Insurers and everyone along the distribution chain have long anticipated the impending technology infusion that would transform the delivery of life insurance and related products to consumers.
That technology transformation crept closer at a glacial pace until the COVID-19 pandemic pushed an industry that relies on face-to-face contact to accelerate its plans.
And something happened along the way to the new cyber-reality: Insurers, middlemen and agents all learned they can rely on technology to forge a new way of selling insurance products.
“It really is touching every aspect of the business,” said Kara Hoogensen, senior vice president of specialty benefits at Principal Financial.
Principal is just one of many carriers that accelerated long-debated technology plans. For example, an online application option in use for life insurance was quickly adapted for use with Principal’s disability insurance products.
“We definitely worked to get that out into the marketplaces as soon as we possibly could,” Hoogensen said. “It’s just easier to do business virtually and digitally at this point in time, as opposed to having a broker sit across the table and help an individual fill out a policy for income replacement.”
Likewise, Principal accelerated use of its Human API platform for consumers to provide access to their electronic health records. The efforts are helping Principal limit its pandemic impact, Hoogensen said.
“We are going to see some pressure on our premium in the near term, but we are confident that it’s going to be a short-term impact,” she added.
It’s a similar story at Foresters Financial, where executives fast-tracked several technology initiatives to help the company ride out the pandemic, said Matt Berman, chief distribution officer. The company is well positioned, Berman said, because most of its life insurance business is already nonmedically underwritten, meaning no blood or fluids are required.
The actuarial calculation is an important bottom-line formula that can get thrown off if major changes are not deftly handled. Foresters, like most insurers, capped its final expense whole life insurance product at age 75. Previously, sales of that product were capped at 85.
“When you eliminate blood and fluid on fully underwritten pricing, but with the math that we do to make this profitable, you may have X percentage of mortality slippage,” Berman said. “But if you have fewer hands touching the application from entry to issue, what you’re hoping is that operational efficiency should neutralize the mortality slippage. So net-net, you’re still either positive or neutral.”
Nearly four months into the pandemic, it is the sales that are keeping losses low for insurers like Foresters. All products on the company’s e-app and non-face-to-face platforms maintained steady sales, Berman said.
“Only in the areas that have been solely supported by either a para-med or a paper app, we saw a dip in sales,” he added.
Helping Middlemen, Too
Further down the distribution chain, technology is also helping independent marketing organizations keep insurance products moving.
“I don’t think there’s going to be a return to where we were,” said Mike Kalen, CEO of Covr Financial Technologies. “Everyone seems to like it. Carriers are comfortable, intermediaries like Covr are loving it, and the advisors, agents and clients are all benefiting from simplification and getting policies faster.”
Covr works with most of the major life insurance carriers in the marketplace, and many of them are increasing the face amounts eligible for underwriting without a medical exam, he explained.
Amounts are still on the lower end — generally up to $3 million at most — but the rapid adoption of technological platforms is helping close more life insurance sales quicker. An industry long resistant to a full embrace of technology is now forced to use it as much as possible.
The early returns are encouraging, Kalen said. Covr is among many companies providing platforms to accelerate underwriting without medical exams, allow for electronic signatures and deliver policies electronically.
In two months, the percentage of applicants under age 60 going through accelerated underwriting jumped from 33% to 50%, Kalen said, citing Covr statistics. That is on life insurance policies up to $1 million.
Before the pandemic restrictions, Covr delivered just 10% of policies electronically, which meant agents still had to meet several times with clients. In eight weeks, that number grew to 62% of policies delivered electronically, Kalen said.
“That saves 21 days on the process as opposed to having it mailed,” he explained. “Five mail drops has now gone to one email. So it’s gone from 21 days and five stamps to one email and an authentication DocuSign.”
Insurers are growing more comfortable and trusting of the processes, Kalen said. Big data availability is making medical assessments more precise, and that means good offers for potential clients.
“We think that over time, the offers have gotten better,” Kalen said. “Meaning that two years ago, you always felt that your healthiest client got the second-best rate, like the insurance companies had built in some conservatism into their rates. Now we feel the healthiest clients are getting the best rates.”
More Honest Than You Think
The life insurance application process starts with the prospective buyer self-disclosing medical conditions. And surveys are showing that consumers are actually more honest than expected, Kalen said.
“The insurance carriers believe that clients are more honest with a computer or a trained call center person than they are with their agent,” he said. “So right away we’re getting better data in the self-disclose part of the journey.”
Otherwise, the continued public availability of more and more data, such as criminal and financial, makes it easier for carriers to complete the underwriting process.
But the emergence of technology in underwriting does not lessen the role or need for the insurance agent, Kalen said.
“I think agents are realizing that their value applies regardless of the process that they choose to put their customers through,” he said. “So if an insurance agent can offer their customers well-priced, simple insurance through a highly rated carrier, they are still adding a lot of value.”