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Mark Scafaro. (Photo: Afficiency)

Life Health > Running Your Business > Selling

Insurtech Startups Pivot Toward Supporting the Agents: Afficiency Exec

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Mark Scafaro sees insurance distribution technology startups going down a popular path: Pivoting from trying to reach consumers directly — and cutting out the agents — to supporting the agents.

Scafaro is the co-founder and CEO of Afficiency, a company that develops life insurance products designed for distribution through websites and mobile phone apps.

Scafaro helped start the firm in 2016. It has received a total of $10.2 million in funding from an investor group that includes The Savings Bank Mutual Life Insurance Company of Massachusetts and Western & Southern Financial Group. The company says millions of dollars of insurance business are now moving through its systems every month.

In September, Afficiency joined with Western & Southern to make life insurance available through part of the mortgage purchase process to home buyers in California.

He earned a bachelor’s degree in accounting and finance from the University of Sydney in 1997, then entered the world of financial services as an analyst at Morgan Stanley, in London. He spent 11 years as a strategy executive at American Express, then three years as head of customer acquisition and servicing at MetLife, before launching Afficiency.

Scafaro answered questions via email about life and annuity insurtechs’ shift from direct-to-consumer strategies, or DTC strategies to agent-support strategies.

The answers to the questions in this interview have been edited.

THINKADVISOR: When did you suspect this pivot would happen?

MARK SCAFARO: Let’s say that the pivot was not a surprise; in the case of some insurtechs, it was a case of a pivot, or else it was a shift out of necessity.

There are a couple of reasons for this: a) the opportunity with agents was always there; agents increasingly want easier digital solutions themselves; and b) there is no denying that making direct-to-consumer (DTC) work economically is extremely difficult.

It’s often said life insurance is sold, not bought. While some consumers out there want to buy and not be sold, it’s really hard to find them.

The acquisition cost for those consumers is high, so it’s only natural that insurtechs focused on DTC have pivoted to agents.

Did the pivot happen faster or more slowly than you expected?

COVID-19 certainly whet the agent appetite for digital tools.

Agents more or less had to become more receptive to digital solutions, and they realized they needed more digital solutions to get their jobs done.

So, the pandemic and all the accompanying changes accelerated the pivot on the agent side.

What’s great is that insurtechs can now capitalize on the move of the agent force to digitization.

Why have life insurance agents survived?

Once again, the adage that life insurance is sold and not bought rings true. The economics are still there for agents to be profitable; agents will continue to be relevant.

Until artificial intelligence gets good enough and can mimic a human being, there will always be space for agents to sell life insurance, especially with the existing commission structure, which makes it a very viable role.

It’s also important to remember that life insurance agents come in many forms and sizes. While some focus on basic insurance products, others are more like financial advisors, working with different types of clients across a broad range of products.

Many consumers perceive life insurance products as complicated and appreciate the advice and guidance of an agent; they need to be reassured and appreciate what an agent has to offer.

Do you think agents will continue to survive once the iPad generation becomes adult prospects?

There will always be a place for an advisor. Until AI becomes so advanced and completely replaces humans, making the agent obsolete, there will always be room for agents to sell life insurance.

We’re certainly not there yet! But it is important to note that there are opportunities for some life insurance products to be embedded within other financial or insurance transactions, perhaps when the consumer is signing up for a mortgage or enrolling in employee benefits.

Do you think the same thing is happening in other financial services sectors, or are the other sectors more (or less) digitalized?

Other sectors are certainly more digitized; the pandemic gave life insurers the impetus to embrace digitization. But that does not mean it’s been easy for carriers and distributors alike to modernize, allowing insurtechs like us to play a key role.

Life carriers were not positioned well or equipped to bring 100% digital products to market. It can take them years to do that, and distributors don’t want to wait that long. We’re able to bridge the divide between carrier and distribution, bringing innovative, digital products to market in a matter of months.

The other important thing to note is that it isn’t feasible to take an existing product and dress it up as a digital offering, as it just doesn’t work like that.

Often, retrofitting backfires. If a product is to be digital, it must be 100% digital from the outset.

Do you see differences in digitalization levels as a threat to the life insurance community or a help? Is depending on agents good for the life and annuity sectors or helping non-insurance financial services companies grab all of the assets?

We’re seeing the best outcomes realized when agents are equipped with the right digital tools, and it isn’t a case of digital tools being a threat to the life insurance community.

In fact, it is quite the opposite.

Agents who embrace the right tools are meeting the market where it is and seeing success.

We have seen the greatest success when there is a collaborative effort between all parties.

We’re uniquely equipped and positioned to bridge the gap between carriers and distribution, helping them to make accessible and easy-to-understand life insurance policies that are available digitally a reality.

Mark Scafaro. (Photo: Afficiency)


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