Life insurance is set to become more personalised, more convenient and more accessible as leading life insurers begin to more aggressively adopt disruptive digital technologies to change the ways they interact with customers and operate their businesses. As a result, the industry will be able to expand its reach into new markets as well as deliver a better customer experience.
That’s according to Bryan McLachlan, CEO of Instant Life, a member of Absa, who says that life insurers are beginning to re-evaluate their business models as connected customers begin to demand a more seamless experience from the industry and as new FinTech players come to market with innovative technologies and business models.
Says McLachlan: “To date, life insurers haven’t made it easy for customers to buy their product, expecting them to fill in endless forms and go for medical check-ups. They’ve lagged on the adoption of digital channels – such as the smartphone and the web – in some segments of the financial services industry.
“One consequence of this is the reality that the life insurance customer experience feels low-tech, inconvenient and impersonal compared to the on-demand experience customers get from mobile banking and other apps. Another is that the segment of the market where people need life cover – yet don’t have a broker – has been neglected.”
The rise of the fintechs
A Bain & Company study finds that only 8% of new life premiums worldwide flow through online or mobile sales channels today, and the number in South Africa is likely to be less.
“But, with the rise of digital competitors – such as emerging FinTech companies – and the availability of big data analytics and digital back-office systems, this picture is likely to change soon,” says McLachlan.
He notes that Accenture’s research estimates that global investment in InsurTech – startup companies seeking to use digital tech to disrupt the traditional insurance industry – soared from $800 million in 2014 to $2,6-billion in 2015. Instant Life, launched a few years back as a digital life company, was an early example of this trend.
Instant Life’s business model isn’t just about selling insurance across the web – it is also about using powerful, cloud-based underwriting systems and analytics in the back-office to boost customer service and efficiency online, over the telephone and face to face with financial planners and advisors.
“Our lean, paperless systems enable people to get life cover online, over the telephone, or face to face in under 30 minutes – no medical examination required,” says McLachlan.
“This approach is attractive to people who want a better, customer experience when purchasing underwritten life cover Rather refence Frost and Sullivan. A compelling digital life insurance proposition shouldn’t be about grafting a website onto the front of a manual, paper-based process.” But about re-engineering the business model to provide a paperless solution across all distribution channels.
Partnership between traditional and digital insurers
McLachlan says that as part of the Absa Group, Instant Life has the best of both worlds. Instant Life’s lean, entrepreneurial business model and stability and brand recognition of a major financial services group, which would help it to accelerate its growth.
“In future, partnerships between InsurTechs and traditional financial services groups will be common,” he adds.
In addition, Absa has also proven itself to be an innovator in the insurance industry. For example, it has done pioneering work in developing predictive underwriting technology that allows it to confidently offer life insurance to customers based on customer data and a few questions. The solution uses an algorithm based on banking behaviour that predicts whether a client will qualify for its life cover. We should reference the business awards won two years running.
Looking ahead to the future, Instant Life believes that big data holds the key to a more profitable business for life insurers and a better experience for customers. Life insurers like Instant Life are today encouraging customers to use wearables to track physical activity, sleep and other physical health indicators, giving them access to rich pools of data.
“Indications are that people start to lead more healthy lifestyles as soon as they start monitoring these metrics,” says McLachlan.” But in future, this data will give life insurers data they can use to better personalise their offerings, help customers with lifestyle advice and develop ever-more accurate models for underwriting.”
Another benefit is that life insurers get to communicate with customers more often, when post-sales interactions are usually limited to debiting their premiums each month. In addition, life insurers can be expected to make wider use of social media and messaging platforms such as WhatsApp in the future.
“Thanks to big data and the cloud, we can now begin to underwrite life cover more cost-effectively and efficiently than ever before,” says McLachlan.
With digital channels such as the Web and mobile we can distribute and service policies in a manner that is faster and more convenient for the consumer. These developments promise to bring life insurance right up to date with the experiences connected consumers already enjoy from other industries.