unfortunately, it’s the reality of our products that business may spike during times of uncertainty. Frankly, we feel conflicted about that. The part we can play, however, is to serve people in their time of need by making it as simple and reassuring as possible to financially protect the people they love.
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