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Related Expertise: Insurance Industry, Life Insurance, Organization Design

Advisors Still Matter to Life Insurance Customers

By Rob Sims and Nathalia Bellizia

For years, the US life insurance industry has been looking for ways to improve the customer experience and remove the friction from its sales and service processes. Although digital tools are available, life insurance is still a business conducted primarily face-to-face, using many manual processes. Or it was—until COVID-19 arrived, forcing the industry to go virtual overnight. Insurers have responded, quickly adopting existing tools that have suddenly become essential.

COVID-19 has also underscored the importance of financial professionals in the sale of life insurance products. Some in the industry probably wondered whether sales, at a time of emptied-out downtowns and main streets, would pivot toward direct online channels. That has certainly happened in other industries and may yet happen in this sector, especially with simpler products. But our research shows that, for most Americans, a conversation with a financial professional is still central to the life insurance purchase process.

Indeed, since the pandemic began, a big part of the value that insurers are getting out of technology has come from the “assist” that technology is giving to financial professionals. If technology can help make life insurance easier to understand, less trouble to apply for, and quicker to obtain, it will create a dramatically better experience for customers. A recent survey by LIMRA and Boston Consulting Group reveals what a better customer experience means and how it might look.

How COVID-19 Has Affected Life Insurance Demand and Activities

It was predictable that the pandemic and the resulting limits on in-person interactions would disrupt insurance carriers’ efforts to develop new business. As of the second quarter, two-thirds of financial professionals were still not meeting face-to-face with clients, according to a survey by Credit Suisse. This has had a particularly big impact at the top of the sales funnel—with financial professionals’ ability to create awareness and identify new prospects. Financial professionals whose prospecting relies heavily on networking and social gatherings have been at a disadvantage for much of the year.

But if the pandemic has cut off an avenue of engagement for some financial professionals, it has drawn attention in a larger way to the reasons that people think about life insurance in the first place. According to a survey conducted by LIMRA, the number of Americans who said they feel a heightened need for life insurance increased from 49% in March, when lockdown orders began, to 58% in July. And in the customer experience survey on which this report is based, LIMRA and Boston Consulting Group found that COVID-19 was a motivator for one in three Americans who started shopping for life insurance after the onset of the pandemic. (See Exhibit 1.)

The pandemic has also prompted carriers to accelerate the adoption of digitally enabled processes. Among these are online scheduling and video conferencing for customer meetings, accelerated underwriting, and the acceptance of e-signatures in place of wet signatures on applications. These are not new technologies, but they are enabling a better, more convenient customer experience at a time when few things in life feel convenient. We expect the carriers using these tools to see improvements in their customer satisfaction scores.

Accelerated Underwriting. One of the more significant adaptations has been a wider use of accelerated underwriting, which allows policies to be finalized in an average of nine days—versus the usual 27—and usually with no need for needle sticks or fluid-drawing. Some carriers have increased the proportion of applications earmarked for this “fast lane” to more than 90% during the pandemic from less than 70% previously, while raising the face amount of the policies that qualify for accelerated underwriting. This is simplifying a process that is long and cumbersome and that contributes to lost sales. It stands to reason that an accelerated process could change some of these negatives and boost carriers’ conversion rates.

Accelerated underwriting isn’t a technical innovation in its own right--the practice has been around for years. Carriers already make extensive use of applicants’ prescription drug data and motor vehicle records. Still not used in most cases, however, are electronic medical records and other types of unstructured data. As accelerated underwriting taps into more data sources, carriers will get the benefit of more accurate pricing and customers will get the benefit of a less intrusive application process.

Hybrid Sales. With the sharp decline of face-to-face customer meetings, the mechanism for life insurance purchases has also shifted. According to our survey, fewer than a third of those buying life insurance policies since the pandemic have done so solely in person, compared with 44% before the pandemic. (See “Our Customer Experience Survey.”) Most sales that were previously made in face-to-face meetings are now made as part of a hybrid purchase process, usually partly online and partly with a financial professional.

Our Customer Experience Survey

The BCG/LIMRA survey—which focused on the experience of buying individual life insurance in the US—was conducted online in July and August of 2020. Of the almost 4,000 respondents, 26% were owners of existing life insurance policies who had not shopped for new policies in the past 12 months. Another 16% had purchased individual life insurance policies in the prior 12 months. Ten percent had been shopping for life insurance but still didn’t own any at the time of the survey.

Most of the rest of the respondents didn’t own an individual life insurance policy and hadn’t seriously shopped for one in the preceding 12 months.

The time frame that participants were asked to report on allowed BCG and LIMRA to uncover important patterns in how COVID-19 has affected attitudes toward life insurance in the US.

These hybrid experiences are especially popular among insurance buyers in the Gen X and millennial cohorts; baby boomers still prefer to buy in person, over the phone, and through the mail. (See Exhibit 2.)

A Clear Role for Digital in the Insurance Sale

It’s no surprise that someone shopping for life insurance products would first look for information online. Nowadays, most consumers do this for any product or service that is outside their regular purchasing experience. Confusing information and cumbersome processes cause customers to drop out of the sales funnel in every industry. (They’re what drove Amazon to pioneer “one-click” ordering some 20 years ago.) Complex and time-consuming procedures are certainly an impediment to life insurance sales. At a time when so many other things are competing for Americans’ attention—including working remotely and the associated challenges of family care amid office and school closings—it wouldn’t take much for a life insurance prospect to abandon the process entirely.

But if good online information is necessary for a life insurance sale, it isn’t sufficient. Consumers usually also need a conversation with a person to get comfortable with what they’re buying. Our survey makes this clear: a dialogue with a financial professional is one of the top facilitators for a life insurance policy purchase. And the factors that rank higher than such discussions (understanding cost, understanding policy terms, and finding trustworthy information) are in many cases addressed during a human interaction. (See Exhibit 3.)

So instead of thinking of technology as a replacement for financial professionals (or for human interactions more broadly), we think it makes much more sense to think of technology as an enabler to enhance and potentially transform the sales model that was the norm pre-pandemic. Because it can allow a financial professional to serve applicants and customers more quickly, provide the financial professional with tools to explain products more clearly, and eliminate lower-value work, technology makes significant productivity gains possible.

The Continued Importance of Advisors

Almost all survey respondents who currently own life insurance (97%) said they were satisfied with the experience of talking to a financial professional when seeking service with their policy. The next most popular service options also had some element of real-time human support (like call centers, callbacks, and live chat). A bit further down the list in terms of satisfaction levels were non-interactive digital channels. Eighty-five percent of owners said they were “very satisfied” or “satisfied” with the online experience provided by life insurers, and 81% said the same about insurers’ social media offerings.

A hint as to why financial professionals remain so important emerges in the reasons given by survey respondents who shopped for life insurance and decided not to buy. A significant proportion of uncompleted sales involve applicants who are not completely satisfied with the product’s value proposition, meaning they don’t find features that are important to them—for example, a savings option or a long-term care rider. Many of those who end up not buying also dislike the complex application process or the need for a medical exam. The most-often stated reason for the decision not to buy is price; more than half of the non-purchasers in our survey reported that the insurance they were considering was too costly. (See Exhibit 4.)

Good financial professionals can counter many of these obstacles. They know how to identify applicants’ needs and explain different policy options, thereby reinforcing applicants’ confidence that they are making a good decision. This is what makes a skilled financial professional so valuable.

Consumers’ faith in insurance agents and brokers—like confidence in other types of financial advisors—has been on the rise since the 2008 financial crisis. After a dip that year, both types of financial professionals are again being seen as trusted guides in the sale of products that are essential to Americans’ financial security. (See Exhibit 5.)

Digital Investments That Enable the Best Possible Customer Experience

So what sort of digital investments should carriers be making? Our argument is for carriers to deepen their investments in digital transformation—including doubling down on technologies that improve the human delivery of advice. We know from both our survey and our experience that many consumers still need human advice to feel comfortable buying life insurance. However, there are a lot of areas in which interactions with financial professionals—and other aspects of the life insurance experience—can be improved through technology.

  • Value Proposition. Explaining the life insurance value proposition has typically been done in person, with the help of a sales brochure and a static printout. COVID-19 has lowered the frequency of these meetings—a disadvantage we’ve already noted. But the decline of in-person discussions has led many carriers to increase their use of digital illustrations, which can be a great sales aid. Similar tools, such as iterative financial calculators—already common in the wealth management industry—can help life insurance customers better understand the differences between products and make more informed financial decisions. There has also been some movement toward wellness offerings. The carriers experimenting with this (mainly through applications and services that help people eat better, exercise better, and improve their health) hope that these services will lead to higher engagement with consumers and a possible expansion of the life insurance value proposition.
  • Prospecting. Most carriers could improve their prospecting through advanced digital marketing techniques. Not many financial professionals start their day looking at automatically generated messages about whom they should be contacting, with what offerings, and through what channel. But the groundwork for such tools is being laid. Analytics and machine learning can also be used to match prospects with financial professionals (based on demographics, personal background similarities, or product expertise). Better matching of financial professionals and prospects is one of the benefits that Prudential Financial is hoping will come from its acquisition a year ago of Assurance IQ.
  • Applications and Underwriting. We have already talked about the expanded use of accelerated underwriting enabled by new data sources and the trend of accepting e-signatures. These changes have been possible because of relaxed regulatory restrictions amid the health crisis. But carriers’ changes should go beyond converting analog processes to digital ones. With so much adaptation already going on, there is an opportunity for carriers to reimagine how these processes should work and what the customer experience should be. A dynamic, responsive questionnaire that adjusts automatically as information is entered is such an example.
  • Pricing. People applying for life insurance provide a great deal of information about themselves during the underwriting process. This one-way flow of information doesn’t provide any value to the prospective customer and can be especially frustrating if the price quote that comes back seems unreasonable to the applicant. Carriers can provide something of value in return. For instance, many prospects would be interested to know where they stand on health markers such as blood pressure, cholesterol level, fasting blood sugar levels, and body mass index. The health analyses and comparisons could also be used by financial professionals to explain the basis of the price quote. Another possibility is to use wearables and other data sources to improve end customers’ physical health and improve the accuracy of underwriting. High health scores could lead to discounts for conscientious customers.
  • Servicing. Human interactions are critical for many of the things (such as empathy, establishing connections, and offering detailed explanations and advice) that customers look for. But technology can make financial professionals a lot more effective and provide customers with more control. Changing an address, updating a beneficiary, or getting clarification on a payment are transactions that customers should be able to handle on their own, through intuitive self-service options; they should end up in the lap of an advisor only if that is the customer preference. And if customers would indeed rather talk to a person, scheduling a conversation should be simple and convenient, something the customer could accomplish with a few taps on her smartphone.

Despite the strides made in recent years, the bias in the life insurance industry (excepting the in-person interactions with financial professionals) is still toward manual, asynchronous transactions. These include paper-based communications with policyholders about payment and other matters. Carriers can do better and many of them already are.

    Lasting Impact of COVID-19

    COVID-19 brought sudden and, in some cases, dramatic changes to the US life insurance industry. It remains to be seen if consumers’ increased attention to life insurance will lead to a sustained increase in sales. However, there are three areas where we are confident COVID-19’s impact will be durable.

    Carriers’ Digital Agendas. Insurers’ digital efforts will continue to accelerate. Technology will be deployed across the value chain, especially in distribution. In the future, financial professionals will use more screens and less paper. Their productivity will increase as they devote more time to customers and less to administrative tasks.

    Advisor Ways of Working. The “human touch” in life insurance will remain critical but will take a different form. In life insurance, as in many service fields, there has been a realization that meetings needn’t take place in person. Hybrid sales and customer engagement models that involve a mix of digital and human interactions are here to stay.

    Financial professionals will remain central to the sales process even as these incidentals change.

    Underwriting. The use of accelerated underwriting will expand further. In our view, carriers are unlikely to reverse standards that have shortened the time (and cost) of policy delivery. Better access to and use of data should also enable better risk selection over time. The long-form paper insurance application will become a relic, and the industry will be better for it.

    This moment of upheaval is also one of opportunity. It is an opportunity rooted in changes that were already underway but that have now picked up speed, enabling the delivery of a better customer experience. We expect these changes to be a win for carriers, for financial professionals, and most importantly, for the customers on whom everything else depends.

    This article is a summary version of a report published by LIMRA, which can be downloaded here.

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