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Where is the industry headed in terms of developing user-friendly products?

Assuming the term “products” entails the combination of products, issue processes and marketing, the answer is forward.

The trend in the past few years in the life insurance sector has set the pace. The industry has achieved much demonstrable progress in developing more producer-friendly products and services.

The efforts were first prominently directed at nontraditional channels, including banks, brokerage firms (regionals and large warehouses) and investment-oriented financial planning firms.

Representatives of such firms have had (and continue to have) the selling of investments and investment-oriented vehicles as a primary focus. The reps make such sales expeditiously and move on to the next transaction quickly. Hence, some call these reps “ticket-writers.”

To make inroads into this channel, insurers found they needed to create products and processes that allow for sales in large volumes. This required a different mindset on the part of insurers. Many recognized this and changed their ways of doing business to accommodate the channel realities.

For example, they have had success selling investment-oriented vehicles such as single-premium life products in the bank channel. They package these sales with extraordinarily fast underwriting processessometimes as fast as 15 minutes–so that the process more closely follows what bank reps are accustomed to when selling other products.

To do this, the companies make the application quite brief, using only an accept/reject process that is based on responses to five or six broad questions. This is suited to the needs in the bank channel, where the death benefits sold are relatively modest, often limited to the low six-figure amounts or less.

In brokerage firms, the need to sell larger policies is much greater. Note, however, the term “larger” here refers to larger single-purchase amounts, not death benefits. Again, the design is because of the investment mindset of the distributor and the distributors customer.

Insurers now offer this channel single-purchase products that feature the flexibility of multi-pay products. The designs also include extremely favorable access to cash values, when such access may be needed. The performance characteristics rank well when compared to mutual funds and annuities on an after-tax basis.

It does require a more robust underwriting process for insurers to be able to sell such larger size policies with quality performance. Yet this process must move very quickly just the same. Average turnarounds of 2 to 5 days are quite possible.

To achieve favorable underwriting outcomes, the insurers use teleunderwriters who gather underwriting data in a systematic and consistent manner. This allows the reps to do what they do best, which is sell more product and advise clients on the best way to accumulate wealth. For this market, independent underwriter consultants have developed excellent drill-down questionnaires that the teleunderwriters use to either confirm or expand upon answers given by applicants.

The use of prescription databases also is growing. Such databases permit independent insurer confirmation of applicant-proffered information.

Some reinsurers now sell expert underwriting systems, too. These permit online applications, include immediate access to the prescription databases, and analyze and accept/reject applications in a timely fashion.

What is the outcome of all this? It permits volume sales of investment-oriented insurance products by sales agents.

Conventional wisdom has it that more traditional producers do not need such products (as defined above). Those who feel producers thrive on addressing difficult and complex market problems particularly are convinced this is so.

My own view is slightly different. There is no question that a significant place will remain for such sophisticated specialists. However, it is very likely that producers who have survived the difficult market in the past few years have done so only because they could deal with the complexity of industry offerings.

Now, if the industry were to move toward simpler designs, or complex designs that are packaged simply, or product designs that the lay person on the street can understand, then the industry would be able to inspire a new core set of producers to sell much larger volumes of business than most executives currently think possible.

Further, the new core set of producers could accomplish this feat by selling insurance instead of mutual funds and annuities.

These user-friendly “products” will combine the best of the following:

Simpler and understandable designs; and,

Speedier issue and underwriting performed by professionals, thus relieving the agent of tasks that take him away from serving his clients.

Will this happen? You bet. In some venues, it is already occurring.

, FSA, MAAA, CLU, is president of Actuarial Strategies Inc., Bloomfield, Conn.E-mail him at caryl@actstrat.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, December 5, 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.