Life insurance has been sold on this continent since the early 1700s. But even today, a huge swath of Americans remains uninsured or woefully underinsured. Nearly 60 percent of middle market households lack individual life insurance, according to a 2009 LIMRA study (Is There Magic in the Middle Market?). Yet the need for life insurance has never been greater. American consumers, faced with a slow economic recovery, are encountering significant financial security challenges.
Carriers, distributors and producers must work together to find ways to make it easier to sell to and serve this market. We have a tremendous opportunity to bring high quality, affordable life insurance to this market and to help these Americans secure what they value most.
So how does a carrier help make distributors’ and producers’ jobs easier in addressing this need? Beyond product, carriers are presenting a new value proposition when it comes to service—including underwriting and application simplicity and ease—that opens up new markets for distributors and producers and enhances their productivity and efficiency. This makes it more profitable for them to serve middle-market and emerging-affluent consumers.
Bucking Tradition in Underwriting
Across the life insurance industry, underwriting has been performed largely the same way for decades. But the traditional underwriting model presents several challenges to distributors, producers and consumers.
1. It can be a complicated, time-consuming and expensive process. The industry is mired in mountains of paperwork to complete, consumers have to undergo paramedical tests, and excessive ordering of attending physician statements (APSs) costs time and money. Moreover, this process may create confusion and sometimes trepidation in the minds of consumers. So how do we streamline and enhance the process?
2. Ironically, the reams of data collected don’t provide a holistic view of the individual that can be aligned with the real drivers of mortality. For years, underwriting has focused on build; yet today, we know that build alone is not a leading indicator of mortality. In addition, many consumers with common medical conditions such as asthma or depression have been unable to obtain high quality, affordable life insurance. Certain health issues often relegate these consumers to higher tables, which significantly increases premiums. In some cases, consumers cannot obtain life insurance at all. So how do we employ more useful indicators to provide the best outcome for the consumer?
3. The complexity of the process itself often leads to poor communication and inconsistent experiences among carriers, distributors, producers and consumers. Extensive paperwork makes finalizing applications more difficult for producers. Prolonged processing times hinder agents from closing new prospects; during these delays, buyer’s remorse is apt to creep in. Agents can find it hard to explain the vagaries of underwriting to consumers, adding confusion to the process and prolonging it. So how can we improve the sales and buying experience?
Working Toward a New Approach
Fortunately, many carriers have been working to innovate underwriting and the application process—making it easier, quicker and more profitable than ever for producers and simpler and more affordable for clients. How are we doing this?
1. Delivering affordability through a deep understanding of the real drivers of mortality. After collecting and analyzing decades of data, some carriers have developed laser-focused knowledge of the factors most predictive of mortality. From research, we know that when it comes to underwriting, height and weight are no longer paramount, and common pre-existing conditions such as asthma or sleep apnea, if mild and well controlled, in many cases should no longer penalize a consumer who wants to obtain life insurance.
Employing this knowledge—and using the right combination of information gathered through the application; paramedical exams, labs and APSs when needed; and reflexive questioning in client phone interviews—the carrier is positioned to provide better rate classes to applicants, meaning more affordable premiums to the consumer, and to take on smart risk, helping to ensure the long term stability of the business.
2. Speeding the process and cutting costs through a simpler application process. By offering simplified applications and acquiring only essential client information, carriers are streamlining the sales process and improving both cycle times and placement ratios. One such process is simplified intake forms that take only a few minutes to complete with a client. Client phone interviews, leveraging reflexive questioning, can speed the process even further by asking for information relevant to that applicant only. In tandem, these enhancements make the prospect of buying life insurance far more attractive.
3. Enhancing communications to better support the sales process. While the two other areas of enhancements are far more innovative, sometimes it’s the fundamentals that can make a big difference, and communications falls into this category. By clearly articulating their target market, carriers help producers and distributors better match clients to the carrier, and find it easier to get a “yes” for their prospective clients. Improving written communications to producers and consumers is another area of focus: Being clear about information needs, case status and decisions helps to smooth out and speed up the process.
Final Thoughts
The time is ripe for new approaches to underwriting. By revamping the way underwriting and application processing is done, the life insurance industry can strike a chord that resonates with Americans looking for protection. By focusing on their need to secure what they value most in life and making high quality life insurance more affordable for them, carriers, distributors and producers can not only seize an untapped revenue opportunity, but also play an important role in restoring consumer confidence.
