Around the world, the life insurance industry has been slow to evolve, putting it out of step with banking, short-term insurance and the retail industry. To advance and grow in a digital age, the life insurance industry must reinvent how it interacts and transacts with consumers. A more simplified application and quoting process that requires less intervention can move turnaround times from days to hours — potentially minutes, creating an exciting path forward for firms to differentiate their services and build strong competitive advantages.
The global life insurance industry is enormous at approximately US$3 trillion in gross written premiums annually1. In South Africa, gross written premiums are up to four times as large as general insurance industry premiums (including household, short-term and disability insurance). In India, the market leader Life Insurance Corporation is a cornerstone of the whole Indian economy with approximately $450bn in assets2. In Hong Kong, the total gross written premiums reached HK$53,101 million, which was its strongest growth in the past five years. The Individual Life category remained the dominant line of business, making up HK$426,344 million or 92.4% of total long term business3.
Worldwide, the industry offers a range of policy and product combinations, which are sold through extensive distribution channels: about 52% of global life insurance is sold via banks while brokers, financial advisers and a small portion of direct sellers sell the remainder.
Growth in the life insurance industry is held back by legacy systems and generally poor turnaround times that put it way behind its FinTech, banking, financial services and general insurance peers.
Industry growth is tepid at less than 1% globally3. While the industry’s sheer size limits its pace of expansion, growth is also held back by legacy systems and generally poor turnaround times that put it way behind its FinTech, banking, financial services and general insurance peers.
Legacy infrastructures and an Old World customer experience
In the US, the average turnaround time between application and receiving a life policy is approximately 27 days. Other countries aren’t much better, with turnaround times of 3-5 weeks depending on the level of underwriting required. Onboarding simply doesn’t match the needs of modern consumers and the process is fraught with uncertainty and anxiety — even if you fill in an application you have no idea if you will get the policy or not.
Application forms are littered with onerous questions and in lots of cases the applicant also requires medical tests. In an age of powerful predictive analytics and intelligent technologies, the life industry still relies on actuarial tables to determine risk, as well as other traditional data points, including an applicant’s geographical location and marital status. This is then layered with a medical analysis.
In an age of powerful predictive analytics and intelligent technologies, the life insurance industry still relies on actuarial tables and other traditional data points to determine risk. The entire customer journey fails to meet modern consumer expectations.
And it doesn’t stop with onboarding. To this day some insurers take death claim forms (and its numerous supporting documents) via fax only. The entire customer experience (CX) hasn’t moved with the times and doesn’t match the experience consumers expect when they are buying a product or a set of services.
Reinventing the CX journey
The life insurance industry’s onboarding journey is ripe for reinvention. If the industry is going to progress and digitally modernize, it needs to transform how customers onboard. The journey must be much shorter, if not instantaneous, and much more customer friendly.
This is why we’re seeing life insurance companies emulating the retail experience. They’re setting up different brands and franchises where customers can walk in, pick their policy off the shelf (so to speak) and purchase it. They’re using technology to auto-populate application forms and draw data from third-parties to run basic risk and affordability checks.
Fraud is always an important issue in insurance, and as insurers digitalize and move to more faceless interactions and speed up their onboarding processes, there’s often a worry that easier onboarding also makes it easier for fraudsters to simulate identities and receive the same quick approval processes as a valid consumer.
The key is to leverage new technologies to build robust protections while maintaining a friction-right experience. The next era of digital services, including fraud protection and identity management, will be defined by the integration of intelligent technologies like AI and ML with big data. Seamless onboarding solutions represent the next step in this evolution of best practices, bringing together multiple disruptive technologies to offer a new level of consumer and business benefits. Today banks that have implemented this are capable of collecting and processing all necessary information and rendering a credit decision in minutes with only a few taps of a screen. This kind of seamless customer integration and management is coming across a broad range of verticals, including insurance. Companies that best take advantage of these solutions will emerge as new leaders and consumer favorites in the same manner as Amazon and Uber. For more on this and the future of fraud protection, please visit my colleague's fraud aritcles here.
Seamless customer integration and management is coming across a broad range of verticals, including insurance. Companies that best take advantage of these solutions will emerge as new leaders and consumer favorites in the same manner as Amazon and Uber.
The role of data in transforming CX
An improved, modernized approach is for insurers to use alternative data and credit data to assess the relative risk associated with individuals at the time of application, before the underwriting process even starts. Instead of subjecting customers to a range of questions and tests and causing delays, insurers in countries like the US use alternative data to create scores upfront that give insurers an instant snapshot of a consumer’s behaviours and other measurable indicators over time. Put these in defined risk parameters and you’ve created a straight-through journey of simplified underwriting that either flags an applicant as lower risk — eliminating the need for onerous underwriting — or higher risk — calling for further requirements before approval is granted.
Modernizing the life insurance business is beginning to drive strong improvements in CX and financial performance. For example, after working with TransUnion, an insurer in India that implemented data-driven assessments into their onboarding processes between 2018 and 2019 sold 60% more policies and wrote 60% more premiums than their competitors — the highest growth in any portfolio in the Indian market. In short order, they climbed to the number two ranking in terms of book size in the Indian market. Taking away overcomplicated onboarding processes, enhancing CX and lowering consumer abandonment rates offers the industry massive potential gains.
After working with TransUnion, an insurer in India that implemented data-driven assessments into their onboarding processes between 2018 and 2019 sold 60% more policies and wrote 60% more premiums than their competitors — the highest growth in any portfolio in the Indian market.
Data-driven risk assessment is allowing for a greater proportion of applications in the life insurance industry to be straight-through processed and more policies sold online. This doesn’t necessarily mean replacing intermediated channels: the same technology can be used by brokers to capture information electronically and inform customers in real time whether they have been granted a policy or not.
In Hong Kong, the Insurance Authority authorized Hong Kong’s first virtual insurer in December 2018 which is offering life and medical insurance plans solely through a digital platform. By leveraging technology, the insurer is able to tap into market segments underserved by traditional insurers and insurance intermediaries, and can formulate a holistic Insurtech strategy that aims at reshaping the market infrastructure3.
An exciting outlook
Digitally transforming the life insurance onboarding process has enormous potential. Data-based technologies will not only better solve for fraud and risk, they will significantly enhance CX, drive efficiencies and create large new growth and service opportunities. Firms that leverage technology and innovate will differentiate themselves and quickly build strategic advantages.
TransUnion’s IDVision with iovation offers a full-range platform of solutions for firms, encompassing ID establishment, ID verification, fraud checks, analytics/models, and stepped-up authentication. Make sure you explore here to see what these can do for you.
TransUnion Seamless Onboarding
TransUnion will soon bring Seamless Onboarding to the market which will enable our customers to onboard their consumers in a quick, seamless manner with minimal friction in the consumer experience, while leveraging the latest advances around biometrics and digital verification and TransUnion’s expansive credit and alternate data..