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Disruption of Insurance Distribution

Disruption of Insurance Distribution

How is the insurance industry being disrupted by online distribution?

Kevin Pledge

May 05, 2015
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  1. Session 75: Disruption of Insurance Product Distribution
   Kevin Pledge

    CEO and Founder Acceptiv Inc. www.acceptiv.com/LAS2015  
  2. How much personal protection life insurance will be sold online

    5 years from now? 1.  0 – 9% 2.  10 – 19% 3.  20 – 29% 4.  30 – 39% 5.  40 – 49% 6.  50 – 59% 7.  60 – 69% 8.  70 – 79% 9.  80 – 89% 10.  90 – 100% 2  
  3. Do you believe that online distribution could disrupt your business?


    Size  of  Insurer   Small   Medium   Large   NA   Yes   1   2   3   4   No   5   6   7   8   3  
  4. Digital Disruption – Other Industries 5   10 years ago

    you would not dream of banking online – “it’s not safe” 5 years ago few people would buy groceries online 15 years ago Travel Agents would claim that you cannot book vacations online – “it needs a personal touch and experience”
  5. Life Insurance Industry - Barriers to Entry Highly Regulated • 

    Prudential oversight of insurance companies •  Capital adequacy •  Policyholder protection Complex Infrastructure •  Systems •  Processes Brand Reputation LIFE INSURANCE IS SOLD NOT BOUGHT 7  
  6. Trend - Uninsured households 57% of families with children will

    have immediate financial trouble if the primary wage earner died 50% of households believe they are underinsured 30% of households have no life insurance Insurance Gap - $20T in US, 1T in Canada 9  
  7. Trend - Agents •  85% of consumers research insurance online

    •  Most consumers happy doing business online •  Disconnect to consumers – average age of agents now 57 10  
  8. Innovation Is possible due to trends creating a discontinuous opportunity

    Will question an existing paradigm Often involve looking at the bigger picture or from another perspective Timing is critical Disruptive Innovation will be: §  n times better, at §  1/x of the cost 12  
  9. INSURANCE IS SOLD NOT BOUGHT 1.  Yes,  this  is  true

      2.  No,  insurance  may  be  bought   Paradigm 13  
  10. Perspective Look at the bigger picture …..from the customer perspective

    Issue is NOT agent productivity Customers want choice 14  
  11. N times better at 1/x of the cost Metrics to

    beat: Time to Issue 42 – 47 days* Capacity Depends on number of agents Cost $500 - $747** + commission Sources: * 2009 LOMA Service Turnaround Times Survey – Term Products: 47 days **SOA 2010 Expense Study Average Per Policy $500 weighted, $747 unweighted 16  
  12. Life Insurance Industry - Barriers to Entry Highly Regulated • 

    Prudential oversight of insurance companies •  Capital adequacy •  Policyholder protection Complex Infrastructure •  Systems •  Processes Brand Reputation LIFE INSURANCE IS SOLD NOT BOUGHT innovation The myth that   18  
  13. Beagle Street UK New entrant – not really an insurance

    company Not encumbered by existing distribution Online only No advertising for first two years 20  
  14. The Problem The new business process is not customer friendly

    Indicative Quote Underwrite Issue Offer Add’l Q’s Modify Application Apply Underwrite evidence Further Questions multiple hand-offs lack overall process control 21  
  15. The Solution – North America Indicative Quote Underwrite Issue Offer

    Add’l Q’s Modify Application Apply Underwrite evidence Further Questions Indicative Quote Apply UW at claim   ! or 22  
  16. The Solution – Beagle Street Indicative Quote Apply and UW

    Buy > 5,000x faster ∞ scalable (85% of the time) 1/10 of the cost Fully Underwritten No fluids or additional evidence Cover up to £750k Better lapse experience Ave issue time 12 mins 23  
  17. What about barriers to entry? Not an insurance company • 

    Focus on distribution •  Partnerships – Reinsurer, Traditional Insurer No complex systems •  Focus on distribution – outsource the rest Fresh approach to branding… 24  
  18. Can this be applied in North America? Market research tested

    Customers go to Google for information Facebook and Google for advice Disconnect with agents 26  
  19. •  10 – 30 year term insurance, up to $500k

    •  Coverage age range 18 - 70 •  Applied UK experience and P&C lessons •  Simpler, yet more flexible than current products •  No medical evidence referrals •  Online, with offline support if needed •  On cover in 15 minutes or less Full UW + Lower cost = Lower premium 27  
  20. T10 - $18.65 T20 - $24.80 Online Quote and Application

    Simplified and Manual Underwriting T10 - $20.00 T20 - $26.04 Online Quote and Application Basic auto and Manual Underwriting T10 - $20.10 Online Quote and Application Basic auto and Manual Underwriting T10 - $20.30 T20 - $30.69 Online Quote Manual Application and Underwriting Where did this put Teachers Life? Insurance   T10 - $13.42 T20 - $21.08 Online Quote, Application and Buy Automated underwriting immediate decision including rating if applicable 28  
  21. $20T   uninsured   New   Entrants?   Synergy  

    $2.7  b   term   market   $14.5  b    protecJon   market   30  
  22. Plans for Online Distribution 1.  My company is not interested

    in online distribution 2.  My company is looking at online distribution only to support existing distribution 3.  My company is looking at online distribution as a primary method of distribution 4.  My company expects online distribution will replace other distribution methods 31