Life Insurance Rebirth

This article is based on a speech I gave for a group of life insurance underwriters.  It is focused on life insurance but has strong parallels with all lines of insurance. 

“The pace of change has never been this fast before and it’ll never be this slow again.”

This quote nails the impact technology is having in all industries as the digital revolution matures. Technological impacts and the pace of change does vary from one industry to another and many single out insurance for being slower and behind.

A 50% Increase in Population and a 0% Increase in Life Insurance Policies

In 1975 the New York Times published an article titled “Year of No Growth For Life Insurance.”

The article opens with this:

“The sale of life insurance to individuals, traditionally considered immune to the ups and downs of the nation's economy, is expected to show virtually no growth this year [1975] for the first time in 25 years. The impact of the nation’s economy was cited as the principal reason.”

In February of 2018, Bloomberg published an article titled “The Decline of Life Insurance Is a Mystery.”

This author describes how in 1965, Americans purchased 27 million life insurance policies. In 2016, the population was 50 percent larger than in 1965, yet Americans still only bought 27 million policies. There may be dozens of logical reasons for this, but no matter how one slices it, there is an opportunity to expand our products to those that desperately need our coverage.

Life Insurance carriers are in a tough spot to say the least. Actuarially speaking, the greater risk for many people is longevity over pre-mature death. Thankfully, the life insurance industry is well positioned to protect people against longevity, but the industry needs to clearly articulate the value proposition. Today everyone is endlessly distracted, and every carrier is jockeying for attention and working tirelessly to demonstrate importance and relevance to our customers and prospective customers.

Life insurance is a unique business, we seek the attention from people that do not want to think about what we do: protection from pre-mature death. No one wants to think about their own mortality, but yet it is paramount to plan properly and ensure your loved ones can financially continue even when you are gone.

The Rebirth of the Life Insurance Industry

The articles quoted above demonstrate the difficulty in getting our message out when one focuses on passing on wealth to your loved ones or providing much needed liquidity to pay for burial expenses and mortgage payments. Getting people excited about life insurance is no easy task, but yet the health of the industry depends greatly on getting people to act and see the critical importance of life insurance in their overall financial plan.

That’s why this industry needs a “rebirth” so to speak. A need to focus on improving life and furthering customer experience for instance. A shift toward lifestyle benefits and customized products that meet the needs of the customers that so badly need our products.

At Farm Bureau Financial Services, I spend a lot of time reviewing industry trends, new ideas and evaluating startup firms. Startup firms do not have the historical information and perspective incumbent carriers have, but many of them focus greatly on lessening friction in the sales process, improving efficiency and increasingly incorporate digital strategies to do so. Many of them believe that consumers are looking for a different experience and may want to go through a different process when they purchase insurance. Some are looking to revamp life insurance by rewarding for certain healthy behaviors and habits. All told, this transformation is occurring in real time and could have large implications to the industry.

You might be thinking “Okay, well it’s easy for small insurance startups to innovate and change, but what about the old incumbent firms?” Can an established insurance carrier truly innovate?

I say unequivocally yes. 

I believe many incumbent carriers are greatly positioned because they have large pools of human capital to leverage, years and years of data to deploy, and they understand the importance of the industry in society. Additionally, incumbent carriers work every day within the regulatory structures and maintain robust compliance programs. Many incumbent firms are in a phenomenal position to compete, win, and increase relevancy over the coming years.  However, I also believe a number of the startup firms are very well positioned to help incumbent firms through this journey. These partnerships will clearly drive certain carriers to the winners circle.   

The Best Way to Innovate is From Within

The most valuable resource we have are the incredibly talented, dedicated, creative and smart people that work at our company. I suspect most carriers would feel the same way. That is why it is so important to tap into the people we have within our four walls. We are all consumers of products we love (sometimes hate) outside of our day job and when you combine that with the amazing knowledge we all possess with insurance there is definitely a winning combination there. Recognizing this, we committed to an innovation fund at Farm Bureau Financial Services. We are not investing directly in companies to take an equity position. We are using these resources as our opportunity to try new things, manage new ideas and see what innovations and ideas we want to take forward into our operations someday. This fund exists to spend and is supported by a cross functional team of emerging leaders within the company. Other FBFS associates advise this group and work within the business to advise and assist. The team works to support new ideas and act as a true test kitchen for these new ideas. FBFS may be unique in the fact that our company offers many other lines of insurance outside of life insurance, but any organization can find and evaluate a large number of new ideas.

Innovation has numerous definitions, but I believe at the core of innovation is collaborating with others to drive an idea forward.  A company should only undertake this process to grow and serve customers better. Creating the future now is critical and making sure our customers and prospective customers know the value of life insurance and why they need the protection is important.  

It is hard to measure the ROI today on these efforts or any efforts like this. However, as this process evolves, it leads to new ideas, helps focus on customer centricity and experience and plows the road for the future. These efforts energize people and provide a creative outlet to those involved. These efforts also help agents in the field do what they do best, which is offer top flight service and expertise to customers. Insurance is a business that demands humanity and often times when people are filing a claim it may be the worst day of their life. Having an expert on your side to navigate this and set up the right plan is key. Insurance, whether life or otherwise, is not a commodity and aligning technology with a great agent is another key toward success.

I have been around the life insurance industry since 2003, and the way I see it, the industry’s largest threat may be ourselves, but I also believe therein lies our biggest opportunities. It is easy and tempting to remain complacent because, to be honest, what we did yesterday worked well. Additionally, our industry has done a commendable job protecting people’s financial future for decades. However, as the Bloomberg article demonstrates, what was good enough in 1965 may not work today and into the future. Meeting the demands of consumers today and the generations that are coming later is critical for our industry to succeed and remain relevant. Our mission and purpose as an industry are simply too important to not do so. The need for mortality and longevity products has never been greater, but it is our challenge to meet the customer where they are and with the products they need in this ever evolving world we are all living in.

As the articles above make clear, the life insurance industry has passed the test of time and is still facing similar issues. Life insurance by design is a long-tail product that is critical to families and one should never discount the need to partner with financially strong well run companies when they purchase life insurance. The industry is ripe to transform and working now to transform will help meet the needs of customers for decades to come.   

Innovation can be a full contact sport. As Governor Branstad repeatedly told me, “People hate change but they love progress.” That could not be truer. Seeing outcomes that drive efficiency, enhance customer experience and even making products more precise and customized will delight employees, agents and customers. Everyone I know that works in the insurance space does it because they believe in the value of the products we offer and deliver to everyday Americans. We are their peace of mind. Transforming to continue to meet these needs and doing it on the terms the customer demands will be challenging but rewarding for all. I remain bullish on the life insurance industry and do believe companies like Farm Bureau Financial Services will win, and continue to deliver on the promises we make to customers, just like we have for over 75 years.