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:
–Potential buyers on the site can calculate their needs, get a premium quote and apply online. If necessary, they can access general information about term life and review frequently asked questions.
–Within one business day of submitting the online application, an enrollment specialist contacts the applicant by phone to complete a medical history.
–A routine para-medical exam follows.
–Once all test results are received, an underwriter issues a decision regarding insurance qualification.
–Policies can be issued within 30 days.
–Producers, customer service and insured individuals can go to the site’s policy status feature to check the status of a policy. They can also use this feature to check the status of an application or in-force policy.
–Policy owners can download forms to initiate customer service transactions. Some of the more simple transactions, like address, billing and beneficiary changes, can be completed on line as self-service transactions.
From the perspective of the applicant, it all happens transparently. The site looks and feels like the Web site of the mutual fund company–so no one realizes that it’s being hosted by Transamerica Reinsurance.
Behind the scenes are the people and technology of CSC and Transamerica Reinsurance. CSC, working with third party vendor Examination Management Services, Inc., Waco, Texas, manages the application enrollment process including tele-app and para-medical procedures, as well as policy administration and policy service.
Applications are uploaded from the Web site directly into CSC’s CyberLife administration system, using CSC’s ViLink software for processing new business transactions over the Web. In addition to creating and hosting the Web site, Transamerica Re provides product development and case underwriting services. An AEGON-affiliated life insurer underwrites the policies.
To date, many insurers have not found the Internet, by itself, to be an effective source of new business. But the Internet does offer effective tools to help drive your business.
These tools can be especially useful in automating the application process, improving communication between producers and customer service employees, and connecting the various “back room” activities so that fulfillment procedures occur faster and with fewer errors.
Making Internet tools available to producers lets them focus time and effort where they add the most value, and that’s prospecting and facilitating sales–not performing paper intensive application and fulfillment procedures.
is lead consultant, product consulting &development with Transamerica Reinsurance, Charlotte, N.C. His e-mail is firstname.lastname@example.org.
Reproduced from National Underwriter Life & Health/Financial Services Edition, March 18, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.