With the repeal of the Glass-Stegall Act, mutual fund companies could offer their customer base term life insurance.
Practically speaking, however, distribution and a cumbersome fulfillment process barred entry into the market. Advances in Internet technology have removed these barriers to a large degree, making term life a viable market for new growth and increasing the likelihood that mutual fund and other financial companies will enter the market.
Life insurance companies can benefit by taking a close look at the business model mutual fund companies use to sell term life to see if any aspects can be applied to improve the traditional insurance company model.
About 18 months ago, Transamerica Reinsurance and Computer Sciences Corp., El Segundo, Calif., our business process outsourcing partner, began mapping out a strategy to enable a large mutual fund company to partner with an insurance carrier to offer a fully underwritten term program.
The ability to distribute term insurance directly to a consumer, without agents, was a prerequisite. Utilizing Internet technology, we developed a term life insurance Web site branded in the mutual fund company’s name and accessible via the mutual fund company’s main site. We engineered the term life site to automate the application process, streamline fulfillment procedures and significantly improve communication among the various groups involved in the entire process.
The term life insurance Web site went live in fall of 2001. The program has exceeded early expectations in terms of applications submitted and policies issued.
It is important to note that our client entered this initiative with two distinct advantages: A strong brand and a well-established primary Web site that is used by a large number of existing customers to conduct financial transactions of all kinds. The volume and, more importantly, the frequency of visits made their site an excellent portal for term life sales.
Using the Internet as a distribution channel may be the most visible element of the mutual fund company’s term life program, but what happens behind the scenes is every bit as important to the overall program.
Internet technology simplifies policy enrollment for the consumer and adds efficiencies to policy fulfillment and ongoing customer service. It also establishes automatic communication links so that fully underwritten policies can be processed faster and with fewer errors. These are areas where life insurance companies may be able to do more to leverage Internet technology even in their existing channels.
To maximize the value of Internet capabilities, insurers need to focus on using the Internet to support their current producers, with customer service employees interacting with the agency force. The Internet can be a valuable tool to generate leads and to streamline back office activities.
One of the most important benefits of a well-designed Internet program is the seamless interface of all related activities: pre-enrollment marketing, policy application, evidence gathering, underwriting, policy issue and ongoing customer service. When these activities are electronically tied together, the result is better communication and faster hand-offs among the different groups involved in the process.
The program we developed works as follows: