Ladder Financial Inc. has been doing a gut rehab of the life insurance sales and underwriting process.
The Menlo Park, California, insurance distributor is selling a term life insurance policy it designed, through the web, in 45 states and the District of Columbia.
Although LadderLife company has only 37 employees, it can issue fully, but quickly, underwritten policies while the applicants are sitting in front of their computers, with coverage limits ranging from $100,000 to as high as $8 million.
The company’s Ladder Insurance Services L.L.C. unit acts as both an insurance producer and as an insurance third-party administrator. LadderLife has arranged for Fidelity Security Life Insurance Company to write the insurance, and for Hannover Life Reassurance Company of America to serve as the reinsurer.
Canaan Partners and other venture capital firms invested $14 million in LadderLife.
LadderLife turned on its website, in California, in January 2017. It generated about $100 million in term life sales in its first 100 days of operation. A few weeks ago, RRE Ventures and Thomvest Ventures helped provide $30 million in additional capital.
Two of LadderLife’s four founders, Jamie Hale and Jeff Merkel, traveled to ThinkAdvisor Life/Health’s offices earlier this month to talk about the company.
Hale, who has a bachelor’s degree from Bowdoin College and his master’s degree in business from Harvard, spent nine years working at the Robert M. Bass family office before leaving to launch his own investment firm.
Merkel, another LadderLife founder, has a bachelor’s degree in math from Taylor University and a master’s degree in business from Stanford. Merkel started out as a management consultant. Before he helped start LadderLife, he was the director of global Android partnerships at an older startup: Google.
Here are five things Hale and Merkel talked about during their TALH interview.
1. Speed matters.
Some life insurers say their new, accelerated underwriting processes can cut the time needed to buy a life insurance policy to a few weeks, or, maybe, a few days.
Hale and Merkel rolled their eyes at the thought of making a customer wait several days to get a policy. “The conversion headwind is just massive,” Hale said.
Some older baby boomers may still go to the bank tellers to deposit checks.
Typical LadderLife site users “don’t even go to the bank branch to deposit their checks,” Hale said.
2. The silos are real.
Organizers of many other insurance technology efforts have said that one obstacle has been insurers’ silos, or divisions between different business departments.
Hale said he sees that problem at life insurers all the time. “They have so many big silos,” he said. “They have a data availability problem.”
Too often, he said, an underwriter may log in to one site to get one piece of information about an applicant, then manually enter the information into another system.
When the data is in the underwriting system, the records may be stored in such a way that analyzing the data through a simple digital process is impossible, Hale said.
Because LadderLife has better systems, it can pull in huge amounts of data, and use all of the data in underwriting, rather than using a little of the data in underwriting, Hale said.
3. Good developers have some pride.
Hale and Merkel said that one obvious problem other life insurance players have had with reinventing themselves has been thinking of software developers as “the IT help desk.”
“They’re not allowing them to innovate,’ Hale said.
Fostering innovation “takes more than a foosball table,” Merkel said.
4. Human beings can be useful.
LadderLife uses a fully automated system to process most coverage applications, but it makes heavy use of live humans to review the underwriting decisions, check for outliers, and see whether the underwriting system caused problems for protected classes of people, Hale said.
5. Life Happens matters.
Hale said he is interested in life insurance partly because of his own personal experience with life insurance: Hale’s own father died when Hale was 11.
Life insurance helped his family stay in its house, and insurance benefits helped him pay for college and grad school.
Life Happens runs annual “awareness month” campaigns in an effort to increase consumers’ awareness of life insurance.
“We think Life Happens is awesome,” Hale said.
Hale and Merkel said that one reason LadderLife can get good developers is that the developers recognize that helping more people get life insurance is important, and that improving the systems used to sell the coverage is critical to helping more people get covered.
— Read Life Agents Face Internal Awareness Threat: Marvin Feldman on ThinkAdvisor.