This year, the financial services industry faces the prospect of significant regulatory change and potential impacts to the life insurance sector.
In a time of flux, carriers are challenged to render their businesses more scalable, efficient and consumer-friendly, while supporting the bottom-line goals of distribution partners. Financial professionals, too, are challenged to consider how they can become more viable, productive and focused on meeting each customer’s needs in the right way with the right solution every time.
Process innovation is key. But there’s more to the equation.
Consider how one well-known American company has focused continually on process innovation to better serve customers. Nearly a decade ago, in 2007, Domino’s began offering convenient online ordering. A year later, the company introduced the Pizza Builder, allowing people to customize their pizzas online, from crust to sauce and toppings, and view their selections appearing onscreen, creating a depiction of their perfect pizza. The process innovation didn’t stop there.
That same year, Domino’s launched the Pizza Tracker®, designed to show customers, in real time, the key steps in the handling of their pie, from preparation and baking to inspection and delivery or carryout. In 2015, the company introduced Domino’s DXP® (Delivery Expert), a custom-built pizza delivery vehicle with an integrated pizza warming oven to help ensure customer satisfaction.
As a recent article by Forbes.com contributor Dale Buss relayed: “This is an arc that Domino’s has been on for a couple of years now, and previously has seen the brand emphasize its digital wizardry in making pizza ridiculously easy to order – now by mobile app, texting emojis, via a voice-recognition avatar named ‘Dom,’ and most recently through the Apple Watch.”
Process innovation in life insurance
Longtime financial professionals likely would say that process innovation in the life insurance industry doesn’t happen as quickly or get heralded as loudly as in many other business-to-consumer industries. In life insurance, product innovation traditionally has been of paramount focus. But process innovation has the potential to drive enhanced product delivery and will be something for carriers and distribution professionals alike to increase focus on in 2017.
“Even Americans who own life insurance might not own enough to keep their families financially secure,” says LIMRA President and CEO Bob Kerzner.
Consumer needs still colossal
The life insurance industry must continue improving on process in order to ease the way for clients to understand more fully how the solutions are designed to work, because consumer needs remain colossal. LIMRA President and CEO Bob Kerzner shared in a recent press release from the organization that “more than 37 million American families are completely uninsured and at financial risk if their primary wage earner dies unexpectedly.”
Additionally, life insurance coverage adequacy has declined, according to the release: “In 2010, insured households had coverage to replace their income for 3.5 years. Today, that has dropped to 3 years, which is far lower than most industry recommendations. Using LIMRA’s Life Insurance Needs Model, LIMRA estimates that 48 percent of households (60 million) have an average life insurance coverage gap of $200,000, which amounts to more than $12 trillion in total market need.”
Kerzner reported, “Our findings indicate that even Americans who own life insurance might not own enough to keep their families financially secure. It is important that people re-examine their life insurance needs on a regular basis to ensure they have enough life insurance coverage as their life situations change.”
The coverage shortfall doesn’t just translate into compelling consumer needs. It also suggests compelling opportunities for life insurance professionals in the coming year.
Ramifications across generations
The needs and opportunities proliferate across generations of clients. Millennials, who will be ages 21-36 in 2017, may be among the youngest buyers or prospective buyers of life insurance; yet, their needs may be among the most profound.
“As the leading edge of millennials have gotten older, they are beginning to get married, buy homes and have children, which are the top triggers for people to shop for life insurance,” Kerzner relayed. “Many of this generation became adults during the Great Recession. As a result, our studies indicate that they are more concerned about protecting their financial well-being than prior generations at the same age.”
The priorities of Generation X, who will be ages 37-52 in 2017, may differ. But in this market segment as well, client needs for protection appear to abound. Gen X consumers are not only well-educated and hardworking, according to the Center for Work-Life Policy. They have disproportionate spending power, according to Forbes. Only one-fourth of adults are Gen X; yet, they account for nearly a third of total U.S. income, and 29 percent of total net worth.
Baby boomers, who will be ages 53-71 in 2017, continue to struggle and their plight gives rise to opportunities to match solutions to needs. A recent study by the Insured Retirement Institute revealed that although more than 80 percent of retirees are receiving some income from a pension plan, and 42 percent are receiving at least half of their retirement income from a pension, less than 25 percent of current private-sector workers are covered under a defined benefit plan. IRI estimates that as many as 56 million boomers won’t receive any retirement income from a pension and that future retirees may need over $400,000 to make up for this income shortfall.
Insurance industry research indicates that Asian-American life insurance prospects tend to respond to a tailored, culturally attuned sales approach. (photo: iStock)
Multicultural market needs
Consider how process innovation among life insurers and financial professionals might better meet the needs of multicultural communities, too, in 2017 and beyond. The most recent U.S. Census Bureau projections indicate that the Hispanic population, which numbers more than 55 million, will grow nearly 115 percent by 2060. The same Census Bureau estimates also project that the Asian population in America will grow from fewer than 20 million in 2014 to more than 48 million by 2060.
To more effectively fulfill the financial and retirement savings goals of multicultural consumers, the life insurance industry must center more on interacting with them where they live and work and in their native languages, with solutions that speak clearly to their unique financial priorities. But multicultural markets aren’t the only sectors in which a more consumer-friendly approach is imperative in 2017 and beyond.
Customers of all backgrounds and ages appreciate customer-centric product design and delivery. Millennials may demand it most vocally (online and offline), but Gen Xers and boomers, too, value choice, flexibility and responsiveness to individual needs.
Related: Diversity equals profitability
Critical elements in the equation
In the mission to continue enhancing product design and delivery, three key elements converge: not just process innovation, but also deep consumer insights (based on engagement) and automated underwriting. If the resulting products are easier for consumers to understand and accept, more client needs likely will be met.
It’s up to the life insurance industry to make the solutions easier to explain and easier for consumers to comprehend. It’s time to take some of the mystery out of the products as well as the application and underwriting process.
The true impact in 2017 of the DOL fiduciary standard remains a mystery. (Photo: iStock)
Lots to learn
What remains a mystery as this article goes to press is exactly how the DOL fiduciary rule will be interpreted by the courts, and how its scheduled implementation in April 2017 will play out. Much has been written about how the rule would create disruption for financial professionals who don’t have securities licenses. Time will tell what will become of the rule. But in 2017, the carriers that may be most helpful to work with are those that:
- Show unwavering dedication to client priorities;
- Are appropriately situated to fulfill the evolving needs of future retirees;
- Continue to invest in aligning with the provisions of the DOL rule;
- Maintain ongoing, frank discussions with distribution partners, and;
- Offer an expansive product portfolio through a diverse distribution network to respond to consumers’ growing needs for guaranteed lifetime income and other savings solutions.
Resources and solutions
Given the opportunities as well as some hurdles going into the new year, financial professionals may be well-served by leveraging newly bolstered educational offerings from life insurance companies. From videos to live-streamed presentations, the training and interactive tools are designed to keep distribution partners abreast of the challenges as well as appropriate solutions.
These educational resources may be invaluable when reviewing with clients the solutions that are most fitting for each individual situation, but that also require more understanding — for example, indexed products. As indexed products are designed to offer greater returns than fixed rate products, they may serve a powerful role in a time when consumers have to bear increased personal responsibility for their own retirement and financial security.
Given, as well, that taxes may rise or social program entitlements may decrease due to a burgeoning federal deficit, it’s possible that permanent life insurance solutions — particularly if structured for robust accumulation and tax-favored access to cash values – will represent a strong opportunity to meet more consumer needs. Keep in mind, however, that financial professionals should always tell clients to consult a tax advisor when considering their own situation.
Whatever 2017 brings, financial professionals who keep a keen eye toward ways that carriers are implementing process innovation, leveraging comprehensive consumer insights, and facilitating streamlined underwriting to respond more effectively to client needs have great reason for optimism. Life insurance is not the same as pizza, but still, there are better ways to create and deliver it.
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