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Reimagining Life Insurance Sales: The Digital Distribution Imperative

Successful distribution strategies rarely make headlines. Unfortunately, unsuccessful ones do.

That’s one of the big legacies of COVID-19. We’ve all gotten a crash course in supply, demand and the logistics of getting “shots into arms,” learning firsthand that the distribution of goods and services, which most of us take for granted, is actually quite hard.

The same holds true in life insurance. While our industry doesn’t take distribution for granted, we still make it look way harder than it needs to be. Consumer buying habits have changed dramatically over the past decade, yet it took a pandemic for many insurance carriers to digitize the most basic functions. These “digital bandaids” helped keep the lights on, but inefficiencies in distribution remain and there will never be a better time to solve them once and for all.

Now, while interest in life insurance is on the rise, we need to reimagine sales and distribution for a new era.

The Life Insurance Distribution Value Chain

There are a number of distribution channels for life insurance, but at the highest level the journey is the same: acquire, process, issue, service.

Traditionally, the industry’s biggest challenges have been at the beginning and end of this journey: finding customers, and keeping them happy. Infrastructure to process — agents, applications, actuaries — and to issue — underwriting, delivery — is well understood and remains largely unchanged since the inception of the industry more than a century ago.

But as we all know, consumer buying habits have been changing for more than a decade as Amazon and others have simplified and streamlined the buying process — and today consumer expectations are sky high. So even before the pandemic, the disconnect between how life insurance is sold and how consumers like to buy had been growing.

As a result, the onset and ongoing grip of the pandemic created a ‘perfect storm’ for life insurance distribution.

Data from the MIB Group for 2020 shows record activity for life insurance applications driven in large part by younger people (≤59). Traditionally, finding customers when they are actively looking for life insurance (often due to an event such as marriage, birth of a child, new home ownership, etc.) has been difficult. Today, the event is the pandemic and interest in life insurance products is high — at least for now.

Unfortunately, the opportunity to engage potential customers remains limited by face-to-face and paper-based processes that are essentially incompatible with buying anything during a pandemic. Hence the imperative to go digital. It’s no longer a “nice-to-have,” and, if we’re honest, it hasn’t been for years as far as most consumers are concerned.
Benefits of Digital Distribution

No matter how a life insurance policy is sold — through an independent broker, an agent affiliated with an insurance carrier, or direct to consumer — the realities of modern life require that the process must be digital from end-to-end. Digital distribution not only aligns more closely with how consumers want to buy, it’s also critical to reducing errors, cost, and time to policy delivery — opportunities that are paramount to producers and carriers.

For the life insurance industry to realize the benefits of digital distribution, every step in the distribution lifecycle must be connected, automated (when possible), and integrated with existing systems and processes with each step flowing seamlessly into the next. It’s not enough to simply digitize certain parts of the value chain if everything that comes before, and everything that comes after, is largely disconnected and manual.

The Digital Distribution Flow

The majority of life insurance policies are still sold through independent agents and insurance agencies, but lead generation is increasingly digital. Consumers use social media and other digital channels to get recommendations from friends and family. They also are comfortable researching products and self-educating online. These initial digital activities are instrumental in identifying potential leads, and by tracking digital behavior life-insurance carriers can start to qualify these leads and turn them into prospects. For example, a prospect that begins an online application is more qualified than a prospect who completes a needs analysis.

Automating lead capture and qualification helps producers know where and when to invest time in prospects, but it can’t be the end of the digital road. Once a quote is generated, eApps dynamically update based on available information and can be completed in tandem with an advisor or independently. Application information is fed directly into a carrier’s backend systems for underwriting and processing.

Once accepted, documentation is automatically generated and sent for signing (e-signing if that’s an option). When a policy is issued and premiums paid, it’s added to an existing policy administration system for as long as it's in force.

From there, the last step in the distribution chain is servicing, which many equate with billing and claims, but this narrow definition undercuts the industry’s longer-term business opportunity. In the past, once a policy was issued, the customer opportunity was considered closed as long as the bills were being paid. Savvy life insurance carriers and producers are adding digital tools for ongoing engagement designed to identify upsell opportunities and maintain brand loyalty.

Digital Distribution = Increased Opportunity & Revenue

Which brings us back to the coronavirus vaccine example. As consumers run into difficulties getting vaccinated, they begin to lose faith in related institutions - federal, state, and local governments, as well as healthcare providers. As consumers run into roadblocks purchasing life insurance, they either go without or find an easier buying option.

Either way, lost opportunity equals lost revenue for incumbent life insurers. Digital distribution offers a potent remedy, solving a problem that existed before the pandemic and isn’t going away.

That said, the opportunity to sell to customers who are paying attention will wane once more people get vaccinated. If our industry does not consider digital distribution an imperative now, we not only leave money on the table, but we also leave a void that digital-native insurers are all too happy to fill.
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