The life insurance industry is overdue for an infusion of innovation and closer collaboration between various industry players, says Andrew Vasko. Such a model has already succeeded in New Zealand.
It’s no secret that life insurers are under an enormous amount of pressure at the moment. This includes pressure to reduce operational costs; increase profitability of certain products, such as income protection; retain customers; and improve operational efficiency through strategies such as straight-through processing.
To succeed, it is critical for life insurers to balance operational-efficiency initiatives with those targeted at improving distribution networks. By using a combination of new technologies, process improvements, collaboration tools and improved integration with other industries (for example, health providers), the life insurance industry can reinvent itself.
In recent years, life insurers have been focused on utilising multiple channels to engage customers and distribute products. This has seen a rapid increase in the popularity of direct channels, which changes the game for brokers. Facing strong competition from a channel that has a mass-market reach and simpler product design, brokers are under pressure to look for better and more innovative ways to conduct business.
Ecosystem interests
What we are now faced with is an industry with a very complex ecosystem comprised of key participants (customers, brokers, and insurers), as well as integration points with multiple industries (for example, health providers, accountants and employers).
Each has its own interests:
1. Customers have individual needs and often no interest in life insurance at all (let alone the patience to wait for a decision). They are ideally looking for a simple solution; the ability to make an informed decision; and the ability to use new technology, such as mobile devices, to transact.
2. Brokers are looking for reliable insurance partners who can support their business; new ways to attract, service and retain customers (for example, through online and mobile devices; and a seamless experience for their customers.
3. Insurers are looking for faster and better ways to develop and roll out relevant products, as well as improvements to underwriting and claims processes that allow for a seamless service.
4. Health providers are focused on the day-to-day treatment of patients and don’t have time to deal with complex requests from insurers. They are looking for a standardised approach that integrates with their own system so they can complete a medical request at the click of a button.
Some of the key players, such as health providers, do not formally belong to the life insurance industry. However, they are a critical element of the ecosystem and their performances can dramatically affect the success of new applications or claim assessments.
Furthermore, by making cutting-edge technology improvements for one or two key players (for example, brokers or insurers) and ignoring the need for industry-wide integration and collaboration, we will struggle to achieve the desired level of efficiency and customer satisfaction that are crucial to the success of the industry.
Can we actually solve problems?
Many of the answers can be found in New Zealand, where the majority of Australian life insurers have local operations. There you will find a new breed of innovators who have achieved significant improvements for the whole life insurance industry.
For example, Konnect NET has established an electronic, highly secure system, integrating 18 insurers, all general practitioners and the majority of the broker community in New Zealand to solve one of the most challenging parts of the life insurance process.
This challenge used to be the collection of accurate and timely medical information from prospective policyholders. By providing a seamless collation of medical information, getting the right data from doctors for new and existing policyholders is now one of the easiest parts of the insurance process.
Let’s take a look at some figures. It used to take an average of 24 to 30 days for doctors in New Zealand to submit medical information required for a claim or life insurance application. That figure has now dropped to between five and eight days. Sales conversion rates for New Zealand life insurance policies used to be between 40 and 60 per cent; that number has now risen to a whopping 75 to 85 per cent. Plus, the average sales cycle for a life insurance product has dropped from between 24 and 30 days to a low 10 to 15 days.
Flow on
The flow-on effect is that insurers and advisers are seeing improved profit margins; and health providers now experience a painless process, which also provides immediate payment.
Milton Jennings, chief executive of Fidelity Life Assurance Company, has seen the benefits of a streamlined system first-hand.
“It only takes five minutes for doctors to check their electronic records and email the information through,” Jennings says. “From the doctor’s perspective, it means more time to spend seeing patients, but they still receive the same payment from us. So it’s a win-win.”
A collaborative approach to problem solving has changed the industry in New Zealand. This approach will lead to more innovation and it opens the door to exciting opportunities for the life insurance industry.
