The life insurance landscape is changing. It is change driven by a tech-savvy consumer base, the ease and accessibility of real-time information and innovations in technology.

Insurance carriers must embrace these changes and leverage available technology and consumer information to guide business processes: automating systems, identifying customers, improving the customer experience, avoiding fraud, etc. Insurers that are not already moving in this direction are quickly falling behind in reaching their key audience.

To stay competitive and increase profitability, insurers must focus on seven critical items that create the highest return on investment, what LexisNexis calls The Smart Seven.

1. Know your prospect

From a fraud and risk evaluation perspective, it is important to know who you are doing business with. The days of establishing personal relationships with life insurance agents have fallen by the wayside as consumers and carriers transition to a more digital world.

While this presents opportunities for carriers to improve efficiencies and reduce costs, it also creates opportunities for fraudulent activity.  Insurance fraud costs at least $80 billion every year according the Coalition Against Insurance Fraud.1

Life insurers must explore aggressive and innovative ways to detect and mitigate fraud risks. Successful fraud prevention strategies are proactive; strategies detect fraud prior to policy issuance and leverage red flags/business rules, real time identity checks, relationship analytics and predictive models. Carriers that leverage both internal and external data and analytics better understand fraud risks throughout the customer lifecycles and are more prepared to detect and mitigate those risks.

2. Leverage data to modernize your process without huge technology investments

Carriers can be gun-shy about modernizing processes and databases due to the significant investment required to bring existing systems into the 21st century. This aversion to modernization can result in inadequate business information (e.g., ensuring underwriting inefficiencies, increased application cycle times, poor customer acquisition practices and low retention rates.

Carriers that want to modernize their processes without making the huge investments to upgrade their technology can enhance their business information with solutions that don’t require carriers to build a new pipe. These offerings enable carriers to leverage billions of public records from thousands of sources. Accessibility to this kind of information is critical to help insurers minimize risks and make better decisions at every phase of the business cycle.

3.       Use predictive modeling to identify the best strategies

Reducing costs and risk is based on improving basic processes and requires a deep understanding of past occurrences to forecast future trends, behavior patterns and risk. Advanced analytical services are available that provide carriers with exactly this type of insight through industry-specific predictive models.

These analytical tools enable insurers to better understand their customers and, depending on the particular model, may serve to guide appropriate business decisions regarding price offerings by risk, avoiding adverse selections, retaining profitable customers, managing costs, etc.

4. Participate in contributory databases – breaking down the barrier

Policy underwriting can be a lengthy process, taking as long as four to six weeks in certain cases. This can result in increased dropout rates among applicants who are not willing to endure such a lengthy process. Additionally, poor data quality is often one of the greatest inhibitors of effective underwriting.

Contributory databases allow insurers to pool industry-wide data, providing contributing companies with new tools to quickly and more accurately define risk profiles and continuously monitor for material misrepresentation or potential fraud.

Participating in contributory databases helps streamline and reduce costs associated with the underwriting process, maximizes decision-making information and improves efficiencies throughout the policy lifecycle. 

5. Engage Generation X and beyond – impacts on distribution, product design and policy owner service

Despite being the most connected generations with access to an increased number of channels for information, sources and purchasing opportunities, many Gen X and Y consumers do not have the life insurance coverage they need, according to a study conducted by the Life Insurance Marketing Research Association (LIMRA)2.  These consumer segments are looking for a less intrusive, more convenient way to purchase life insurance policies.

They want easy access to education information. And they want a variety of options to connect to carriers — online, phone, email and in-person. They are looking for things like third-party validation to speed up the process. It is the nature of the way they live — immediate gratification with more viral relationships.

Life insurance hasn’t adjusted for this change in the marketplace. To keep pace and gain market share insurers will need to evolve and be more responsive to the viral, social and mobile needs of these consumers.

6. Leveraging data and analytics for improved customer service and experience

Streamlining operations through data and analytics can enhance the customer experience, resulting in improved customer acquisition and retention rates.  Best-of-breed solutions use only a few customer data points to pre-populate insurance applications. This process improvement significantly expedites the application process, providing cost reductions for the carrier and optimizing the experience for the applicant. 

7. Start simple

“A journey of a thousand miles begins with one step,” said Chinese Philosopher Laozi. This statement holds true for carriers looking to improve efficiencies and profitability through the steps outlined above.

Adapting to change and scaling to meet the demands of today’s dynamic life insurance landscape may seem overwhelming, but the key is to start simple. Carriers should identify areas of their business where opportunity is greatest then define a simple plan to get started.

Success is always scalable.  

 

1.  Source:  Coalition Against Insurance Fraud: How big is $80 billion?

2.  Source:  LIMRA:  Sales Potential for Underinsured Life Insurance Market Doubles in Six Years, September 6, 2011