Poor first impressions are often extremely difficult to shake. Just a few years ago, Web-based insurance programs of all varieties got off on the wrong foot with Internet sophisticates seeking speed, interaction and convenience.

Life insurance, though, represented the "poster child" for all that was unfulfilling with online insurance programs. The complex nature of life insurance had long been regarded as a poor fit in a Web-based environment.

Rather than being able to obtain rates-the most important factor in shopping for term life-individuals found that the best that carriers could offer in terms of functionality was a "quote request," which enabled consumers to complete a personal profile and submit it for processing to an agent or carrier representative.

If external deficiencies weren't enough, consumers had their own issues with life insurance. Many failed to approach it with the same sense of urgency as auto or homeowner's coverage. Stigmatized by its very essence-you collect on a claim when you die-many prime life insurance candidates, those in their 20s and early 30s, opted to defer policy exploration.

But over the past six to 12 months, the emergence of new tools and technologies for both customers and agents have enabled carriers to breathe new life into a once-moribund business venture.

"Web-enabled life insurance programs have come a long way just over the past year," says Larry Paul, chief marketing officer for Carpentersville, Ill.-based Financial Keyosk Inc., a Web-based distribution channel for financial services and products. "Last year, most people inquiring about life insurance online could only request an application, but now many of them can apply online."

While auto insurance is expected to remain the "most shopped" online insurance segment, one-third of individual life insurance sales over the next three years will "touch" the online channel, mainly at the front-end research stage, says Matthew Josefowicz, senior analyst with Boston-based e-business consulting firm Celent Communications Inc. "Consumers will come to the Web to sift for life insurance information. If they go to an e-marketplace site and seek a particular carrier's product, it behooves that carrier to be there to meet them."

Life decisions

Many of the hurdles that suppressed the growth of life insurance programs online for so long have been cleared due to a renewed commitment by carriers to technology investments.

However, the confluence of two mutually exclusive developments have also positioned life insurance as a top-of-mind investment priority with many young consumers.

The tragic events of September 11 prompted individuals to reassess their insurance needs. In December, applications for life insurance continued strong for the third consecutive month, showing a more than 11% increase in activity compared with December 2000, according to Westwood, Mass.-based MIB Group in its Life Index report.

"Since September 11, we've seen significant increase and awareness of life insurance," says Michael Witwer, vice president of life products management, institutional business department, at New York-based MetLife Inc.

"Shortly after the tragedy, this increase at first was anecdotal, but the demand for either first-time coverage or increased coverage moved from anecdotal to actual," he says. "Based on health statement forms, we've seen an increase in life premium receipts of about 50% within our group life program."

The second development, which had been bubbling under the surface for awhile, is the tendency of consumers to research their financial investment needs on e-brokerage sites such as Fidelity Investments and Charles Schwab.

Through this research, many individuals became exposed to life insurance and began to regard it not as a commodity but as protection wrapped within an investment, such as a variable universal life product.

"Just over the past two years, a growing number of consumers have become more comfortable managing stocks online," says Diana Scott, senior vice president, group insurance and e-business for Boston-based John Hancock Financial Services Inc. "Asset allocation on the Web began to feel comfortable to them. One tendency was to buy an investment product and then round out the equation with term insurance."

The exposure to life products by way of investment/brokerages sites might have opened the door a crack for carriers, but it was up to carriers to bust the door down. Technology investments supporting life coverage, analysts say, will be a key. And these investments have picked up significantly within a two-fold plan of action: improve profit margins by fostering internal efficiencies, while providing consumers with online tools to better determine their insurance needs.

"People don't understand how life insurance fits into their needs and how much insurance is enough," MetLife's Witwer says.

In what was a big leap for IT investment activity, carriers in 2001 embarked upon several IT initiatives. They implemented tools to help reduce the cycle time to issue policies, and introduced real-time underwriting technology that could better identify online prospects-for instance separating low-risk customers from high-risk ones.

For the benefit of consumers, carriers-with the help of technology partners-implemented online needs-analysis tools that can pinpoint an individual's life insurance needs.

Because online application questionnaires are often interminable, carriers also developed reflexive questioning technology that's intuitive enough to dispense with areas not applicable to a particular individual.

Because life policy issuance relies on individuals to disclose a significant amount of personal data, carriers identified algorithms as a way to detect fraud stemming from applicant non-disclosures.

With agents continuing to play a primary role in a consumer's insurance inquiries, carriers armed agents and brokers with Web-based illustration technology that could help crystallize, as well as demystify, a complicated product line.

Serving term

The consensus among industry observers is that consumers have placed a high priority on life insurance emphasizing protection over investment. As such, these observers predict there will be an accent on acquiring term and other basis insurance products.

"The rocky performance of the stock market last year is taking a toll on variable life products," says Elaine Tumicki, assistant vice president for Winsdor, Conn.-based LIMRA International, a marketing research organization for the life insurance segment. Annualized premiums for variable universal life products fell 26% in the third quarter, compared with the same quarter of 2000. "On the bright side, universal life is showing a resurgence," she adds.

Aware of the untapped potential of the term insurance market, New York-based inviva, a life and annuity holding company, recently began offering an instant term product managed through a completely electronic platform with both online and human support.

Customers can apply for immediate coverage between $250,000 and $1 million for 10- or 20-year term policies. Waiting for a policy to be bound is a huge factor in prompting individuals to change their minds. Inviva addressed this dilemma by issuing customers a 90-day binding quote based on their application, after they input an electronic signature, set up payment and schedule a medical exam.

"We make it easy and appealing for the customer to obtain a life insurance policy," says Todd Solach, vice president of marketing for the New York-based company.

"During the three-month period of the binding policy, the customer's insurability at the quoted price and rate class is confirmed," he adds. "Upon underwriting completion, including a medical exam, coverage is extended for the entire 10- or 20-year term." In addition, customers can access and maintain their policies online.

High rating

Recognizing the sleeping potential of term insurance, John Hancock Financial has also committed significant resources to cultivating this product within the vast life insurance portfolio.

"We first offered term insurance on our corporate site, developing our processing technology internally," Scott says. "Term coverage was the foundation on which we established the Web program before exploring additional types of life insurance, such as variable life. We developed a buying experience for term and built the program from the ground up," she explains.

John Hancock term insurance offerings, available from its www.johnhancock.com Web site, have several consumer-friendly attributes. For example, the subject of rates has become a delicate one, causing a great deal of consumer consternation. John Hancock provides individuals with the lowest quote plus those for other rate classes, and a brief explanation of what factors could cause an applicant to be disqualified from the lowest rate class.

"Online quoting systems typically ask a series of questions and provide consumers with a premium figure, usually the lowest quote possible, based on the information gathered," Scott explains. "But often, the applicant is surprised to find they must pay a higher rate once they fill out a detailed questionnaire.

Points of Pain

"We always try to address the points of pain that prompt people to log off the site out of frustration," Scott says. "Researching term insurance is a product many people are now comfortable with, but for those who aren't, we offer them a chance to begin their initial research, obtain some answers and then save a document and pick up where they left off at a later time."

Another consumer priority when researching life insurance is obtaining "rich information with comparative pricing first and foremost," Celent's Josefowicz says. "Individuals want to research things without a lot of pressure and then follow up with a live conversation with an agent," he adds.

The agent's role in a life insurance purchase is not vastly different from the role he or she plays when an individual is researching and buying an auto policy. But many carriers question their agents' prospecting skills and ability to make effective product recommendations, according to a report titled "Reinventing Life Insurance Sales," published by Cambridge, Mass.-based Forrester Research Inc.

"Some agents and brokers have access to more than 200 products, and for them to know which ones fit a consumer's needs is tough," says Todd Eyler, Forrester senior analyst and author of the study.

Aside from the steep learning curve, many carriers have watched online life programs remain unfulfilled because many are wary of channel conflict when selling life products online.

Rather than taking a position of omission and avoiding life programs online, several providers are approaching it from a position of commission. "Our platform centers on distributing products through the input of a trusted advisor. It's a Web-enabled program that combines the element of human touch, which is very meaningful to people," says Financial Keyosk's Paul.

Easy for Agents

John Hancock has also found a way to "rise above channel conflict by engaging agents in the online process by being upfront with them on these programs," Forrester's Eyler states.

"We want to make doing business with John Hancock as easy as possible for our producers," says Ken Nordstrom vice president, estate and business sales for John Hancock. For example, the company is rolling out a Web-based illustration program called eHansel. The first-generation of eHansel-referred to as Hansel-is a PC-driven application supported by CD-ROMs.

"eHansel is designed to look and run like our current illustration system on the personal computer, with no additional training or equipment needed," Nordstrom says.

John Hancock conducts business with a significant number of independent agents. Some of them and their staff often work from a home office. As such, they have to rely on a PC with sufficient hardware and software capacity to support illustrations and other programs.

"By activating eHansel, agents can jump onto the Web and take a spin without disrupting the existing storage space on their computers," Nordstrom explains. "Moving the tools completely online assures that the latest data is available to all producers as early as possible."

When John Hancock moved eHansel to the Web, it had to make certain the product was Web-friendly. "We had to perform a significant amount of testing to make sure the product would work smoothly on the Web, particularly if there were multiple users," Nordstrom says.

Dynamic Information

"We had to determine whether we'd need to incorporate another server in the network if the site was deluged by users, and had to determine how we could migrate users onto another server during heavy volume times. We've addressed those concerns sufficiently," he adds.

Housed on secure servers, eHansel enables producers to tap into dynamic product information that can help them design customized new-business proposals and concept illustrations during sales calls. Because the development of products hinge on various state regulations, the solution provides relevant data on the latest insurance regulation changes that have occurred on the state level.

As proposals are being crafted, all of John Hancock's distribution partners are able to save their work either to a secure space on the Internet server or to their own personal computers, Nordstrom adds.

It may not be outwardly apparent yet, but the insurance industry is making inroads in the refinement, marketing and distribution of new products and technologies for both consumers and partners for online life insurance programs.

This is no small feat since just as recently as 18 months ago, Web-based life insurance resembled a dead-end street more than it did forward progress. One of the mandates carriers now obey is that since life insurance represents a hard sell to some consumers-online or offline-the selling approach must be carried out creatively. For producers, emphasizing life events to prospective clients can be an effective approach to build sales.

"We place an emphasis not on the sale of a life policy, but on the fact that you, the bread-winner of the family, need to have proper protection if something were to happen to you," Financial Keyosk's Paul explains. "I think to resonate with a potential life prospect you must first stress their responsibility to the family, and then discuss specifics."

Before effective marketing strategies can come to fruition, carriers and their partners must take a hard look at their operation and verify that selling life insurance in a Web environment-and the degree to which they sell products and services-is in their best interest.

Instantaneous Changes

The positive news is that, in some instances, Web-enabling a business component can be more cost-effective than running that component offline.

As it offered the PC version of Hansel, John Hancock incurred frequent costs to re-issue CD-ROMs-costs that reflected changes within the carrier's product pricing structure, including new products and new state regulations.

"It would take weeks to get an updated version of a CD-ROM out in the field. With eHansel, the change is made instantaneously," Nordstrom says. "We had a lot of both fixed and variable costs associated with the PC version of the product. We think we can take those costs savings and reinvest it into other areas."

Carriers also realize that it's in their best interests to encourage consumers to become more self-sufficient on the Web.

"If an insurance company can provide individuals with dynamic applications online, then they've made it easy for that individual to do most or all of the data entry, rather than the carrier's support people having to key in data," Celent's Josefowicz points out.

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