Close Close

Life Health > Life Insurance

Its No Longer Business As Usual, So Don't Offer The Usual Solutions

Your article was successfully shared with the contacts you provided.

Its No Longer Business As Usual, So Dont Offer The Usual Solutions

Micheal Levison

These are difficult times for the life and health reinsurance industry. Margins continue to narrow and investment portfolios have been battered. Capital is difficult to raise and the industrys core value proposition is seen by many as a commodity.

Long gone are the days when reinsurance client relationships were built largely on personal relationships and entertainment budgets. Todays cedents are much more demanding and much more focused on their bottom line.

The major players in the industry are reacting to these realities in two distinct ways. One group has adopted a “back to basics” strategy, shedding unprofitable product lines and trimming ancillary services. This camp is focused on doing just a few things and doing them very well. Rather than forsaking innovative ways to add value, these reinsurers seek to add services that are much more product focused.

Contrastingly, the reinsurers in the other camp have adopted a “more is better” strategy. They feel the best way to differentiate themselves from the competition is to offer a wide range of support services that address many of the most fundamental challenges insurance companies face.

Some of these services have been offered for quite some time. Support provided in the areas of IT, policyholder administration, claims management and asset management have been of tremendous help to many carriers. Most of these initiatives can be broadly classified as operational support.

But recently, some of the most innovative companies have developed and begun offering marketing support as well. On their own or in partnership with specialists, they are bringing their clients and prospects unique strategies designed to generate more revenue, lower acquisition costs and improve retention rates. Naturally, the quid pro quo for this support is healthy participation in the premium generated from these initiatives.

For instance, one leading reinsurer has made significant investment in a product chassis and an IT infrastructure designed to more efficiently sell face amounts of life insurance below $250,000.

This “middle market” is a primary focus for large retail banks entering the life business. As these banks seek out carrier partners, those that can bring an effective processing system to the challenge will have an edge. By helping their cedents compete in new distribution channels more effectively, these reinsurers ultimately help themselves.

Another strategy is focused on the retention challenge facing annuity portfolios. At least one carrier provides a turnkey marketing campaign designed to “capture the runoff” of a cedant’s annuity contracts during the surrender process. Other strategies are aimed at acquiring additional deposits on existing contracts.

Yet another strategy focuses on converting short- term Retained Asset Accounts that an insurer sets up to hold a beneficiarys proceeds from a life insurance claim into long-term annuity or life insurance relationships.

Given recent stock market fluctuations, others also are having success in proactively converting variable annuities to an existing carriers fixed contracts before the customers move their money to other companies.

Some forward-thinking reinsurers are attacking the marketing challenge through product differentiation. The theory being that innovative product features will make the product easier for the agent to sell and easier for the consumer to differentiate. In some markets, one reinsurer has started adding a “low cost” benefit to Critical Illness policies that provides access to a worldwide network of leading specialists upon diagnosis.

Other reinsurers have taken a similar approach with riders that cover the cost of second opinions. Another reinsurer, for example, has done a great deal of work providing an efficient product design for simplified issue term life insurance.

Reinsurers can help their clients unlock the latent value found in their policyholder portfolios.

Effective cross-selling has been a very frustrating challenge for most carriers. Some studies estimate that 80% to 90% of policyholders never hear from their agent. These agents are clearly focused on servicing their “A” clients and finding new ones.

Many reinsurers see this as a real opportunity to add value to their client relationships and to help grow their own business at the same time. Through the use of cutting edge direct marketing techniques, a proprietary technology platform and marketing campaign funding provided by the reinsurers, a carrier can implement a comprehensive policyholder marketing strategy on a completely outsourced basis.

Reinsurers can also design products that allow the carrier to integrate the campaigns into their core distribution channels at the level they desire. The program is well-suited for marketing both riders and stand-alone products on a post-sale basis.

These are but a few examples of the trend. As time goes on, leading reinsurers will undoubtedly come up with new ways to differentiate themselves. For some, their survival will depend on it.

Micheal Levison is CEO of North, Central and South American operations for ReMark International, Atlanta. His e-mail is [email protected].

Reproduced from National Underwriter Life & Health/Financial Services Edition, October 10, 2003. Copyright 2003 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.