Where Do Life Insurance Products Go Next?

As we look at a world in flux, it’s important to remember that the only constant is change. Technology is a good example, as it has a far-reaching impact on other industries. Look at Uber, a simple app that revolutionized and dominates the taxi industry. Airbnb achieved status as the leading hotel alternative without owning a single property.  In our own industry technology impacts everything from marketing to distribution to underwriting–including the way people buy and sell life insurance. Technology will continue to change the way we do business, and we either participate or get left behind.

I personally can’t imagine owning a driverless car, but the auto industry believes that within a generation there will be a huge demand. In one generation we’ve seen the replacement of the life insurance agent by the “financial advisor” and continued growth in platforms used to sell term insurance. But in that same amount of time, little progress has been made towards the automation of the permanent insurance process. This presents an opportunity to create the next industry norm.

I didn’t expect to stop using my camera because using my cellphone is easier and results in a better picture. The efficient delivery of a solution can easily change what we consider the norm. For instance, there are medical testing programs in which select carriers allow insureds to visit a supermarket or pharmacy to get measurements like blood pressure, weight, and pin-prick blood tests that are all electronically transmitted to the insurance company to get real-time underwriting information and skip the need for a blood draw or full paramed exam. 

We need a shift to identify more efficient processes to move the product, as industry research and analysis point to the increased need and want for life insurance in the consumer market. The industry is paying attention as carriers embrace the use of technology to change business processing including John Hancock’s Vitality program and Lincoln’s LincXpress featuring a 12-page application with simplified underwriting. Both have been well-received by consumers.

Revisions to the actuarial guidelines will continue to change and, as interest rates begin to rise, there could be more regulatory calls for increased reserve requirements to compensate for falling bond prices.  This will open the door to creating new products based on current assumption and equity participation.  With the current AG 37 and 38, it is still less expensive for the insurance companies to price variable products than indexed or traditional UL products.  This has led to most carriers adding indexed subaccounts into their variable products to give the ability to take advantage of the volatility reduction that indexed products bring with the lower cost structures that variable products have.  If you fear declining markets, you can put money into the indexed subaccounts and still have the chance to participate if the markets move higher than the caps or participation rates of the stand-alone IUL policies. This feature, coupled with a simpler underwriting process, will increase consumer demand.

The DOL fiduciary rule has caused most financial advisors to begin creating financial plans for all of their customers and most are required to include “risk assessment” as part of the plan.  This small change provides a huge opportunity to introduce life insurance to advisors and their clients, but we have to make the process simpler than it has been.  This means we must embrace an evolution from being the processing center to that of a marketing engine.  Instead of worrying about the future of estate taxes, we should be taking the time to educate brokers and consumers about the trend to speed up the life insurance placement process.   

For the time being, there isn’t an automated platform to replace our distribution system—so there still exists the demand for our knowledge to help consumers evaluate their needs and identify possible solutions. Carriers are racing to the finish line with more simplified issue processes to make our jobs easier.  We need to work with them to position life insurance, once again, as part of the foundation of financial planning. As distributors, we need to take the opportunity with younger consumers to teach the value of permanent life products and pursue methods to reach this segment through non-traditional means. It’s our job to direct the conversation and position life insurance as a viable alternative.

Dave Wickersham is the founder and CEO of The Leaders Group, the largest distributor broker/dealer in the world for variable life insurance. In the 20 years that the firm has been in business, it has grown into the premier broker/dealer for BGAs, with more than 130 agencies calling it home. He is also a founder of The Life Insurance Center, an application fulfillment center built for BGAs.

Wickersham can be reached by telephone at 303-797-9080. Email: dave@ leadersgroup.net.