CaringBridge,© a nonprofit organization, exists to help families keep their social networks informed when a family member is battling serious, life-threatening illness like cancer.
As I write this, a dear friend is battling metastatic brain cancer. His wife created a CaringBridge© Journal to share their journey with others.
The day of the surgery to remove a large tumor on his cerebellum, my friend’s wife posted her first entry:
“As a woman, I will not question my man’s statement:
‘I didn’t lose strength; I was just weak.’
It was just so macho, in a meek way.”
The day after his surgery, she posted this:
“He said quite quietly this morning, ‘I’ve been thinking about what the doctor said—It’s going to be a long marathon. A marathon is a very long run…in a very short time. Climb each hill, some easy, some hard. That creates a whole picture. You’ve just got to pace yourself.’”
Point: A marathon is a very long run…in a very short time.
The Life Insurance Industry Is in a Marathon
Like nearly every industry, the life insurance industry is in the throes of the digital revolution. Consumer expectations require that carriers invest in end-to-end IT solutions and comprehensive systems in order to keep pace with the consumers’ ever-changing requirements and demands.
A supply chain involves a series of steps involved to get a product or service to the customer. First Mile, Middle Mile, and Last Mile delivery phases are terms used within supply chain distribution specialties.
First Mile logistics: Simply put, once a good or service is manufactured, wherever it goes next is known as the First Mile.
Middle Mile logistics: Is when products or services are moved from a facility that holds the services or products briefly, and packages them into orders and gets them out to consumers. Fulfillment centers are significant players within the Middle Mile process.
Last Mile logistics: Is the transfer of goods or services to the final delivery destination. It is known alternatively as same-day delivery, next-day delivery, express delivery, or just standard delivery. Simply put, it’s the last step in the delivery process.
Within the life insurance industry, the digital revolution is changing everything, and impacting every supply chain phase, with great rapidity. Examples include automated underwriting, the use of Big Data in risk assessment, e-applications, e-policy delivery, and paperless processing.
Because life insurance consumers are not isolated buyers, but omni purchasers of products and services, everything that the life insurance industry does is instantly compared with every other purchasing experience.
Example: Amazon
What is Amazon’s First Mile? “The First Mile is the flow of materials within the supply chain to create a product before it’s delivered to the customer.”1
What is Amazon’s Last mile? “The Last Mile team helps get customer packages from delivery stations to a customer’s doorstep.”2
If the Last Mile is delivering one thing to one person by this time tomorrow, the First Mile represents the delivery of one component to one worker on an assembly line.
Point: The life insurance industry is in a marathon (along with every other industry) and needs to go a great distance in a short period of time.
The Last Mile
The Last Mile phase of supply chain management describes the short, final delivery and communications segment of distributing the services or products to customers. Last Mile logistics tend to be complex and costly to providers of goods and services who deliver to these customers.
“Some of the problems of Last Mile delivery include minimizing cost, ensuring transparency, increasing efficiency, and improving infrastructure.”3
Ecommerce sales are expected to reach $6.5 trillion by 2023. This will be accomplished “thanks largely to new fulfillment concepts including Dark Stores (shuttered stores opportunistically converted into fulfillment centers), warerooms and automated order facilities.”4
Dark Stores and Ghost Kitchens
(Is it just me or are those evil-sounding names?)
As online shopping booms (reaching nearly $100 billion in 2021), many retailers are struggling to meet the demand of customers for same-day delivery. To accomplish this Herculean task many retailers are turning to Dark Stores.
“A Dark Store is a micro-fulfillment center dedicated to rapid online order fulfillment. It is a kind of small, local store but without the customers. It has aisles with shelves and racks for groceries.”5
The name “Dark Stores” is derived from being dark—that is, closed to the public—since they are only used to fulfill online orders. Dark Stores are being utilized increasingly in the grocery and whole food sectors, fashion, big box retail, homewares, and furniture industries.
Many retailers are searching to find delivery-focused alternatives to traditional stores. Among these are Kroger, Wendy’s, and Chick-fil-A. They are among major U.S. chains that took over nearly 100 million square feet of industrial and warehouse space in 2021 (with an additional 376 million square feet of space under construction).
Dark Stores, through delivery, are enabling retailers to enter markets where they do not operate physical locations via ghosting. “Wendy’s, Chick-fil-A and other fast-food chains, for example, have introduced ‘ghost’ kitchens that operate expressly to serve delivery orders—no dining room or carryout.”6 Chick-fil-A, and other fast-food retailers, partner with a leading ghost-kitchen brand, Kitchen United, to offer delivery out of a shared commercial kitchen.
“The ghost kitchen craze is being driven by the explosion of delivery options in fast food.”7 Think UberEats, GrubHub and DoorDash.
From their website: “Kitchen United MIX’s mission is two-fold: Delivering delicious food options to hungry communities who crave variety; while also providing local restaurant businesses with streamlined operations support within clean, safe, state-of-the-art kitchen facilities.”8
Consider their value proposition:
- “Want American, Asian, and Italian takeout from three different local restaurants all in the same order? Create your MIX!
- Need to place a single order catering to all different dietary preferences from high-protein, to plant-based and health-conscious, to comfort food? MIX it up!”9
Another firm is competing in this same space. Ocado makes their mission clear on their website:
- “Whatever your schedule, there’s a delivery slot just for you.
- Our mission is to wow customers through an incredible combination of unbeatable range, effortless convenience, and fair value.”10
Next for Life Insurance Distribution and the Last Mile
As recorded above, Last Mile decisions are based on these objectives:
- Minimizing Cost
- Ensuring Transparency
- Increasing Efficiency, and,
- Improving Infrastructure
Minimizing Cost
For as long as I have been in financial services, life insurance carrier distribution systems have included these parties:
- Retail Agents/Brokers
- Brokerage General Agents
- Aggregation Groups
Over the years I have witnessed carriers reducing their own costs by relegating more and more responsibility to the distribution system. The carriers quit doing things that are necessary and simply cast them off on their distributor partners. Examples:
- Printed Marketing Materials, Forms Inventories
- Agent Training and Contracting
- Live Customer Service Representatives
- Orphan Policy Service
- In Force Policy Illustrations
- Paramed Scheduling
Savings to the carrier only resulted in increased cost to the distributors.
Point: Digital solutions should reduce costs for carriers and their distribution partners.
Ensuring Transparency
The philosophy of business transparency requires the sharing of information freely in an effort to benefit the organization and its people, suppliers, distributors, customers, and the public. Transparency happens by implementing good processes and formalizing feedback.
Point: All parties need to understand and agree that the outcomes are worth the effort.
Increasing Efficiency
Efficiency is defined as “the ability to achieve an end goal with little to no waste, effort, or energy. Being efficient means you can achieve your results by using the resources you have in the best way possible.”
Efficiency is not achieved by simply eliminating steps in the process that yield unrecognized or undercelebrated benefits. Distribution partners know the activities they do that enhance relationships with customers, increase the likelihood of future sales, and lead to referrals and good will.
Point: Carriers would do well to listen and seek to understand these benefits.
Improving Infrastructure
One of the tension points between carriers and distribution partners is marketing, lead-generation, and prospecting. In the P&C world, carriers opted to go direct to consumers with national ad campaigns. Sure, the name recognition helped some distributors make additional sales, but they ended up in competition with their own carriers.
Point: Economies of scale can and should benefit all parties.
Last Mile Pivot Point
Underlying the entire debate about costs, speed to market, customer satisfaction, paths to increased sales, and product positioning is a simple question that is endlessly debated: “Is life insurance bought or sold?”
This debate points like a laser to the question of whether or not people want to buy life insurance from a person or if they are self-motivated enough to drive their own purchase decisions through web sites and digital or robot advisors.
My Personal Experience with The Last Mile
From the beginning of my career in life insurance, I have counted it the highest privilege to present life insurance solutions to families and businesses, to assist them in applying for coverage, and to deliver the actual policies they acquired. There is something magical about our products. They are the means by which love extends beyond the grave. I had the joy of seeing families cared for when the unexpected happens. It was inspiring to see business owners and families adopt the disciplines of saving and preparing for illness, disability, long term care, retirement, and death. It was in all these interactions, these Last Mile activities, that I found my greatest fulfillment.
Summary
The life insurance industry is in a marathon in adapting to the digital realities and has far to go in a short period of time.
I do not pretend to have the answers. I no longer have the responsibility to work actively on alternative means of delivering our products more effectively and satisfactorily to our end users.
In the life insurance industry, everything is headed in the direction of greater consolidation. Mergers are sensible when the objective is lower costs through scale and achieving greater efficiency by eliminating redundancy. Consolidation generally does little to improve end-user value, or to enhance the general public’s embrace of the industry.
At one time our industry was entirely built on relationships.
Final Point: In our efforts to gain efficiencies and cost-savings in the Last Mile, perhaps we can remember the importance of relationships.
Maybe we can create “Light Stores” and “Angel Centers.” As we “climb each hill, some easy, some hard,” maybe we can create an incredible combination of variety, safety, value, and effortless convenience for people needing our products.
Here is what I do know. I agree with Solomon Huebner: “There is nothing more uncertain than life, and nothing more certain than life insurance.”
Footnotes:
- https://www.zdnet.com/article/its-not-delivery-why-the-first-mile-can-kill-you-and-what-to-do-about-it/.
- Ibid.
- https://www.investopedia.com/terms/l/lastmile.asp.
- “The ‘Dark’ Stores In Retail’s Future: Prepare To Be Ghosted,” by Bryan Pearson, https://www.forbes.com/sites/bryanpearson/2022/02/03/the-dark-stores-in-retails-future-prepare-to-be-ghosted/?sh=74c4fac13c4a.
- https://www.shiprocket.in/blog/guide-to-dark-stores/.
- https://www.businessinsider.com/chick-fil-a-wendys-ghost-kitchens-growth-2019-10.
- Ibid.
- https://www.kitchenunited.com/.
- Ibid.
- https://www.ocado.com/webshop/startWebshop.do?clkInTab=Home.
- https://www.investopedia.com/terms/e/efficiency.asp.
