Distribution Matters features conversations with Breathe Life customers, partners, and the industry at large on life insurance distribution challenges and opportunities.

This article features Colleen Risk, a highly respected life insurance industry analyst at Celent.

Celent is a research and advisory firm focused on technology for financial institutions globally, and the mission of its insurance practice is to inform insurers about technologies that provide efficiency, cost reduction, and great experiences for the advisors, insurance companies, and insureds.

Q: How has life insurance distribution changed over the past 10 years?

A: Until recently, distribution really hadn’t changed much in decades. However, the pandemic has taught us that we can work virtually – essentially opening a new channel for advisors to sell beyond the traditional face-to-face meeting, a significant development in distribution.

We’ve also seen advisors become more technology-focused. Insurers have been providing more digital tools, especially during the pandemic, and advisors are learning that using these tools can provide a huge advantage. For example, the ability to meet with clients via the web and guide them through an application process that results in a point-of-sale decision – this is new. And this digitally-enabled processes can be completed in a matter of minutes as opposed to the days to weeks needed when using old school, paper-based processes.  

In particular, the ability to automate and accelerate underwriting without fluids is a tectonic shift. Even as advisors return to face-to-face selling – it’s a relationship business after all – it’s highly unlikely that we’ll ever go back to sending paramedics to draw fluids from applicants.  Similarly, gathering information at the point of sale using modern eApplications dramatically reduces the number of “not in good order” (NIGO) applications that require going back to the customer for more information. Roughly half of all paper-based applications are NIGO, so this is a huge improvement for advisors and insurers alike.

Q: eApps have been around for a while now, why are they so important to insurance distribution today? How can they be improved?

A: I’ve been working with eApps since 2002 and they have evolved into one of the most important tools in the distribution process. When eApps were initially introduced, they were static. Data were entered into a standard form and if additional information was needed, the underwriter or case manager had to call the applicant to gather the missing information. 

Today’s eApps make it easy to log into the real-time version of a candidates’ application. In addition, the use of reflexive questions based on available information reduces the chances that an application will require follow-up calls. For example, if the applicant does not mention having diabetes but the prescription database reveals a diabetes medication, the eApp can prompt a question asking if the applicant has diabetes, avoiding the need for additional calls. 

Another big change that has made eApps more effective is the acceptance of e-signatures. E-signatures complete the point-of-sale decision process that has been enabled by automating underwriting and the use of third-party data like health records and prescription databases.

Today, eApps are mainly used for term products but moving forward, I think we’ll see eApps that use advanced analytics to facilitate sales of more complex products. In addition, eApps will become increasingly more sophisticated, providing “next best” product suggestions and wellness support as part of the application process. 

All of these digital tools we’ve been talking about are helping advisors and insurers better understand their customers. With these new insights, advisors can be more proactive and engaged in helping their clients live their best lives.

Q: If you could solve one distribution problem by waving a magic wand, what problem would you solve, and how would you solve it?

A: This is an interesting question, and I have two answers. The big distribution challenge that the insurance industry has yet to solve is the $19 trillion protection gap – I’d use my magic wand to erase that. Life insurance is such a valuable tool for protecting families and building wealth across generations, but it’s not well understood by the public. I think a lot of folks see life insurance as an expense, a luxury item, and it’s less expensive than most people think. I also think these improvements in sales and distribution that we’ve discussed will help – making it easier to buy life insurance is an important step towards reducing its perceived complexity, though not sufficient on its own to close the gap.

My second wave of the magic wand, given our discussion today, is to eliminate paper applications. Getting rid of paper applications would virtually put an end to NIGO applications, which in turn will reduce the time required to underwrite a new business application from weeks to minutes. Modern eApps are a major improvement, and it is my hope that in a few years every advisor will have access to eApps for all policy types and be willing to use them to accelerate the new business process.