Technically speaking, life insurance is behind the times

Robert W. “Bob” MacDonald, CLU, started selling life insurance in 1965 as an agent for New England Mutual Life. In 1999, his company, LifeUSA, merged with Allianz Life of North America, and MacDonald became the company’s CEO. Under his leadership, Allianz Life doubled in size. He retired in 2002 as CEO and as chairman in late 2003. In 2006, he was lured out of retirement to serve as CEO of Allianz Income Management Services (AIMS). He resigned from the position in 2007. Widely acknowledged to be a true visionary and product innovator in the financial services industry, MacDonald was one of the first to call for a restructuring and updating of life insurance products and for the entrance of banks into financial services.

Just as a musician must keep in time with the music for the rhythm and melody of a song to come to life, so too must the insurance industry keep in time with the future, if it is to have one.

It is not possible to hold off the future, but one can be in time with the future. By being observant to change, responsive to new needs, open to innovation and by exhibiting a willingness to reminisce about the future, it is possible for the insurance industry to prepare for and even influence the shape of its future.

Time has shown that those who achieve the most success in the present are those who, in the past, were considered to be ahead of the times. The curse of a failed future is reserved for those who fall behind the times. So, the question of the day is: when was the last time the life insurance industry has been described as being ahead of the times?

The real shame is that while the onrushing future offers the life insurance industry a unique opportunity not just to compete, but to dominate in financial services, the industry gives every indication of an embedded tendency to rest on its past success. If this continues, the industry can only watch as the future passes it by. There are a number of important areas that could be cited, but the best example of the industry’s unwillingness to be in time with the future is in its failure to use technology to improve its business model.

Competitors leaving us in the dust
Compared to the other sectors of financial services — banks and investment firms — the life insurance industry is in the dark ages when it comes to the use of technology for processing, marketing and customer services. This not only hampers the industry’s ability to provide competitive customer service, but also impedes productivity and increases costs to the point of making the industry non-competitive.

The cruel irony here is that 60 years ago, the life insurance industry was on the forefront of technology. By being the first major industry to embrace computer technology into its business systems, the industry was considered ahead of the times. The use of technology allowed the insurance industry to significantly improve productivity and reduce costs. It launched a period of exceptional growth and profitability. That was yesterday.
Today, the life insurance industry is clearly behind the times in the use of technology.

And we are not talking about some esoteric, futuristic concept of technology, but technology that is proven and readily available. In fact, it is technology that’s already being used effectively by the life insurance industry’s competitors to dramatically outstrip the industry in ease of doing business, productivity and lower costs — resulting in more rapid growth and profitability.

For example, banks have embraced technology in a way that has allowed them to change their business model from the highly expensive and inefficient system of brick-and-mortar branches to a virtual online business system. This has allowed banks to significantly reduce costs, improve productivity and actually enhance customer service.

Practically every transaction a customer needs to complete with a bank can be accomplished either online or via the ubiquitous ATM network. And even though customers perform virtually all the processing themselves (doing the bank’s job while reducing bank costs), consumer surveys now rank bank service among the highest.

Remember when stock broker firms had offices on virtually every corner? Business could only be done with a broker, and paper-intensive transactions took seven days to complete. Today, technology allows customers to control their investments. All transactions can be completed online from anywhere in the world and confirmed in milliseconds. And it’s all accomplished with reduced costs for both the investment firm and the consumers.

How we can adapt
The modern consumer, raised on video games, computers and the Internet, has become conditioned and trained and has indeed reached the point of demanding that interaction with companies be completed on an almost instantaneous interactive online basis. And yet, despite the availability of proven technology that increases productivity, reduces costs and enhances customer satisfaction, the life insurance industry remains mired in the “legacy” of outdated processing.

The life insurance industry could adopt available technology such as the Internet, iPads, tablets, online interactive software and social networking tools (if Facebook and Twitter can drive revolutions, you might think they could be used to communicate with customers and agents) to create a virtual insurance company.

Existing technology could be used to recruit, contract, educate, train and supervise agents. Available technology allows for most applications to be completed and submitted online. They could then be processed, reviewed and underwritten automatically by the computer. Once approved, policies could be digitally downloaded to the customer. With iPads or laptops, agents could have access to company resources wherever they go, using the technology to prospect for customers, analyze options available, assist in the sales process and complete the sale.

Much as customers now take the lead in reviewing and managing their accounts with banks and investment firms online, an investment in technology by the insurance company would allow customers to keep current with their insurance coverage and policy values as well as make incidental changes and pay premiums.

While all parties to the insurance transaction would benefit from the use of existing technology, it is the company that would benefit the most. By creating a virtual online company, almost all of the agency’s paperwork, manual processing and snail mail would be eliminated. Productivity would expand by quantum levels, costs would be drastically reduced and, maybe most important of all, the agent’s credibility with the customer would be significantly improved.

Technology is the most effective tool available for the insurance industry to be in time with the future. However, time is short and the failure of the industry to act in time may mean that it will run out of time.


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