Most consumers admit that purchasing life insurance is not something they relish-mainly because of the issue of their mortality. For life insurers, selling their various products has been difficult as well, but this shortcoming has little to do with consumer resistance.
While individuals have a ready-made excuse in delaying acquiring life coverage, industry observers say life providers have been shackled by their own inefficiencies-a situation that must be rectified. These sore spots have been marked by a lack of systems integration to properly serve agents, reliance on paper processing and inadequate underwriting strategies.
"Consumers applying for life insurance often become frustrated by the length of time it takes to get a policy issued," says Terry Burt, president of Canton, Mich.-based BudgetLife, an Internet platform for consumers seeking life insurance. "Most companies employ a paper-intensive process requiring multiple data entries and manual delivery of paper documents.
"Even online insurance sites process requests the old fashioned way: They write it down and put it in the mail," adds Burt, whose Web platform has a direct link to the back-office databases of various life insurers for consumers to obtain quotes.
This lack of execution isn't an enviable position for life insurers, particularly when many senior-level executives have high hopes for their life units. While property/casualty units endure volatility swings in their business, such as weather-related disasters, life businesses enjoy much more consistency. Potentially, this enables them to churn out far more impressive profits and revenues.
However, this built-in advantage has often gone for naught as many life insurers can probably cite at least one specific "pain point" of life processing, such as underwriting, illustrations and quotations, applications, policy issuance, pay-out administration and case management. In addition, too few insurers have chosen to implement a complete policy life cycle platform that unifies all these individual components, states Michael Roe, president and CEO of Navisys, an Edison, N.J.-based systems and solutions provider.
"An integrated workflow to streamline data entry and operations through straight-through processing is the objective," says Roe. "With a system in place that addresses the full policy life cycle, insurers can dramatically improve IT efficiency since all business and product rules are stored in one place."
Back-office challenge
Full policy fulfillment, though, is still a work in progress, born out by the fact that it takes an insurer an average of 38 days to close a new life insurance application, according to LOMA, an Atlanta-based life industry trade group, which represents 1,250 member insurers.
Moreover, legacy system bottlenecks hamper new product development efforts, which take anywhere from six to 12 months-unacceptable when development time should take one to four months, states Navisys' Roe, whose firm offers insurers its Home Office and Front Office pre-built software to drive integrated processing.
Life insurers are up against "a lot of back-office operational challenges," Roe explains. "Distribution channels are not linked due to multiple and disparate legacy systems. Insurers often have a new-business system for each channel, which is a very expensive proposition. The goal is to streamline business processes and improve IT architecture."
One thing is certain: Insurers have a wide range of options to consider to better engage their producer networks, customers, and even underwriting units in order to make new-business processing more fluid.
In what is one of the few remaining direct-to-consumer Web platforms, BudgetLife recently developed a solution called the Fast Application Screen and Transfer (BeFAST) process, which uses direct interfaces to insurer databases to speed life insurance delivery.
Combining proprietary software and the Web, BeFAST is an expert quoting system that enables an individual to enter a life quote request at BudgetLife's Web site, and the request is transferred directly into an insurer's database. "We have partnered with companies, such as Zurich Life and Banner Life, who provide direct access to their computer systems linked through BeFAST," Burt explains.
"When a customer opts for a quote from Zurich's or Banner Life's rating engine, BeFAST flows the inquiry into a proprietary e-application format developed by the insurer-partners. It then transmits the inquiry to the back-end system and promptly returns a quote. An agent is then assigned to follow up with the customer."
The result: BeFAST is lopping two weeks off the application process as it eliminates manual processes and leverages the rule-based competencies to push "jet-issue" type applications through rapidly while an underwriter concentrates on more complex cases.
Paperless is fruitful
Identifying strategies to improve turnaround time for new-business processing has become a rallying cry for life insurers, a growing number of whom have reached the conclusion that producers and consumers will gravitate to the programs that offer quick, convenient, accurate and customized services.
With speed and efficiency in mind, Jefferson Pilot, a life insurance operating unit of Greensboro, N.C.-based Jefferson Pilot Financial, invested ambitiously in electronic tools to drive life processing-all in the name of becoming a "digital" and paperless insurer.
"In order to become more competitive in the marketplace, doing business electronically was the next step," says Patty Creedon, vice president, underwriting administration at the Concord, N.H.-based company.
"We first engaged in mass systems conversions, unhooking our legacy environment and removing 'stovepipes' that slowed us down. We developed a rules-based e-application, called NuVent, which we are in the process of testing internally."
Developed by Navisys, the product will be offered to JP Financial's external producer network early next year, providing them with an entire new-business fulfillment platform in which to issue new life contracts. When the system is up and running, producers will be able to engage the provider in a completely electronic environment. "Agents no longer want to fax paperwork to us as many have adopted their own electronic file imaging," says Creedon, whose company has implemented an automated work distributor (AWD) solution that's supported by NuVent.
"Producers want to transmit an e-app, and we have set up an AWD (developed by El Segundo, Calif.-based Computer Sciences Corp.) to accept any application from an agent's desktop regardless of the system they use. Ultimately, all of the pieces involved combine so we can administer all products and all distribution channels from one system."
When all is said and done, JP Financial projects that NuVent will help reduce internal costs 20% in 2004 as well as increase life applications 20%. "Already, we've leveraged our improved operations to greatly enhance turnaround time for life applications, which now averages 21 days.-well ahead of the industry average."
New product pipeline
All these measures are crucial because industry observers freely admit that not only is slow turnaround time a major obstacle, but so too is life insurers' ability to churn out new products-particularly in targeting individuals seeking low-face term insurance-currently regarded as an under-served clientele.
"I think insurers had come to the conclusion that new life products didn't matter," says Navisys' Roe.
"The market was not responsive to these products, and insurers have not had an efficient way to deliver them anyway. But via straight-through processing, life insurers are improving efficiencies for all new business-even low-face term prospects that they might have once ignored," Roe says.
No doubt, there has not been a lot of push for agents or insurers to chase marginal selling opportunities, says Doug Curtis, vice president of business development, at Federated Life Insurance Co. of Canada, Winnipeg, Saskatchewan.
"It costs us $150 for every application we accept regardless of the face value amount," he says. "It didn't pay to pursue low-face term business. But new Web-based solutions are making it easier for us and our agents to serve this clientele."
Several years ago, when Federated Life was acquired by a new parent company, it made a decision to phase out its career agent network in favor of independent brokers and managing general agencies. When Federated changed distribution philosophies, "we realized that it was also a good time to differentiate from our competition-to get away from offering commoditized products," says Curtis.
Licensing a solution developed by Toronto-based MFXchange Holdings Inc. called WriteNow, which touts "no-fluids" underwriting, Federated Life can now issue term policies that once took weeks far more quickly.
The jet-issue applications are being pushed through in as quick as 15 minutes. And, although complex applications require an underwriter to perform additional research before deciding whether to accept or reject the application, the time cycle for approval on these applications is about two days, according to Curtis. "We 'white-labeled' WriteNow, and internally refer to it as
"Using traditional methods, an agent would spend three to six weeks waiting for an application to be processed. During this time, an evidence request would require a saliva and urine sample, an attending physician's statement (APS) and a paramed," Curtis adds.
"But via
Proof in the pudding
The proof is in the pudding. Federated has watched its net premiums soar 200% from a year ago.
But the one compelling advantage of the process is the fact that Federated, by the end of this year, will be able to offer $1 million in term insurance with no medical requirements.
"We currently offer term insurance up to $250,000 through the
Not everyone is sold that life insurers can painlessley implement dynamic automated new-business processing solutions. The fact is, most life insurers must perform a balancing act between corporate responsibility to shareholders and new investments in technology.
"The reality is that the legacy systems of insurers are servicing a large volume of new and existing business," says Ann Purr, second vice president of information management at LOMA. "To say that you're going to embark on a systems replacement is easier said than done."
Low-hanging fruit
With so much to contend with, many insurers often identify the low-hanging fruit of their operations for better life processing, says Navisys' Roe.
"Maybe underwriting is an easy-to-address pain point in the new business cycle for life insurance," he explains.
Adds Purr of LOMA: "Insurers will continue to focus on isolated technology investments for new business processing-the type of investments that will get them through the next quarter, because not all insurers have the luxury of doing a systems replacement. They have shareholders to appease and frankly I think life companies have been very savvy business people. They work well with what they have."
