Some producers will always prefer the decidedly low-tech sales approach of simply bringing a pen and a notepad to meet with customers. No flashy sales illustration will be shown on an iPad. The only “app” used will be in the form of a paper application for life insurance coverage.
This old-fashioned approach has its merits, to be sure, and it’s hard to argue with the success it has brought many a successful producer. You are face to face, with nothing to distract your full attention from carefully listening to the needs of the client. Many clients no doubt still appreciate the simplicity of the pen-and-notepad approach.
In the span of perhaps six weeks from the time of the meeting, the paper app gets filled out, then probably gets kicked back a time or two for being “not in good order” (NIGO) and is finally submitted to the carrier. The policy is eventually issued, printed out and personally delivered to the client. The whole process isn’t exactly quick or easy for the client, producer or carrier.
Well, like it or not, the life insurance sales process really is evolving at many offices and kitchen tables across the country. The evolution is being driven by changing consumer preferences and carriers who realize they need to make it easier for today’s consumers to obtain coverage. Many producers — some willingly, some kicking and screaming — have modernized their sales process to integrate tablet technology, electronic application capabilities and social media. These new technologies and processes are primarily intended to:
• Meet modern consumer expectations by providing constant access to information and service through multiple channels.
• Reduce the cost of sales by eliminating NIGO submissions, simplifying application processing, reducing cycle times and increasing placement ratios.
• Allow the producer to spend less time on paperwork and more time selling, while also getting paid faster.
Let’s start with the consumer angle. Carriers today are competing in a market where average household expenditures on life insurance have declined by 50 percent over the past decade. It’s no surprise life insurers are anxious to transform their products and service models to better fit the needs and expectations of today’s consumers, particularly those who are under 50. Newer technologies are allowing consumers to access information and communicate with carriers and producers on their terms via multiple channels: email, Internet sites, call centers, social media, Skype and old-fashioned face to face.
A new study released in March by Conning found changing consumer demographics, lifestyles and preferences are creating both challenges and opportunities for life insurers. Mary Pat Campbell, analyst at Conning, notes that the speed at which new technology is being adopted by consumers has accelerated. “Most relevant to life insurers, consumers are more and more apt to conduct financial transactions as well as buy financial products online,” she says. “Some of those in prime traditional life insurance-buying ages have high usage of online banking, with 65 percent of those age 30 to 49 engaged in this activity in 2012, compared to only 25 percent a decade earlier. Being able to take advantage of this shift in consumer behavior is key for insurers.”
As for the carriers, they are increasingly investing in technology platforms that significantly streamline the application and fulfillment cycle. According to recent iPipeline-commissioned research from Celent, based on data from 20 carriers, the unit cost to handle new business by using e-apps dropped from $299 to $187 per application received. That represents a 37 percent reduction in unit cost. And unit costs dropped from $446 to $233 per policy issued from an application start point, representing a 48 percent reduction in unit cost. This means a potential $2.1 million in savings on every 10,000 e-apps submitted.
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That same Celent research revealed that the percentage of NIGO rates dropped from 70 percent to 16 percent for switching from paper to e-apps for term life and from 70 percent to 19 percent for whole life. The average new business cycle time was reduced from 50 to 30 days for term life (a 40 percent reduction) and from 49 to 24 days for whole life — a 50 percent reduction.
For their part, producers are integrating iPads into their workflows not only to display sales illustrations and generate quotes for clients, but also to submit electronic applications. Producers using e-apps eliminate point-of-sale mistakes, increase placement ratios and get paid faster. Tech-enabled producers are also making good use of ever-emerging smartphone and tablet apps designed to make them more productive and efficient.
The iPad effect
The first iPad was released in April 2010. The first Samsung Galaxy Tab was introduced in September 2010. Research company IDC estimates the total number of tablets sold worldwide in 2012 at 122 million. It predicts 172 million tablets will be sold in 2013. Pew Research Center’s Internet and American Life Project found 19 percent of U.S. adults owned a tablet as of January 2012.
LIMRA’s “From Connected to Mobile: Producer Use of Technology (2012)” found 21 percent of producers in North America own tablet computers for business use. Companies are seeking to support their sales force’s use of tablets by providing more apps for CRM, sales illustrations, quoting tools and e-apps.
The impact the iPad has had on the life insurance market was hammered home at the mid-March iPipeline Connections 2013 conference in Las Vegas. (iPipeline, for anyone still unaware, provides the process automation and seamless integration needed to make a sale by aggregating approximately 120 carriers, 1,200 distributors and 400,000 financial professionals in a single, Web-based environment, including the iGO e-app for electronic insurance application processing.) During a breakout session at the conference, speaker Rich Grisham, director of global solutions at iPipeline, said the introduction of the iPad changed everything.
“And when I say everything, I mean everything,” Grisham said. “We are seeing more and more folks using an iPad to close the deal. We’ve seen a dramatic uptake of apps being submitted via the iPad. This is a breakthrough not only for us, but also for the industry.”
Some carriers have had great success with pilot programs, providing iPads to agents and seeing significant increases. Aflac famously did so way back in 2011 when it provided 150 New York-area agents with iPads loaded with their “Launchpad” sales presentation app. The company saw an 18 percent increase in sales among those agents within 90 days. And many producers use their own iPads. (Although BYOD — “Bring Your Own Device” — presents some security and data ownership challenges.) They can show sales illustrations, draft quotes immediately, accurately fill out applications, take an e-signature, voice signature (and likely coming soon, a video signature), and submit the app electronically.
The e-app adoption campaign
Sarah Stewart, vice president and COO at Omaha-based insurance marketing organization Financial Brokerage Inc., shared a recent producer adoption success story with the audience at the iPipeline Conference. She said they approached an unlikely candidate who wasn’t enthusiastic about switching to iPipeline’s iGo e-apps and drop ticket models. But he committed to it and experienced, compared to his 2011 totals, a 39 percent increase in applications submitted and a 56 percent increase in annualized premium. He was the company’s top producer in 2012, and Stewart said the only thing he changed was using these tools.
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At Allegis Financial Partners, Vice President Brady Murray, CFP, says the automation of the application process by using e-app has been the biggest positive impact technology has made at the company. “This has significantly sped up the application process and virtually eliminated any oversights or mistakes that occasionally happened with a paper application,” Murray says. “Fortunately, many of our producers throughout our agency have adapted well to making this transition. Over 50 percent of our applications in the fourth quarter of 2012 were submitted electronically.”
One of those adapting producers at Allegis is Tyler Petersen. “I absolutely love the e-signature process in comparison to submitting a paper application,” he says. “I have found that underwriting speed has increased significantly and obtaining signatures from clients in other parts of the country has become much simpler.”
Andrew W. Mathews, president at Berkshire Advisor Resource Inc. in Denver, says his company has been electronically processing life applications with various carrier partners. “For our retail side, we use iGo e-app for those carriers that offer it,” he says. “We are in the initial stages of its use. However, from what we have seen so far, it has shortened the underwriting cycle time. For our brokerage side, we have been using for over a year The Standard’s Policy EX that allows for e-delivery of policies to both producers and their clients. Petersen International Underwriters has also added an e-delivery that allows the client to accept and pay for their policy online.”
In addition to life insurance and annuities, e-apps can also be used for products including disability insurance, Medicare supplements and final expense policies.
E-apps not perfect
Plenty of statistics will tell you that electronically submitted apps significantly reduce NIGO and reduce the cycle time. But that doesn’t mean your customer will always be able to provide all the flawless, complete information needed to complete an e-app. And the e-app generally can’t be submitted unless it is perfect — hence the low NIGO rates.
But a bigger challenge to widespread adoption of e-apps is finding a way to make them work beyond lower face value policies.
“It’s always been ironic that carriers first seek to implement e-apps and e-policy delivery to address their high cost of processing large volumes of low-premium term apps — yet for most of these same carriers, their distributor partners like Lion Street, M Financial and others that often represent the majority of their target premium written must still use traditional methods of app submission,” says Scott Weber, vice president of practice management and technology at Lion Street. “The high-net-worth market consists of high death benefit applications that are fully underwritten, requiring accompanying medical and financial records, generally utilizing permanent products [as opposed to term and drop tickets] and typically start as informal or trial apps. Until carriers provide broader support for e-apps in this scenario, they have limited appeal to distributors in this most lucrative market segment.”
For reasons such as this, e-apps figure to remain an enigma for independent producers working the high-net-worth market, and adoption will continue to see greater penetration with career agents who can be required by carriers to use e-apps. There is presently no way to obligate independents to do so, to the chagrin of iPipeline President Paul Melchiorre.
“The captive is easier. They’ve got a higher percentage of adoption,” Melchiorre says, mentioning that captive companies now sometimes require that any new agents brought in must use e-apps. “But we’re getting to a point where [producers] are looking at it and saying, ‘Do I really want to get left behind?’”
Greater awareness, education and training will be the keys to driving adoption, Melchiorre says. “It’s still only a small percentage. We’re still at a stage where people are being made aware. Eventually it’s going to hit a tipping point. The way I look at it, we’re still only in the first or second inning of adoption.”
Sometime later this year, iPipeline predicts that the one-millionth e-app will be submitted (and whoever submits that millionth app gets a $10,000 bonus). That will have taken about seven years. When will iPipeline hit the two million mark? “I think it’s going to get there a lot sooner than people think,” Melchiorre says. “Next year we’ll get to two million,” adds iPipeline Chief Marketing Officer Michael Persiano. “Mobile will get us there.”
So get comfortable, producers. There’s a lot of game left.
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