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Category Life Insurance

Lockdown proves a useful predictor for insurance distribution

02 June 2020 Gareth Stokes

The national lockdowns imposed on many countries has presented global insurers with an unexpected opportunity to gauge consumer appetite for a range of digital processes. Early experiences suggest that consumers are further along the digital acceptance curve than insurers imagined. Some good news for South Africa’s financial advisers and insurance brokers is that human interaction remains an integral component of technology-backed distribution methodologies. We are fast migrating to an environment where human touch serves as a differentiator that overlays the wholesale process automation enabled by digitalisation.

An RGA EMEA webinar, presented 26 May 2020, is the perfect foil for today’s newsletter. The discussion on ‘Changing consumer behaviour and digital distribution in a COVID-19 world’ was expertly led by Adriano De Matteis, MD: Italy at RGA. He was joined by CEO at Simply, Anthony Miller, and MD for RGAX EMEA, Jonathan Hughes. “The pandemic reality is different for all of us,” opened De Matteis, before inviting his guests to share some of their thoughts and experiences in adapting to changing consumer behaviours and accommodating customers’ lockdown needs. 

The status quo has shifted

“We built our platform digitally on ‘native’ cloud technology,” said Miller. “That has not only enabled us to be agile and experimental; but set us up for the environment we find ourselves in today – it is clear that doing things the old way is no longer viable”. His sentiment was echoed by Hughes, who observed that inertia was a common threat faced by a diverse grouping of insurance businesses. The same consumer behaviours will inform strategy, whether you operate as a sole proprietor or part of a multinational, or whether you run a ‘human touch’ advice firm or a purely digital Insurtech start-up. You must adjust your processes for the step-change introduced by lockdown and begin planning for what comes next. 

The lockdown has changed how consumers interact with insurers. “Sales through our [traditional] face-to-face channels are down because it is difficult for traditional businesses to sell in the way they are accustomed to,” said Miller. But simply.co.za experienced “strong demand and volume growth” in its retail segment, that could result in more policies being sold during May 2020 than in any prior month. “We have experienced strong growth via brokers on digital platforms,” explained Miller. The retail business targets mid-income earners using multiple channels supported digitally. 

Underwriting stumbling blocks

There is anecdotal evidence that traditional life insurers have experienced significant declines in new business during April and May 2020. Hughes observed that there were countless factors impacting the take up of life insurance policies during lockdown. “It is a complex picture”, he said. “Consumer led interest is up, while event triggers such as mortgage activity is down. And the ability for different distribution channels to service consumers is further complicated by the life insurer’s ability to complete its underwriting processes”. 

Statistics from India-based PolicyBazaar.com, a digital insurance aggregator, point to significant increases in health and insurance policy sales during the crisis. RGAX has also been closely monitoring the online advertising segment to inform its digital distribution initiatives. They have seen a marked increase in the number of advertisers in the insurance segment, up from around 300 in April to a staggering 900 adverts in May. This increase is due to lead generators rather than life insurers advertising their own product. The lesson for financial advisers and insurance brokers is that a big proportion of traditional intermediary sales will be digitally initiated. 

The need for human interaction in the insurance distribution processes remains top of mind, even in the digital world. “We started with the view that life insurance is sold rather than bought,” said Miller. “Having a human voice in the channel is necessary and we have always incorporated this via our call centre and chat support offering online”. He added that a process of trial and error revealed that the broker channel was critical in expanding an insurer’s distribution and servicing footprint. “Having a digital core makes it easier to move into new channels [including intermediaries] and across brands,” he said. 

Digital versus human touch

This realisation explains why phrases like ‘human digital loop’ have crept into product design meetings at Insurtech firms. Simply.co.za tackles the debate by balancing two apparently conflicting statements. The first statement: The more human your digital process is, the better. And the second: The more digital your human process is, the better. “Trying to integrate the digital and human experience into a seamless one is the way we should be going about it,” said Miller. 

RGAX observed that digitally-focused propositions delivered better customer experiences by augmenting their digital efficiencies with human trust. “A digital solution is rarely as universally reassuring as human touch,” said Hughes. “The fusion of digital and human is more important today than ever”. 

De Matteis wrapped up the enthralling discussion by asking whether there was anything that life insurers would  have done sooner, had they known of the impending pandemic and consequent lockdown. Miller observed that an earlier shift to a flexible working model would have been a no brainer. “We had a flexible model compared to others; but there was always a sense that we should be in an office. We have been impressed by the way the team has responded to the remote working model,” he said. The widespread adoption of remote working has shown that employees can be trusted to perform with autonomy. 

Hughes focused on aspects that had taken insurers off guard. He observed that the persistence of discretionary investments into Fintech and Insurtech initiatives had come as a pleasant surprise. “Businesses are trading cautiously through this period of unprecedented stress; but they realise the importance of the digital path and intend continuing on it,” he said. The other ‘surprise’ is that the responses observed during lockdown are not that surprising at all. You may be surprised by the pace and scale of what is unfolding around us right now; but if you had stopped late-2019 to consider what a global pandemic might look like, then nothing in our current environment would be totally foreign. 

Writer’s thoughts:
My recent interactions with professionals in the insurance and investment space suggest that financial advisers and insurance brokers will continue to play a critical role in financial product distribution; but the provider picture often differs from the intermediary experience. Are you confident that ‘high touch’ financial and risk advice will survive through the digital age? Please comment below, interact with us on Twitter at @fanews_online or email me us your thoughts [email protected].

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