Will Google Enter The Insurance Industry?
Life insurance ownership in US is at a 50 year low
Expect flat life insurance sales in 2015
Life insurance company consolidation, late 1990s and early 2000s
In 2001 top 10 life companies accounted for 40% of the premiums
In 2013 top 10 life companies accounted for 46.8% of the premiums
Source: SNL Financial LC.
Let’s examine some Life Insurance industry facts
Total number of Life Insurance companies in 1995
Total number of Life insurance companies 2013
Consolidation has helped to reduce operating costs, general overhead, and has significantly increased efficiency
Life Insurance Industry Employment
Source: US Dept of Labor
Percent of Selling Distribution:
Independent Agent/Broker 49% 49%
Affiliated (Career Agent) 44% 40%
Financial Institutions, Work site 5% 7%
Insurance Company Direct Response 2% 4%
Product Market share by Premium
- 1995 Universal Life 24%
- 2013 Universal Life 40%
- 1995 Term Life 15%
- 2013 Term Life 22%
- 1995 Whole Life 46%
- 2013 Whole Life 30%
- 1995 Variable UL 15%
- 2013 Variable UL 6%
This space is reserved for profit margins of products that are featured in the graph on the left. However, unfortunately, it is virtually impossible to report from an industry perspective.
Simply defined, individual life insurance product profit is the balance remaining of premiums and net investment income, after claims and expenses have been paid.
For profit margin, you take the present value of all future profits and divide it by the present value of your premiums. In other terms, complex products hide high profit margins. This strategy is used when pricing new products. Products that are easy to analyze, like term life insurance, are competitive, and profit margins are low.
The TermQuest Challenge provides a transparent design element, which examines the positive impact of profit-test actuarial assumptions to lessen surplus drain, unique to the North American marketplace.
Will more transparency help or hurt the consumer to by life insurance?
The Life Insurance Consumer Psyche
Could a basis for weak consumer buying power be based on the statistics not wildly cited by the US Department of Labor, stating that individual life premiums, as a percent of disposable income, has dropped form 1.4% in 2000 to 0.7% in 2010?
Tragedy brings into focus
The purchase of life insurance is more likely to occur after a disaster rather than prior to it. This is a tough one to exploit. In these days of social media, marketers can take advantage of major events. Not necessarily a tragedy, but a few years ago at the SuperBowl during the blackout, a number of hashtags surfaced. These hashtags benefitted multiple companies with their quick and witty reply to the situation.
The Herd Mentality
A prospective consumer has obtained insurance information through their conversations with friends or neighbors; therefore he/she will be inclined to purchase insurance. “Cousin Hayley just bought life insurance, maybe we should too”. As a marketer, position your message on social media to gain interest. “The new social norm: buying life insurance” happens to be less than 140 characters, by the way.
Event driven approach
Getting married, having children…. Most of the consumer marketing efforts are concentrated towards “Major Lifestyle Events”. Standing out in a sea of other marketers, your message has to have the connotation that “some of us are leaders, others are followers”.
The Manufacturing of Life insurance
To credit the largest life insurer in the USA, METLIFE has in the past few years introduced an initiative, which has targeted middle market consumers via direct methods and the testing of a Walmart promotion. These two METLIFE methods are priced exactly the same as the product their field agents sell, but presented differently. To the consumer, what is the benefit to buying direct?
Attempting to secure a unique spot in the marketplace is a real challenge in any industry. Can our industry attract any new players? Or better yet, can any existing companies truly adapt to a consumer centric model that the digital world demands and improve their ROI, simultaneously?
There is a simple and profound way to improve profitability and lessen surplus drain.
There is a simple and profound way to position products in a merchandising fashion.
There is a simple and profound way to reinventing prospecting for the end consumer.
Who wants to be the first to attempt this feat in USA marketplace?
Current life insurance product positioning
Regardless of whether life insurance is sold or purchased by self-directed consumers, comparing similar products from different insurance companies is impossible to ascertain. On the surface they appear alike, but the way products are truly priced, in terms of underwriting criteria and sales loads, makes for the discussion of transparency a significant issue.
Case in point, underwriting risk classification is no longer uniform from company to company regardless of which product is examined.
“The extent of recognition of policy size and sex varies from company to company, giving the buyer the opportunity to select against the industry as a whole by buying from a company whose classification system favors him”. Link file on desktop SOA James Anderson
The net provides a powerful amount of information. Aggregators use their sites to formulate their best collection of information, whereas it truly only provides a method of frontend product positioning. However, the broker still does not deliver a true informed marketplace to the consumer. Let’s take term life insurance for example; what company sells the most term products by premium in North American? Are they indeed the least inexpensive?
Assuming there is no underwriting or sales load transparensy ever, can the life insurance industry take a lesson on effective merchandising strategies from retailors?
You walk into a sneaker store; you are immediately presented with various sneakers made by 10 different manufacturers. Your budget is $100; chances are you will walk out of the store spending $100 for shoes.
You’re looking to buy life insurance; you notice on a television commercial that for $100 a year you can buy $50,000 worth of life insurance. After going through underwriting, the insurance company determines that your family history negates you from that top classification and as a result, cannot offer you that $50,000 policy. They counter their offer with a $175 deal. You, however, cannot afford it and consequently, they are unable to offer you any lower face amount.
The ways in which life insurance products have been, and still are, described in the marketplace, not only create confusion for consumers, but also actually impair consumers’ inclination for buying.
The TermQuest Model
Not just for term insurance
TermQuest incorporates automated risk underwriting technology along with a levelized commission structure. This element will positively impact profit-test actuarial assumptions to lessen surplus drain, resulting in better product profitability and/or further reducing consumer (premiums) prices.
TermQuest presents four different term products that contradict “the commodity approach” that the industry has presented to the digital world. This merchandized platform provides a number of options as to how consumers select products based on speed, ease of acquiring a policy, and/or providing them with the best value.
Regardless of how the consumer entered their quest, technology will either confirm or suggest an alternate type of policy based on the consumer’s risk classification or their monetary commitment.
TermQuest creates multiple touch points via either a “quick quest” (for self-directed consumers) or storytelling theme “extended quest”. In either case the consumers experience a familiar retail product approach similar to everyday products.
There are several opportunities to create a new channel utilizing the TermQuest brand, thereby avoiding channel conflict for the cede insurer and providing an innovative scalable solution to sell life insurance to Middle America.
“Truth be told, life insurance is not a high priority”. The choices are complex and confusing. The buying process is long and cumbersome; to say nothing of the emotions that are stirred when people start thinking about their mortality.
This site provides a broad overview of the forces affecting the insurance industry, and offers possible models of ways to innovate Life Insurance. These ways can open up a very fruitful discussion with various life insurance manufacturers.
TermQuest® started operating as a web site in 1995 recognizing the efficiency that the web provides. At that point, we began to offer Low-Load term life insurance. Here is what the site looked like in 1996: