In yesterday’s post, I provided categories within which to organize the innovation players within life insurance. Both startups and legacy businesses are pursuing solutions to industry pain points. Attention is being paid to distribution, product, client experience, speed, productivity, big data, compliance and other areas within the life category where inefficiencies exist or where client needs are not met today.
The very complexity of life insurance will be a deterrent, at least in the near-term, to the volume of innovations in Fintech. Much of the innovation, including the examples presented here and in my last post in April, aim at specific issues with the current model for life insurance, versus taking a clean-sheet approach.
Entrants into the space aim to solve advisor problems, or become the new intermediaries between the carriers and the client, or assist the carriers themselves. For their part, carriers are funding and/or leading transformation efforts. They know they must adapt, but since it’s almost impossible to drive massive change from within an established business model and culture, it is likely that startups creating differentiated value that avoid becoming mired in complexity can do well.
Here are examples of opportunities.
Advisor conversations move from the kitchen table to digital channels
The Global Insurance Accelerator aims to drive innovation in the insurance industry. Of note in GIA’s 2016 cohort is Serious Social Media, a tiered offering that automates advisor participation in social media. Based on a user-defined profile, advisors are provided with algorithm-driven content distributed via their social media identities.
Hearsay Social is a more evolved startup also enabling advisor social media. The Company boasts relationships with seven out of 10 of the largest global financial services companies, among these New York Life, Pacific Life, Farmers and AXA. Hearsay addresses the compliance requirements carriers have so their advisors can participate in social media: (1) archiving every instance of social media communication, and (2) monitoring all advisor social conversations, and intercepting compliance breaches. While not sexy, this capability is critical and commands c-suite attention.
An early-days market entrant also targeting advisor digital presence, LifeDrip claims to offer an automated marketing platform, including a personalized agent site, targeted content, signals on client readiness to buy, and product recommendations.
Advisors as intermediaries are unlikely to disappear any time soon, but their role, engagement approach and capabilities must be more tech-savvy to appeal to virtually any consumer segment in this market with buying power. Expect additional new entrants that continue not to write off live intermediaries, and bring to market solutions to reshape the advisor relationship.
The new intermediaries are digital
Smart Asset promises to simplify big financial decisions including the purchase of life insurance, with an orientation towards how people make these decisions vs. pushing product. Shoppers can input data to a calculator and determine a coverage target; they are then encouraged to request a quote from New York Life. Smart Asset’s experience will be more credible when it includes multiple providers. It will require marketing investment to scale participation. Its basic approach could appeal to a large segment that will demand simple, low-cost product.
Policy Genius has developed a consumer-friendly interface including instant quotes for life, as well as pet, renters and long-term disability insurance, following completion of an “insurance checkup.” As with other startups, this is a data-gathering exercise undoubtedly important to the company’s business model. AXA is an investor in Policy Genius; the site promotes several major carriers as product providers.
Slice Labs is worth calling out because it is a direct-to-consumer play defining itself against a specific, important market segment – the 1099 workforce whose growth is being stimulated by the “on-demand economy.” Think not only about the Uber and Airbnb phenomena, but also the reality of more Americans moving away from traditional employer relationships where automatic access to benefits was a given.
Viewing carriers as startup clients
All of the companies mentioned already focus in and around the acquisition of new clients. InforcePro offers an automated solution for agents and carriers providing proactive insights into sales opportunities and potential risks that exist within their current books.
Why does this matter? Insurance contracts are inordinately complex – even for the experts. Carriers and agents, particularly in recent years, have been forced to focus more heavily on maximizing the performance of the policies they have issued, versus just trying to sell more. The focus on the relationship with the policyholder has been skimpy. Life insurance policyholders can cancel a policy but cannot be “fired,” and represent ongoing exposure as their future claims can be on the carrier’s balance sheet for decades. With the risks and potential value now more obvious, in-force management has become a priority for focus and investment.
Carriers driving efforts to innovate beyond incremental moves
Haven Life owned by Mass Mutual but operated separately is a digital business whose product line is term life up to a $1-million benefit. The company operates in over 40 states and represents a bold move for a 165-year old carrier. Nerdwallet rates Haven’s pricing as “competitive” – not the cheapest but well within range.
What is interesting about Haven is that it is not just implementing a shift of the same old approach to digital channels: quotes are available in minutes and coverage can become effective immediately, with the proviso that medical testing be completed within 90 days of policy issuance. In this space, this approach represents meaningful experience innovation.
Last year John Hancock initiated an exclusive relationship in the US with Vitality, marketing a program that gives rewards to clients who demonstrate healthy habits such as having proactive health screenings, demonstrating nutritious eating habits, getting flu shots, and engaging in regular exercise. Rewards range from cash back on groceries to premium reductions. This program is strategically significant because it aims at prevention, not just protection, linking preventative behaviors that clients control to cost savings.
Numerous carriers are participating in innovation accelerators, establishing their own incubators, and/or forming dedicated venturing and innovation units. It remains to be seen which of these are what a colleague refers to as “innovation theater” and which are for real - drivers of new business opportunity. As with any early-stage plays, their stories will emerge over years, not quarters.