Digital is transforming every industry – from pharmaceuticals to fast-moving consumer goods – and no one is immune to it. It has radically changed how businesses are being run to how consumers engage with their favourite brands. Mr Rakesh Kaul of UnderwriteMe Technology Services Ltd and Mr Jeff Cook of Pacific Life Re Asia, look at the impact of digital on life insurers, tied agents, D2C channel and IFA.
In the past, business processes are determined by the limitations of technology at that particular moment in time. However, in the digital world, the limitations are invariably ingrained in the mindset of business leaders, however endless it may be.
For consumers, digital has unleashed an awesome power that truly puts them in control. In the New World, digital means ease of research, personalised pricing, immediate fulfilment and sharing experiences. The words of Dale Carnegie cannot be truer, “If you are doing today, what you did yesterday, you will be out of business tomorrow”.
Life insurers
In Asia, the early adopters started their transition from paper to electronic submission around 2010.
Good digital end-to-end process needed
However, the majority of the automated processing was still done in the back office. To a large extent, this remains the case today. Even with sophisticated electronic application systems, insurers are largely unable to offer the functionality to enable decisions at Point of Sale (POS).
There is still a human touch required in most new business processes. A good digital end-to-end process removes significant acquisition costs and enables the insurer to accept a high proportion of policies at POS.
A robust digital rules engine empowers underwriters to drive continuous improvements in the customer journey. The best insurers in this area actively use data to identify the most common causes of referral and automate their underwriting decisions.
In doing so, they free up valuable (and scarce) underwriting resource to drive this change at an increasing pace. This improves the distributor and customer experience, and in many cases giving the customer the peace of mind that his/her cover is in place immediately rather than requiring him/her to provide additional information, or even worse, having to make an appointment to see a physician (or undergo blood tests).
Reliable data on distributors
Digital also provides reliable data on distributor behaviour. For example, insurers can compare individual distributors by their mix of business, disclosure rates (for example, finding out the percentage of declared non-smokers), or behaviours (for example, those who change their answers in order to improve the outcome).
This helps the insurer to target the best distributors with differential service, and also to provide support to the advisers who are performing less well. This will ensure that the insurer retains and motivates the best quality agents and has a good understanding of the business being written which will help to retain a future competitive proposition.
Learning quickly and implementing changes swiftly
For insurers, we are still at the foothills of how digital can transform distribution. Looking ahead, digital can tailor a new business process to much smaller customer segments, including individual distributor branding, application design, use of other customer data for predictive underwriting, and use of external data to reduce the number of questions.
Digital gives us the ability to learn quickly from our experiences and to swiftly implement changes to constantly improve the buying experience for the customers. This will include the desire to regularly refine the underwriting rules to optimise the POS decision rate, with the least number of questions whilst minimising any impact on profitability or customer premium.
Tied agents
Many insurers in Asia continue to invest heavily in their best agents and some are creating different labels for their top tier agents.
Now more than ever, it is important for insurers to equip these agents with market-leading technology so that they can best service their customers. This will help to recruit, retain and motivate these agents to sell volumes of protection business which have higher margins relative to the more traditional savings products.
More options
Digital offers many new ways of meeting the customers’ needs better by providing more options to choose from.
A sophisticated rules engine can help to increase rider attachment rates, upsell to the maximum allowable sum assured for a risk, provide alternative decisions, for example, to “choose between a loading or an exclusion”, and offer a “sell to budget” function.
These options, together with a high level of decisions given at POS, are likely to give the distributor greater confidence in the underwriting process, enabling them to sell a wider range of valuable protection covers to their customers.
Direct to Consumer (D2C)
The D2C insurance market is increasingly gaining focus in several countries in Asia including regulator encouraged initiatives in Singapore and Malaysia. As a result, many insurers have launched or are planning to launch direct online channels.
This presents a challenge for the traditional insurance agents and increases their need to demonstrate their value to the customer so their service is not seen as being a commodity.
One way to do this is for the agent to be the helping hand for the customer through the range of possible protection covers, recommending a personalised offering that best meets their needs with the outcome of the digitised underwriting process confirmed to the customer at POS. Younger customers expect this ‘Buy it Now’ mentality from their other purchases and will want this from their insurance agent.
Independent financial advisers (IFA)
In some Asian countries (for example, Korea), there is a trend where tied agents are becoming independent. This presents a further catalyst for digital enhancements by insurers who wish to command a strong share of this part of the market.
The ease of doing business will be a strong driver for the IFA when they are selecting the company to recommend to their customers. The protection sales process remains complex as each insurer has its own unique application process and questions set. For the life insurance industry, digital has not yet moved from a one adviser-one insurer application approach to a one adviser-many insurers buying process.
Connecting adviser to multiple insurers
We believe that the next generation of digital will connect an independent adviser to multiple insurers, where one easy process can compare underwritten terms, as if the adviser had applied separately to each.
This requires new rules engine technology that allows each insurer to wire up its rules however they like, yet delivers as good a journey as if the distributor is connected to just one.
Both the customer and the IFA now have a choice of selecting their preferred insurer based on the final underwritten price, without having to wait. This gives the IFA the option to amend the cover if required and explain any sub-standard terms that have been included, increasing the chances of this policy being accepted by the customer.
The wrap
Digital is here to stay, and our customers are embracing it in every element of their lives. For too long now, our industry has snoozed whilst others have embraced change, but now is the right time and our opportunity to seize the moment. Doing nothing will invite a tech company to enter our industry, bringing with them a fresh approach to how we service customers in a manner similar to how Uber and Netflix have disrupted taxis and videos on-demand.
By embracing this opportunity, we will be able to serve our future customers in the manner they expect, and help to recruit high performing graduates into our industry to sell valuable insurance cover to those who need it.
Mr Rakesh Kaul is Director, Asia Business Development, at UnderwriteMe Technology Services Ltd and Mr Jeff Cook is Head of Underwriting & Claims at Pacific Life Re Asia.